All Forum Posts by: Dan A.

Does anyone know what is the property tax rate is as a % of sale price? According to smartasset.com, it's 3.44% in Franklin County. Is that accurate? Seems like it would be pretty tough to make any $ if that was indeed the case. 

Got it, thanks @Walter Holmes for your responses.

Good morning BP,

Does anyone have a recommendation for a RE attorney that they worked with for a foreclosure auction in Southern California? 

Hey @Walter Holmes, this is super helpful. When you mention reading the complaint and starting w/ the case docket, are you referring to the notice of default / sale or a different document?

Thank you!

Hi @Yonah Weiss and any other cost seg experts on the forum, can you pls provide a ballpark estimate for how much a cost segregation study in LA should cost? This is for a 4-unit investment property with 4 separate one-story bungalows and a 4-car garage.

It helps a ton, thanks @Walter Holmes. If you are willing to talk through what you see as the key risks of a foreclosure auction beyond what I noted above, I would be very interested to hear that as well.

Thanks, Dan

@Ron S. and any other experienced foreclosure auction investors:

Can you help me think through the worst case scenarios here? These are the things that I've come up with so far, in order from "this is an unmitigated disaster" to "not ideal but it's manageable." I know there are a lot of other potential outcomes, so I would love to fill this out with other potential risks.

- You bid on a lien that is not 1st priority

- There are major foundation issues that will require significant renovations

- The property is occupied by a tenant and we will need to honor the lease

- There are unpaid property taxes

- Owner decides to trash the property on their way out

What am I missing? I know there are a million different scenarios, but I'm interested in downside scenarios that are specific to the foreclosure auction process.

Thanks @Ron S., that was super helpful.

Thanks @Ron S. Can the lender bid a value below their debt? Say they decide that they only want to bid $375k even though their note is worth $425k, going through some of this same math that I walked through above (I understand it's a little different because they don't need the same profit margin). Are they able to do that? Or is the opening bid always the amount of their total debt? I guess what I'm trying to determine is whether this deal is DOA for me because the lender note is valued at more than I would pay for the property.

And I agree, that type of deal scares me as well. We would be buying as part of a buy + hold strategy, so I'm trying to see what type of pricing I would be up against and whether I can make the numbers work for me considering I don't have to take into account agent commissions, closing costs, or a quick profit on a sale.

Thanks everyone for the thoughtful replies.

@Ron S. I agree that there is little to no margin for error given the terms presented. That's why I am asking the question about the estimated opening bid. I guess my question is: if that $425k bid amount is what is owed to the bank ---> and the property is worth $500k ---> bank should have no problem purchasing at $425k to protect their own interest. So if I'm not willing to pay more than $425k, is this one DOA?

Another question for the group is how to conceptually think about the max purchase price that a flipper will pay on a property like this. Here's how I did the rough math:

Estimated ARV of $500k

Less: $50k for repairs / renovations / interest. Added layer of uncertainty given that the property is occupied so there is no way to do an inspection 

Less: $35k for closing costs + commissions. 5% on $500k = $25k + $10k for add'l closing costs

Less: $40k for profit. This is a total guess, but anything below that seems like a razor thin margin for error given the uncertainties involved

$500k - $125k = max flipper bid of $375k. Is something like that in the ballpark of how others will be looking at a transaction like this?