All Forum Posts by: Adrien C.

It is definitely a gamble to hedge that something will happen in 20-30 yrs that appreciates the values enough to make it worth it. Maybe that's why some investors are willing to deal with being slum lords in these areas knowing that there's monthly CF to cover current and future expenses, make some profit, and hedge for future growth. I'm talking about the people buying 25+ $10000 houses. 

Yes- 

If the ROI is the same in 2 areas, then that's when I start to look at other factors in investing there- the potential growth of that area, landlord friendliness, which sports team I like, etc.

Is there value in buying land/vacant lots/inhabitable houses in cities that are currently depressed? 

I ask because land is a item that has a limited supply. As population increases, the availability of land decreases thus increasing its demand and value. Every state has large cities with areas that have fallen to the crapper. Is it realistic to think that at some point in ones life, these areas will experience a revival- either because jobs returned or because of forced use because we need places to park people as the population grows? 

I'm not talking about dropping big bucks on this junk now. In my area, I can buy SF lots in depressed areas for back taxes or a couple hundred bucks (maybe max $2000 if there's still a house on it) if still owned by someone. Taxes are running $300-500 annually on these vacant lots. So over a 20 year period, that's maybe $8000 in taxes (which is written off annually anyways). Is it reasonable to think that in 20 years or more, this lot is going to be worth a lot more should revival happen? 

@Bob Ewoldt I'm not an expert on the IL side of the fence - can you give an example with legit numbers of what you mean by a better deal? In reality, the particular tax rate of an area and other area related expenses are irrelevant in deciding where to invest. What I mean by that is the decision shouldn't be made on say tax rates but on ROI. Who cares if you pay 4% in property taxes if the ROI is still 15%? Is it better to invest in an area with 0.5% property taxes but get an ROI of 4%?

Since there is no judgement- it's early in the process. Find the owners, get them on your side and show them how you can help. Once they are on board, have them fill out an information release authorization form from the bank which gives you permission to speak w bank. It may be a situation where you do a sub-to, catch up back payments, keep loan current while you rehab, and then sell. That doesn't work well if you are keeping as a hold if which case you probably want to do a short sale. The bank probably assigned a relationship manager to the loan who is trying to work with the owners to resolve the debt before foreclosure. 

Follow Wayne's advise above- there's no point spending a lot of time researching a property if the owners are not willing to work w you. Up to the time of the auction, the owners on title have some control in whether or not the property is sold. You mentioned you had access to the docket of court filings. Look for the document that is the judgement. This document will show the total amount due to the bank. Many times you estimate of the remaining mortgage is way off because you don't know when they last made a payment, all the back unpaid interest, court and attorney fees, and other fees. The judgement will also show other folks who are owed which will have to be negotiated with in a short sale. The earlier in the foreclosure process you can initiate a short sale offer, the higher the likelihood of the bank accepting; foreclosures are extremely expensive for a bank. Once a NOS of sale is flied, you have little chance of a bank accepting a short sale. They've already dropped a ton of money on this and don't have much left to lose by letting it go to auction with hopes of getting a good bid battle. With the LIS being pretty recent here, I'd track down the owners ASAP and try to get something worked out. Best of luck- it's a numbers game. 

I use my standard purchase agreement which has a section for how this transaction will be paid- CASH or seller financing. In the Other Provisions part (blank space in contract before signatures), I outline the financing terms: interest, amortization schedule or interest only, term length, etc. The attorney closing the sale should be able to draft up a mortgage that is recorded. 

I'd be interested in hearing her discuss putting together a short sale offer for an off market property. Many of the vacant houses I target are not listed and upside down. The foreclosure process here can take 2-3 years or longer to get it to the auction. Good market to target. 

Assuming your numbers are correct:  

He's willing to do the financing because he knows a bank won't finance a loan for his asking price and a smart investor won't pay him what he wants. He's hoping some uneducated investor/homeowner gets all emotionally tied into it and the easy financing and signs the bottom line. My sister just did this- couldn't qualify for a loan. Found someone who would owner finance, fell in love with the house and "had to have it" and took the seller up on his financing. Fortunately for her, she lives in it and doesn't care about making a profit or good cash flow. But she'll never be able to refi anytime soon unless they drop a bunch of money (which they don't have) into it to get it to 95% LTV.

FYI- I'm a wholesaler. I buy properties that are ugly, distressed, whatever. A third of the properties I buy are from newbie investors who purchased a "deal" and were going to flip it. After realizing they are in too deep, they let it sit for some time as they figure out things. I find it, make a offer that is usually lower than their purchase price. They complain that they'll lose money. Lesson learned in RE is the money is made with the purchase and not the sale. It's not my job to help you turn your bad purchase into a good deal by over purchasing myself. If they don't like my offer, let it sit another 3-4 months sucking out more holding costs and make another offer even lower. Eventually they cut their loses. 

As @Steve Vaughan was saying, it's not in your best interest to put money into a property you do not own- which is the situation with the lease option. Even though you're recording stuff, you'll pay a butt load in lawyer fees to try to prove your rights to the property should they sell to someone else. Instead of the LO, purchase the property for whatever price you determine is right for you, close with an attorney or title company (based on your state), and have the seller hold a mortgage note on the property. You can still pay the $225 monthly amount or whatever you agree. They get paid monthly but you have ownership of the property. Doing this allows you to rent it out to someone else on a LO. If you do a LO to acquire it and try to LO it to someone else, it makes it extremely ugly when the final buyer is trying to fund the purchase with a mortgage of their own and you don't yet own the property.