All Forum Posts by: Joel Owens

Matt,

What the sellers mean is the past buyer either found something on inspection,the bank took too long to reply to the short sale,or the buyers offer was too low and they didn't like the banks counter.

So short sale approved means the bank has ordered evaluations of the property and came to the conclusion this is what they would accept. Generally the sellers have no money in these situations.So the costs associated with the seller side the bank might balk at paying and you will have to come up with those funds.

The separate deed issue is a biggie as well.

Residential loans are single family properties,duplexes,tri's,and quad's.

Anything 5 units and above goes into commercial financing.Commercial financing the underwriting is much easier to qualify for as it's not regulated like the residential.

If the properties are separate legal description than most lenders will count them separately and not together.This will force you into a residential type lender. If it's one legal description you can count as 5 units or above.

They are some commercial lenders who will do if separate legal descriptions but the properties have to be together and the lenders are few and far between.

As gar as tenant inspections.Many times buyers just say insurance inspectors to take pictures so it doesn't spook them.If the seller has been a crappy landlord they won't mind new blood.

If the current landlord is awesome and their impression of you is not stellar they might high tail it out the door.

If the landlord has been self-managing it will make more of a difference.If property was managed by a company and you keep that company not much will change for the tenants.

Ann the Florida market is highly fractured meaning depending on the county and even the city they all use different MLS's.

I have another broker friend in Naples,Florida that list many REO's.So you would need to know the specific area of Florida first you want to buy in.

Mehran you could go that way.What is the average sales price there?? If you are buying FHA for 300k that would be only 10,500 needed with 3.5% down.

If you go conventional they will want more down.

Why not put a little down as possible with the fixed low interest rates and then leave money for immediate investment??

There are many options.

Jack you would do well to take a seasoned investor in your area to lunch and pay for it.Ask questions and for an opinion on the property.

My thoughts are being from 1900 are there any additions that weren't permitted or up to code??

Is this use as a 4 unit grandfathered in for just the current owner compared to the land use map and zoning??

How many problems or capital expenditures will you incur if the property has mold,venting problems,radon,asbestos,lead paint,roof problems (too many layers),structural problems,galvanized pipes,knob and tube wiring etc.

It seems from what you posted that repairs are really eating them up.You would need an inspection of how old the mechanicals and the updates are.

You then from the property inspection need an estimate of what it would take to do all the replacements and repairs to make it like new.This way you aren't dumping huge money into year after year.

You also could contest the tax values to get those reduced to improve cash flow.

Do you have bad tenants and low rents because the property is run down and in a good location OR if you even do the updates and repairs will you still be in a bad location with low rents and bad tenants??

So many things to consider which is why you need some eyes on the ground to help you with this.

good luck

If the seller rejects the winning bid or counters and you won't accept you will get your deposit back.

The reason for non-refundable is so if you back out once being the winner and approved by the seller they want to make it painful for you. It also weeds out people doing hair brained schemes.

If that is the buyers only 2k or they have little reserves they will make sure all their ducks are in a row before bidding.

Williams is on of the auction houses but there are about 5 to 6 big ones such as them.The bidding takes place in a huge meeting area,at the subject property,or online only or both on location and online.

My experience is the prices get bid way up over a good deal to a bad deal.If the deals were that great they wouldn't need to mail me out glossy expensive magazines because the prices would sell the properties.

Many time as an REO listing broker a listing might get pulled and put up for auction as the asset manager is praying some idiot will overpay and be the winning bidder.

Once that doesn't happen they assign back to the listing broker and do a price reduction.

Some properties sell auctions but not the hype Williams and other claim.

Auctions many times are a waste.The awesome deals are when you have little competition and can whittle down the price.

I think the biggest point missed here is the CONDITION of properties for sale.

Many investors are looking for just carpet and paint and a few outdated fixtures.Guess what so are home buyers and they will OUTBID you everyday of the week.

If you are a rehabber your goal is to resale a property or hold long term for rent depending on your local market or the market you choose to invest in.

So to make the numbers work you have to buy really low.For a home buyer if they get 10k to 15k equity after new paint and carpet they are happy so they will bid close to asking price or over if the listing price is low for the market.

In the property you posted on that is definitely going to be a cash buyer.Make your offer and see if they come down.

If you are making a low offer just submit a one page letter of intent until you get your price and then go full contract with all the amendments etc.

Saves a lot of time and money on paper.

Yes start off small and build that is the key.

Are you buying for cash flow or appreciation??

I noticed you are in California.Many investors are not purchasing there that live there.They are looking at Florida,Georgia,etc. where you can buy multiple properties cheap that cash flow well.

California tends to be more of a speculative market where the markets can swing wildly and many take a gamble on appreciation.

You just need to define what you want your plan to be.

About what range do you have to put down??

You make 90k a piece or together??

FIRST STEP is to correct any mistakes with your current finances.

Order your 3 credit reports.What is on there that is negative??

Are your credit card balances high and your interest rate high??

