All Forum Posts by: Denise Evans

@Gabriel Welch

The classes and books and videos are on my website.

You have to research Alabama in particular, because it is very different from other states. When you purchase at the auction, you buy the tax lien, but you are also entitled to immediate possession. You can fix the property up (if needed), rent it out, and keep the rent money even if the owner redeems. Plus, they have to pay you for the VALUE (not the cost) of the preservation improvements. That is, the before-and-after difference in value of the property because of your preservation improvements. After 3 years, you receive a true tax deed. The money-raising strategy comes from buying properties from the State inventory that did not sell at the annual auctions.  You can buy for as little as $1,000, with a redemption price of many thousands of dollars, without having to make any preservation improvements.  I have classes, videos, and a book on this topic if you are interested.

Gabriel, you might want to check into Alabama tax sale properties. They can be purchased for VERY little cash. In the range of $1,000 to $2,000. With the right strategy, they will almost certainly get redeemed rather quickly, generate far more than the statutory 12% interest, and cost you absolutely nothing in rehab expenses. After you do a couple of those, you will have the equity you need to target rehab-and-keep tax sale properties, or the equity for a more traditional real estate purchase.

Do not rely on Zillow. Research the property records to find mortgages. Unless a mortgage is more than ten years old, the principal balance will not have reduced by very much.

If a property is correctly listed as a short sale, but the 1st mortgage balance is less than the list price, then a 2nd mortgage is causing the problem.

Call the listing agent to see if they will give you more information that will yield some insights. If not, then talk to some other agents who work in that same price range and area of town. I guarantee you, most of them know the story behind that property.

Then, get back in touch with me.

@Vicky S., I usually worked on properties with loans in the range of $375K to $1.2MM.  Properties in the $375K to 600K range were considered McMansions in this market, and those up to $1.2MM were considered luxury properties. I tell you that so you can compare to your own market. Generally, the banks were more flexible with luxury properties because that market always recovers more slowly than starter homes or McMansions.

Years ago, when I worked on larger commercial transactions, I saw the same relationship. The larger the loan, the larger the discount.  Probably because the fear of a mistake is also larger.

In your situation, you said the first mortgage balance is 20% less than the list price. Why do you think this would be a short sale opportunity? Is the list price any place near the market value? Is there a second mortgage that is perhaps preventing a deal at a reasonable price?

Hardships can be a variety of reasons that people would normally not consider hardships. For example, on Fannie/Freddie loans, an acceptable "other" hardship (besides the check box ones on the form) includes "property or borrower's employer located in an area that has suffered a federally declared disaster."  Baldwin County, Alabama, (the beach area) has had 7 federally declared disasters since 2007.  People finally couldn't keep trying any longer. On every single short sale where that was the only hardship I could demonstrate, every one got approved. That's on short sales dating from 2009 through 2014.  My advice--carefully review those hardship reasons to see if one might apply.

Hi @Scott Steffek, sometimes you just don't know all the facts and hidden agendas. Rather than waste time and emotional energy on that type of deal, move on. It's kind of like that romantic relationship that seemed perfect but just fizzled out.  You'll make yourself crazy wondering why.  Usually, there is no lesson to be learned, it's just something irrational about that situation, or an outside factor (such as another love interest) that you know nothing about and can do nothing to fix.

Don't forget about things like licenses, rental taxes, legal and accounting. Also, even if you never have vacancies, you need to include a vacancy and credit loss factor. A property might be vacant for one week out of the year when you turn tenants, for example. A tenant might move out owing you money, creating a credit loss. You should also calculate a reserve for capital expenditures.  If you will need new appliances, or hvac units, or carpeting in a certain number  of years, you should put a certain amount of your cash flow in a savings account or "sinking fund" each month so you will have the cash when you want to make those purchases.  This is not an expense of the property, but it is a cash flow deduction.

What part of Houston are you targeting? We used to live in Cypress, I worked off the SW Freeway in the Arena Towers, and my husband worked just outside the Loop on Post Oak. Houston has so many distinct areas with their own personality, there are lots of opportunities.

A duplex is a good starter investment because it gives the economies of scale with multiple units, but without jumping into the deep end of the pool with apartments. It will also alert you to multi-tenant issues on a small, easily fixable, scale. For example, people who invest in single family homes rarely think about noise control issues, and extra insulation between units to cut down on sound transmission. If you go from SFR to apartments, you won't think to check insulation and firewalls as a due diligence item. They don't think about pets, their affect on common areas shared with other tenants, and the landlord's responsibility to provide safe common areas. Also you'll gain experience in trying to show a unit and the other tenant is helpful, or antagonistic, and how to handle that. If the numbers work--go for it!