All Forum Posts by: David Krulac

Colby Miles,

Forget about it!

"If it doesn't cashflow, its not for thee"

Sure there are lots of people buying property that doesn't cashflow, and some even have good reasons, like they want a trophy property and don't care if they make money, they betting that maybe long term they'll make a killing, or they think that buying real estate is a hedge against inflation and will be a much better place to park money than CDs. Whatever.

But if you are starting out or an itermediate real estate buyer, then as far as I'm concerned you shoudl stick to positive cash flow and leave all the rest for less sophisticated buyers than your self.

William Bannister is absolutely correct.

Here's some examples of tax sale properties that I've seen:

bottom of man-made lake

side of cliff 50 feet tall

Army bombing range

Expired land lease for river front cottage totalled by flood 30 years ago

Expired lease for TV tower pre-cable, that was already removed from property

Land only with building owned by another party who had pre-paid their lease for 30 years, so if you bought you would start collecting rent in 3 decades.

super fund toxic waste site

Abandoned gas station with leaking under ground tanks

Abandoned steel mill

house with only 3 walls as the rear wall collasped into back yard

house on city demolistion list

Strip of land 2 feet wide, left over from road widening project

Landlocked residual land from highway project

Abandoned Quarry

Abandoned junk yard, various colored ground stains from antifreeze, gasoline, oil, automitive fluids and metal parts.

Slag pile

Chromnium factory

Abandoned building filled with 55 gallon drums of unknown liquids

Ravines

Wetlands

Flood ways

Drainage ditches

Site with endangered species

Garbage dump

Have a nice day!

In the thread about the TV show Property Wars, it was brought up about things found in and on foreclosed property.

1. In a recent one there was the last occupant's ashes. I called the relative to come get the ashes. I've found lots of dead or live bodies but all were critters, mice, squirrels, rats, snakes, all kinds of insects, ground hog, possum, skunk, and even found a dead cat. I never found any dogs but one person told me they found a dog chained in the yard and another told me that they found a live dog locked in the house. I didn't see that dog but did see all the evidence that the dog left.

2. I found major parts of cars and cycles, and a few whole cars but nothing of any value or nothing even running.

3. The most of the money that I ever found was change, some coins and there always seems to be lots of pennies on the floors for some reason.

4. A friend of mine says that there are always tires at these properties, and for the most part that seems to be true. This last one with the person's ashes did have the obligatory 1 car tire on a wheel, which the trash company won't take if it has the wheel attached.

5. I've never found any gold or silver, and very few currency, usually some cash in an envelope, or stuck in cards or books. I do lots of reading but I never use currency as a bookmark.

6. Often times there are some tools, but they usually are incomplete, inoperable, or abused. Recently I've found some cordless power tools but strangely enough they almost always are missing the batteries.

7. I friend recently bought a foreclosure and took out three 30 yard dumpsters of trash from the house. They only thing that he took home with him was one extension cord. He say that was lightest haul he ever had from a foreclosed house and he remarked at the irony of this house having so much tonnage, but so little usable stuff.

8. One house that I got was vacant for 15 years, and have everything still there, clothes, furniture, shoes, and all personal items and even a car in the garage. There was even food in the frig that had been there for 15 years with the electric turned off. There were pots in the frig with leftovers and all the food was black, unrecognizable blobs. The odor was one I'll never forget, I almost gag just thinking about it.

9. Usually the stuff left behind is mostly junk and trash, things that are broken, or missing parts.

10. Several house were so over grown with trees and shrubs that you could not see the house from the street. One house I couldn't find because the house was overgrown as well as the dirt driveway.

11. Another place was owned by an alcoholic who hadn't cut his grass in 5 years. The grass was about 4 feet high and looked like a hay field. The people mowing the grass kept hitting whiskey bottles and beer cans scattered all over the yard and hidden in the tall grass.

What kind of treasures have you found in foreclosed/abandoned houses?

Sam,

not exactly....

1. You advertise and get potential applicant and completed application. Tenant should ALREADY be Section 8 approved and have a voucher to show that. It will show the maximum rent that do and what portion is paid by S-8 and how much they pay themselves.