What about car payment?? Are you driving a mack daddy vehicle with an huge car payment and insurance requirements??

Your mindset has to get out of spending mode and into investing mode.Sell your newer car and buy an older one for cash.

Live below your means and save so you can amass properties and THEN live the good life for an extended period of time.

Call the credit card payments and get the interest rates reduced.You can't get a YES unless you ask.

Call your mortgage company.Some have what is called a short sale refinance where you can get a new loan at the reduced value.If you can't do that go for a loan mod or temporary reduction to boost income and decrease expenses.

Your property tax bill if it is high contest it to go lowered.Cable,clothing allowance,cell phone,eating out nothing is off limits.

If you do this you will start turning the tide.The question is HOW BAD do you eventually want to be able to quit your 9 to 5??

Start working on these items first to increase cash flow and start decreasing bad debt.

Mehran,

You don't need to re-invent the wheel.What exactly are you trying to do??

Are you someone with actual cash or have some down for a loan or a late night infomercial type that has no money and is trying to be a middleman and collect a fee?

Not being snippy just seeing what you are trying to accomplish.

Realty Trac and all those sites are outdated junk.They sell subscription after usually 30 free days for highly outdated data.

With pre-foreclosures you have to remember not everyone wants to sell and also might file Bankruptcy or do a workout with the bank.

On REO's depending on your state foreclosure laws a bank may be in the process of foreclosing but because of redemption rights,legal proceedings,or title issues they have to delay listing the property for sale.

Very rarely will a bank not list a property with a broker especially on the residential side.An asset manager for a bank handling hundreds of files doesn't want to talk to you,won't talk to you,and waste time teaching a rookie with questions.

I am just giving it to you straight.If you want to be successful you have to know how the system works.

The MLS is the place to get the most up to date data period.As soon as I get a listing assignment from the bank the listing agreement has within 24hrs you have to put it in the MLS and send in proof to the AM.

Many times we don't even get the AM's e-mail.It's uploading contract on a portal and by phone.If they don't know what file you are connected to or who you are they will just delete.This is why many never answer the phone and screen their calls.Then they call back the important ones.

Some listing reo brokers will have buyers list they notify of an upcoming listing hitting the market.Sometimes if you offer and the price is good enough the AM will accept and close out the file.

Other times the AM will want the property exposed to the market for 7 to 10 days to see what kinds of offers the property attracts.

Now that is usually how national banks operate.Sometimes local and regional banks you can buy direct before they list with someone.

Also the rules are different if you buy in bulk or buy the note at a discount from a bank.

It really depends on what you are doing in how to proceed.

Some never get going and have "paralysis by analysis".

The goal is nothing will ever be perfect you just have to get started and constantly revise along the way.

So many people look for a reason to not do something that they never get going with anything.

Fear of failure,fear of success,fear of making a mistake,having doubts are all mental roadblocks.

I ran 14 miles the other day without stopping.I am 25 pounds overweight but still had an 8 minute plus average.

People always tell me they can never do that and can't believe I can.The point is they never know because they never TRY and find out.

Some is physical but most road blocks are mental and people give up with their mind way before their body does.

Most are looking for that silver bullet (the next greatest toll that will make you rich beyond your wildest imagination! )

Consistency and small steps will get you to your goals but it is not as sexy and glittery as the magic pill many want to swallow.

Smart work,determination,consistency is the key.

Charles I definitely agree and I am not even close to being a tax person.

When I do commercial short sales the sellers ask about the 1099 phantom gain and how that will be huge to deal with.I tell them if they can to try and do a loan mod or interest rate reduction first.

Some bought at the height of the market and are pouring money into an over leveraged property. In these cases they don't want to keep pouring money into a property or do a workout on something where even when the market recovers it will be worth less than their mortgage balance.

In other words there is no reason for them to go down with a sinking ship.

In these cases I tell them to consult their tax accountant for legal advice and that I am not a tax person.

I do tell them if they do nothing and it forecloses the 1099 will likely be higher than in the short sale.The reason is markets continue to decline in value and unemployment is still high. Usually once the tenants get wind of a foreclosure the occupancy drops as tenants jump ship to another landlord close by.

So usually by the time the bank forecloses and takes over the complex the value has eroded even further.

I am not a tax expert but it would seem easier to mitigate a small 1099 versus a large one.

Also if it forecloses depending on what type of loan it is they won't be able to get financing for xx numbers of years moving forward.

So as you say many things to consider.

Sellers are always looking for a totally clean break from a bad situation and it doesn't exist.I tell them you have options and have to try to make the least painful and most in your favor as you can.

The bank is trying to get what they want and the seller is trying to get what they want and both have to give to get somewhere.

With taxes some are very risk adverse,some test the waters a little,and others swim with the sharks and hope not to get eaten.

At the end of the day it's a personal choice for everyone how they conduct business and live with the choices they make.

Charles do you have a blog on taxes and planning on BP that you do??