All Forum Posts by: Martin M.

@Robert Wood

The more that you borrow, the less of your own money is tied up in that property, which means... you can use your own money as down payments to purchase additional investments. That's an oversimplified answer but you get the idea.

@Vladimir Kunau

Some hard money lenders may work with you, even without the experience.... others will want the experience. A good next step may be to make phone calls to multiple hard money lenders to test the waters there. Search for lenders in your area as a starting point. You might end up hearing "no" from the first 10 you call but you only need 1 "yes"

If you can find a run down property in a sought after area, and create equity in it through a rehab, you've got two paths forward after that... refinance as you've said or even just sell at a profit if you can't get the refi.

The critical piece is running your numbers on the rehab as accurately as is possible. It's easy to screw this up on your first investment. You won't get the numbers 100% exact, but you need to aim for that so you don't hugely underestimate the costs and lose your shirt.

The J Scott BP book on estimating rehab costs is meant to be good. I haven't read it but that may also be a good next step.

You mentioned investing in multi family.... The BP Brandon Turner multi family book is a good read for that... some of the content that could be useful to you is calculating your cash flow, specifically running through the various expenses an investor has and the different types of financing and the limitations of each of them.

And I hear ya... it's tough when your job demands so much of your time but just take baby steps... you will get there! Good luck

Hi Stephen, if the numbers work, you could always rent it for 1 year and then sell if it's not working for you. If you haven't already done so, I'd work and re-work the numbers in a spreadsheet to ensure that you've got the return calculated as accurately as possible. Numbers to consider:

I appreciate that the tenant may pay the first three of these, but still mentioning them in case not.

Utilities Water

Utilities Electricity

Utilities Heat

Utilities Garbage & Recycling

Snow Removal (does it snow in Seattle??)

Landscaping

Proeprty Taxes

Insurance

Mortgage Payment

Vacancy - 7 to 10% is national average

Property Management - Roughly 10% of total rent (Call a few local property management companies to get actual quotes if you haven't done so)

Repairs - Oven not working, plumbing etc.

Capital Expenditures Reserves - What shape is your roof in? etc.

Also for your return, you'll want to calculate that based on the money that you've personally invested out of pocket into the place. If I'm understanding your post correctly you might be calculating the return based on the market value of the property, i.e. 775k - but it doesn't sound as if you've placed 775k of your own money into the property, since you've stated that you have a mortgage.

What you'd want to do instead to calculate the return is you'd take your annual rental income, minus all of the expenses in a year, expenses being everything that you're paying out of pocket in relation to the property, such as the examples above, and that gets you your cash flow. For example's sake, let's say rental income's 36k a year and all your expenses are 34k a year. Your cash flow is 2k a year (36k - 34k). If you've placed 150k into the property, i.e. down payment etc - to calculate your return you'd calculate:

2,000 = x% of 150,000

OR

2,000 divided by 150,000

which equals a return of 1.33%

The wild card here is, Seattle as I understand it has had a strong housing market in recent times. A decade from now could you have an additional $300,000 in equity? Potential appreciation is something else to consider in addition to your annual return. 

Good luck!

Bigger Pockets podcast 580 is relevant to some of the discussions here. It was with auction.com's VP of economics. One of the takeaways that I got from the podcast was that the early 2022 numbers for foreclosures should be taken with a grain of salt, as others here have pointed out. However... what really caught my attention in the podcast was this:

He'd stated that auction.com's internal data around the national housing market as a whole showed a softening in the market in those months right before COVID struck. I'd ask you to read that again. A softening in the market right before COVID struck. This gives credence to the idea that the government's actions during COVID, i.e. forebearances, historically low interest rates etc. was an intervention that likely created an artificially inflated housing market that otherwise may have been about to level off or correct. We'll never know for sure at the end of the day, but this sure is a strange market that we're in.

@Jason Reynolds

Hi Jason, I'd speak with a probate attorney that works in the county where these properties are. They'll probably answer most of your questions quickly. Probate laws can be quirky depending on the state.

Regarding executors though, this is fairly straightforward. They're typically designated on the Will itself.... or... appointed by the court if no Will. Check with the county clerk (or probate attorney) for this county and ask if Wills are public record once they've been filed with the county. If so, ask what you'd need to do to view a copy of a Will. From there you can identify the executor in it and so on.

Also something else that you may have not considered... depending on the state law... it may be legal/normal for Wills to be filed in the state but no probate cases actually opened for them. Point being, you may want to expand your search to Wills filed, to identify heirs. Not just open probate cases.

