All Forum Posts by: Brian Bagdasarian

Any foreclosure auction is going to work in a similar way. You won't be able to tour the property (although you can obviously do drive-bys). Assume that there is going to be damage and or repairs needed. Research the history of the property at the county registry of deeds - find out what was owed on the property, as well as any additional liens or levys. Due Diligence is key in these processes.

If you decide to go forward, and want to bid, make sure that you have your funding in place beforehand. This, for most people, will mean that you'll need a HML relationship beforehand, and will want to give them a heads up on what you're doing. You'll have a very short window (around 30 days usually) to close if you were to win the deal.

Day of, you'll need to bring a check (cashier's normally), and usually be pre-registered for the auction. Its pretty common to have to put 10% down (although I've seen this be has high as 20%).

Things to watch out for:

- Don't get caught up in a bidding war. This can feel exciting, but you need to have your numbers firmly in place before you ever place a bid, and know when to fold your hand.

- Be able to confidently walk away. I was in an auction around a year ago, where I am still 99% sure I could have won with my next bid. I walked away because I hit my threshold. Even another 5k would have skewed my model, and there's always another property.

- Have an exit plan - If you win, what are you going to do with the property. The clock starts ticking, and you are running in a negative situation until the property is sold or rented. Make sure that you have those carrying costs available, and budgeted for.

There's a reason why deals (5+ doors) are underwritten based on cashflow, rather than future value.

I just looked up that property - there's an easy 150k-200k, if not more, needed on it. 200k is essentially the land value. If you look at what is renting for around 1k or so, that property isn't even close to being at that level. This deal feels like a stinker.

Max conforming LTV on an SFR investment property is usually 85% (This is the Freddie Mac max). 75%-80% is more common.

Its been a number of years since I've had to look at inspections and appraisals for that area, but if I recall, there were a couple of things that were throwing flags - primarily around materials used for plumbing (which largely can be chalked up to lifespan of systems), and some changes to the building code in regards to materials in the mid 80s. It wasn't a universal, black and white type of situation, but rather something that came up multiple times over a few year period. There were a number of changes to the regulations and standards for things like concrete structures, how fittings (brass and copper) had to be designed etc. 

If you're looking older than that, just make sure that your building inspection it thorough.

@Kevin Paglia have you looked at some of the stuff out by Desert Inn?

You're in the Destin area. When I was lending down there, we usually started to see issues come up with properties built before 1985 or so. 

FWIW your direction lays more in what your short and medium goals are. House hacking is great, but isn't necessary unless there's a certain amount of monetary pressure (or that is your general investment POV). If you're buying within a given development, buying several units (once you've clearly established the financials) can be one of the lowest-effort ways to get going.

An example - We have, over the years, owned multiple condo units at a local ski resort. We know the market (after spending 35+ seasons there), and know that for six months per year we can generate significant cashflow on seasonal rentals. While I've had the opportunity to do a ground up build several times, it doesn't make sense as there isn't the demand to balance the risk-reward ratio in our favor. Instead, we've acquired a specific type of condo each time, as we've proven the model out with the first one, and each additional one was essentially a rinse and repeat of the same model.

Where I see there being potential risk in the LV market (I've lived there), is if you were buying across different parts of the area (i.e. some in Henderson and some in Summerlin), as the micro-markets are different, and therefore your financial models would need to be adapted.

The TLDR: Before you make any move, figure out what your goal is. If it is to create essentially turn-key cashflow within an existing development, go for the multiple units.  If it is to do a true value-add play, wait until the right thing comes along.

 

Are the condos all in the same complex?

I'll usually supply one if requested. We're considering installing mini-splits into a couple units for this coming summer. The amortized cost is minimal, and while we may not see an immediate return from a cashflow POV, when we re-rent we'll be able to pump the rent accordingly.