2. The S-8 rents for the entire country are at http://www.huduser.org/portal/datasets/fmr.html

fmr = fair market rents

3. Before the tenant moves in S-8 will have to inspect the unit and it must meet their standards.

4. After inspection then you can sign lease to start on the first of the month in which S-8 has already agreed to start paying the rent.
This may be the next month or the month after that. The whole inspection, approval, HUD paperwork process can take a month or two depending on the individual office workload.

I buy property at the foreclosure sales, called Sheriff Sales here, often. Sometimes we get inside, sometimes not. We look at the properties before the sale, we do not drive around from property to property during the sale. If we did that we would miss much of the sale. Soemtimes the foreclsoure list is 100s of properties and the Sheriff sells them very quickly.

From the original published list, about 1/3 get postponed, sometimes for seemingly no reason. There is an abondoned house that I used to own 3 owners ago that is on the Sheriff list. It is vacant for 2 years now and the owners have split and probably haven't paid their mortgage for probably 4 years, but the sale keeps getting postponed, and its not even owned by the bank yet.

Another 1/3 get cancelled. The owners sell their property, sometimes short sale, or they bring the delinquency current or something else happens to fully cancel the sale.

Of the remaining 1/3 most start at a price too high to be economical and end up as bank owned REOs. Particularly houses with mortgage guarentees like FHA and VA. The banks don't discount the prices and get their guarentee money. Of this remaining 1/3 about 10% to20% are sold to third parties.

I've bought houses at the sheriff sale and even bought an entire subdivision at sheriff sale.

@Sam Schlacter

I've been renting section 8 for many years though it is a small portion of the business.

I like to see a section 8 tenant with a job. One section 8 tenant was a state employee with 2 kids and qualified for section 8, with S-8 paying about 1/3 to 1/2 of the rent.

Qualifying S-8 tenants by income doesn't work as many don't have income. Section 8 requires a parent with children over 6 years old to work 20 hours a week, while a parent with children less than 6 years old don't have to work at all.

An eviction will take the S-8 tenant off the S-8 list and is a deterrent as well as the S-8 yearly inspections to keeping the property in good order. Good housekeeping is a S-8 rule and poor housekeeping can be a cause for inspection rejection and re-inspections.

A single parent with 2 kids of different genders will qualify for a 3 bedroom unit and can be ideal tenants as there are only 3 people in a 3 bedroom unit. Elderly single tenants are also usually good section 8 tenants.

The rent comes like clock work being direct deposited into your account. Some of my tenants have gotten 100% rent but that is rare, most get from 1/3 to 2/3 assitance from Section 8 and have to pay the difference themselves plus the utilitites. I always include sewer and trash charges in the section 8 rent for houses/townhouses and always include sewer, trash and water in the apartment units, but always have the section 8 tenant pay their own heat and electric.

2. You can deny any applicant S-8 or non S-8 for any reason, even bad breath, sloppy clothes etc, as long as you are not discriminating against any as a protected clss as defined by law, like race, religion, sex, age,etc. If you reject somebody for a credit score, you should have that in writing and apply that standard of yours to everybody.

3. Lease is with S-8 and tenant, I also have tenant sign my standard lease, so the tenant in effect has 2 leases.

4. We never pay heat or electric for a S-8 tenant apt or house and never water metered seperately for a S-8 house tenant.

5. Here, and I expect most S-8 offices require an inspection of the proeprty before they will pay any rent. This can be a delay, in some counties the inspection can be a month out.

6. The S-8 allowable rent is on the HUDUSER website and is the median rent for the area. They don't usually pay more than the median rent. If your market rent is above the median rent for the area, S-8 won't pay it. Many of our properties, actually most of our properties are above the S-8 max rent level. When we advertise we always include the monthly rent in the ad, to prevent a lot of inquiries expecting lower rents. When we have a place that meets the S-8 max rent level we will include in the ad "SECTION 8 OK" which attracts many inquiries as so many properties are above the rent levels or the owners/manager won't rent S-8.

@Mary M.

Since you bid on the 21st day, you must be an owner occupant as the first 30 days are reserved for owner occupants and HUD will not accept investor bids during that period.

Investors/cash bidders must close in 30 days, owner occupants can sellte in 45 days. If you exceed those tiem frames HUD requires an extension which they charge for, even if the delay is their fault. They will entertain a request for refund of the extension fee, but it is not a sure thing.

