All Forum Posts by: Hal Thompson

I've never done this as a business, but i know about surplus funds related to buying properties at auction. How these funds are managed is dictated by state law, so you will need to pull the laws and regulations related to surplus funds for whatever auction (deed of trust foreclosure, sheriff's sale, etc) the funds are related to. Some jurisdictions I operate in amended their laws a few years back because the law used to be vague on who was owed surplus funds after a sheriff's sale. In some cases, the homeowner could be paid the overage at an auction before junior lien holders, if they were first to claim the money.

Like any other source of cash, there is of course an opportunity in connecting people who are owed these funds with the methods required to collect them. However, most properties go to auction for lack of equity, so it's rare to have a pool of funds that exceed the amount of the debt. Maybe 25% of properties will have an overage that exceeds the first lien. Then, there need to be no other debtors in line to collect the overage (or the laws have to support the former homeowner collecting before the junior debtor...maybe still on the books in some places but far rarer after the GFC). Then presumably you will only get a piece of the action, since you require the person who is owed the overage to agree to let you collect.

Ultimately, it's a lot of work for probably not that much money. In rare cases these funds may exceed $50k. In most cases, the total pool of money is probably between $1k-20k. It will take going through hundreds of auctions to find maybe 5-10% what have any surplusage at all. My guess is there are some sweet spots in various jurisdictions for this, but it wouldn't be my first choice for getting into a new business.

I also want to point out that "self-managing" does not equal do all the work yourself. I have my go to plumbing company, my go to fridge repair guy, go to handyman, etc. In some cases, I show up to do the work. In others, I have someone else go do it for me.

The difference is my hand is on the rutter at all times.

LOL this +1000. I won't lie, it would be nice to have someone else do the work. However, you can't turn over the management of your business to another entity any more than you can turn over management of your life and expect good results by definition. Some of the dumbest people I've ever met have worked for property management companies. They were lazy, stupid and seemed to lack any internal drive whatsoever. Turn your livelihood over to some random property manager at your peril.

Bucket #1 - Those that hire a professional property management company
For those of you in Bucket #1 - Congratulations! I'm guessing you will run the world someday.  

Well...there is Trump I guess, so maybe he's not wrong. This whole thread seems like one big troll to me.

It's about to get very chilly in BRRRRRRR land...

I know very seasoned investors who won't buy property anywhere they can't drive in 2.5 hours. Once you get some practical knowledge buying/flipping/renting homes, then you might want to take a look at remote investment opportunities. I would caution you not to invest remote for your first purchase, unless you are investing through an entity that does this for a living. All of the problems that are baked into buying and renovating investment property are 5X worse when done from some other city.

The answer is "it depends". What is your personal financial situation? Will you end up paying more or less for housing if you buy the condo? Could you rent the condo to cover your costs if you get tired of living there or have to move jobs or even cities?

There is never an inherently good or bad time to buy real estate. Right now, you may be able to get some of the lowest interest rates on a mortgage in all of recorded history. However, we have also had 10 years of low rates and rising real estate prices, and now 30M people are out of a job. The market for real estate might get very soft over the next few years. Will you be able to ride it out to the other side, if you lost your job, or if rents dropped by 25%?

Sorry to make it complicated....but it is complicated. Being good at real estate investing is about weighing your upside and downside risk, in the context of your portfolio and personal appetite for risk, and then coming to a strategic decision. There are unfortunately no easy yes/no answers in most cases.

I occasionally buy properties at foreclosure auction in a handful of states that still have redemption laws. Quite often, it is the law when a property is subject to a statutory right of redemption that if you improve the property at all (with a few exceptions), and it is redeemed, that your costs to renovate the property are lost (you won't get that money back as part of the redemption payoff). Many an unwary buyer has been caught in the trap of renovating property subject to redemption, only to find they don't recover those costs when the property is redeemed.

This has led to some interesting situations where I have rented properties during the redemption period that, upon first look, no sane person would think could be rented. Giant red stains on the carpets, ripped up flooring and trim, holes in the walls, etc, etc. Usually, after a day or two of cleanup, I can get the unit into rentable shape for less than $500, and rent it for say $1000 a month (which is usually WAY below market, but enough to cover any ongoing costs such as taxes, HOAs, maintenance, etc.). This is good enough to ride out the redemption period, which in some states can be as long as a year or two.

My reason for telling you this is that you can rent the unit without new floors, and that you should try to find the price at which it would rent sans new flooring. Maybe even post two ads, one with new flooring and one without, and advertise them at different price points based on what you expect to get with new flooring. This will give you a sense for whether the renovation makes sense at this time.

While of course a nicer unit will rent for more money in most cases, I've always found this delta to be pretty low. It's hard to take a property in a "B" area and get outsized rents through renovation or "fancying up" the place. If you have a "B" property in an "A" area, you can sometimes get much higher rents through renovation.

Eventually, all properties will require renovation. Sometimes it's forced by circumstance (i.e. roof leaks and forces a renovation of the flooring). So at some point you will probably replace the floors, but you should see what you can get without doing fancy renovations that most renters probably won't really care about. My 2 cents...my guess is others probably have different advice.

Is this "lien" a deed of trust? You could contact the trustee and tell them that the Deed of Trust was misfiled, and that you would like them to correct the error. Do you have paperwork from the loan that says it is secured by a different property? You will need some evidence to backup your claim. If all of the paperwork specifies the wrong property, this is going to be more complicated.

Pro tip: Get to know how to search your local recorder's office. Not only is there a lot of interesting information for real estate investors in there that will give you a leg up on competitor's, but you will be able to check these kinds of things in real time and not have to worry about what kinds of mistakes other people are making that will impact the future marketability of your investments. I have caught many mistakes over the years in recorded documents basically in real time (there's sometimes a lag of a day or two before recorded documents appear online), and forced the mistaken party to correct the mistake. It's way harder years later when the responsible party has retired or died, or the loan has been sold to four different entities.

@Jeremy Benezra Yeah, but that's precisely my point. Your flipping transaction costs are a deadweight loss to the market. The only value they create is in the tangible increase in livability to the owner. If the transaction costs of buying, light rehab, and selling outweight the value increase for the buyer, they will choose other options in the same neighborhood. In the past few years, when inventory has been incredibly tight, this has tipped the scales in favor of flippers and sellers. But in a non-inventory constrained market, it may tip the scales away from the flippers, since your transaction costs are the buyer's deadweight loss.

As inventory increases, buyers have more options at different price points. They don't care what it costs you to flip the house, only what they can get for the same amount of $'s. If they can also buy a ~$750k house, invest $150k, and not have any transaction costs, they may prefer that to your flip.

So you paid $784,000 for this distressed property a year ago (at the absolute top of the Seattle market), rehabbed the kitchen, and now want +$450000 for your troubles?

Seems like some flippers are going to learn that the bidding wars of the last few years work in reverse also, when the buyers have all the options/power...