Regarding identifying whether or not an estate owns real estate... that's a good one to ask the probate attorney... but... some form of an inventory (I'm using wrong legal term here because I forget the name) does get filed with the court by the executor, which lists all of the assets in the estate. Perhaps that's also public record that the county clerk can provide to you.

Searching the county recorder as you've already suggested I'm sure would yield a lot of info. too.

Good luck!

@Marcos Ruvalcaba

Between the two my vote would be Realty Shore

How about Shore Realty instead? Might sound nice with multiple locations... Shore Realty San Diego, Shore Realty Anaheim and so on

Hi Tony, As I'm sure you know, most auctions don't guarantee clear title. This is just one of the high risk aspects of buying at auction that spooks private lenders. That said, hard money lender like these guys are saying is one option. For local banks etc. that you can build a relationship with, it's likely worth trying that at some point, as obviously you'd get better terms. I'd caution though, you may have to try many local banks to find one that's willing. Again due to the high risk (but never say never).

One path you might try.... go the road of HMLs to start, heavily document each deal along the way, so that you can then point to a successful track record when speaking with a local bank, and you'll be able to demonstrate that you know what you're doing. For example, property one might look like... borrowed 300k from a HML at x%, property purchased for 200k at auction, rehab costs, property taxes and realtor commission totaled 60k, profit earned before taxes paid = 40k and so on. The employee(s) at the bank may know absolutely nothing about real estate. So being able to talk through your successes with the paper trail to demonstrate them can go a long way (include a few graphs or pie charts... a lot of bankers like visuals).

This same paper trail approach can also be leveraged when seeking outside investor money. Outside investors, like banks want to see a successful track record...  and a repeatable system that is generating profit. Wish you much success!

@Austin Peters

A good read. Breaks down a complicated topic (foreclosures) into easily understandable terms.

https://store.biggerpockets.com/products/bidding-to-buy

Hi Sara, the first thing I'd probably look at is, has the seller been designated by the court as the estate executor (executor typically has the authority to sell the house)? Typically an executor is named in a Will, but there isn't a Will here.

Regarding tax liens... you're right to be focused on this. I'd remain focused on that. Call the county treasurer's office, or visit them in person, to obtain an accurate picture of what's going on here with the back taxes. Specifically, you want to know if the treasurer has a tax sale scheduled for the property. Also, call the county assessor to identify, who last paid the property taxes. You want this to be the homeowner on the title. In this case that'd be the lady that has passed away. What you're trying to identify here with this step is this, if the tax lien has been sold, you'd likely see that someone other than the homeowner has made proeprty tax payments for the property.

It doesnt sound as if there's still an active mortgage on the place, with the taxes being so far behind. That said, you've likely checked for a mortgage already through the title search, but if not, you need to know for sure if one exists, because if it does, that still needs to be paid off monthly, even with the owner having passed. Otherwise a mortgage lender can still foreclose.

If it were me, I'd take these steps...

1. Look into the property taxes. With tax sale being the focal point.

2. Get a full title search with insurance and identify all liens (sounds like you did already)

3. Google "county name where property is located" followed by probate attorney. A probate attorney in that county can probably tell you what's going on with the case and may have more access to the probate case documents than the general public. You could also ask the attorney to reach out to the attorney representing the family in probate to get a clear picture of what's going on with the case. You can ask them for their general sense of how long it may be before you can purchase the property (provided the title is clear). Ask the attorney to be clear about their fees up front and let them know you're prepared to walk from this deal already.

Last but not least you can also run the title search yourself through the recorder of deeds for the county. I wouldn't do this in lieu of paying a professional title company, especially for a cash investment, but you can do some of your own homework on the property there, in addition to the professional title company's search. Depending on TX law, you may be able to view some of the court case documents yourself directly as well, whether online or in person at the courthouse's computer systems. You could call the county "clerk" to find out. Good luck!

@Josie Sweeney-Rogers

Hi Josie, you may have seen this site already, but posting in case not.

https://www.chicago.gov/city/en/depts/bacp/supp_info/sharedhousingandaccomodationslicensing.html

The Shared Housing Ordinance link on that page may have some info. that's helpful to you.

Also, I know there was a ban put in place on one night rentals a year or so ago. If I remember right, the mayor was looking to crack down on units being rented for parties or something like that. I don't know if that's still in place. Worth looking into if you were planning to allow 1 night rentals