They are fussy on the deposits, we recently had one kicked back because the deposit was too much. There are several asset managers for HUD and they have slightly different rules. One of the asset managers requires the deposit to be a ceritified check, while another accepts the broker escrow account check.

If you don't have the original signed docs to them in 48 hours, no faxes acceoted, your contract will be rejected.

They will accept less than 80% but it depends on the days on market and who the asset manager is. We did have one accepted at 44%, but that is extremely rare for the ones I'm tracked. And obviously the nicer the property or the lower their price is in relation to the value the more competititon that there is. One recent HUD sale that we did not get was a house built in 2010 and sold for almost $300,000 when new. HUD sale in 2012 was for about $125,000.

They are fussy, and have a bunch of rules, many of which are on their website www.hudhomestore.com. No all of their listings are bargains, some are just plain over priced and they almost always need a work sometimes a lot, some times not so much. In cold climates freeze damage is a big concern as the properties have almost always been vacant at least through one winter.

I bought a house from the state department of transportation. They had bought the house to build a highway interchange. The neighbors protested the interchange design and the state changed the design to skirt the neighborhood and ended up with 2 extar houses that they didn't need to tear down. They rented the houses for 7 years then by an act of the legislature and signed by the governor, the property was put up for sale at a public auction.

I ended up being the high bidder at the auction and signed their contract, putting 10% deposit and the balance due in 30 days. I was planning on moving into this house and gave notice to my landlord that I would be moving in 45 days, gave myself an extra 2 weeks to move, and they quickly re-rented my apartment.

30 days comes and the state is not ready to settle. I'm ready to settle, but they are not. I went to the state capital and met with the deputy attorney general, who was handling this house sale for the state. I explained the situation that I was about to become homeless and asked for permission to move into the house, since it was empty and my apartment was re-rented. He said that they could not let me move in as they didn't have the property insured. Essentially they were self insured. I said that insurance was no problem as I had already gotten home owners insurance in anticipation of settling in 30 days, so I had already bought insurance. The deputy AG said that if I produced a paid insurance policy they would let me move in.

I did and they did. So I moved in before settlement. Now the muncipality had a rule/regulation that the sewer and trash bills had to go to the record owner, which was the state. So the state continued to pay the sewer and trash bills. And the state had also contracted with a landscaping company to mow the grass as long as they were the owner, so the grass cutting was paid for by the state also. I did pay for the gas. electric and water.

You'll notice that at no time in my discussions with the state was there vever any mention of rent or mortgage payments. I thought that we would be settling in a matter of days, and the deputy AG never brought it up either.

I ended up living there rent free and mortgage free for 6 months. It was then that I decided that this real estate was a pretty good move.

Kyle,

Congrats on discovering Real Estate, it has been very good to me and many other investors.

Beginning as you are, and buying your first property to live in then move and keep it as a rental is a great way to start out. For 1 thing the financing for owner occupants is easier to get and at better terms. FHA will finance 96.5% of the purchase price and you can often have the seller pay for much of the closing costs, FHA allows the seller to pay up to 6%. So you only need 3.5% down. Save your cash, you can use it for improvements and subsequent purchases. I think starting out you should borrow as much as possible for as long as possible. Borrowing 96.5% for 30 years, makes sense to me at this stage of your RE career. Later on you can think about 15 year mortgages. Currently 30 year rates are just over 3% interest and 15 year rates are just below 3%.

For an owner occupied mortgage the lender will require you to sign a document that says that you indeed are going to move into the property and occupy it as your full time primary residence for at leats a year. There will be no restriction on getting paying room mates. After the year is up you can do the process all over again getting another owner occupied mortgage for property # 2, move into it for another year, and then repeat. Some body I know did this buying a townhouse, another townhouse, a single family house, a 3 unit apartment, a 4 unit apartment and a farm, ALL as an owner occupant with owner occupant cheapest rate mortgages. He became a serial mover and a serial buyer owner occupied properties. If you're willing to move every year or so, this can be a lucrative real estate inventory builder.

Persoanlly I do have a preferance of 3 bedroom houses (SFH or TH) over 2 bedroom houses. apartments and condos are a different story.

Family was NOT in real estate business, I became self taught. First house bought single family house from the state department of transportation at an auction. I had never been to an auction, if was interesting and have bought many more properties at auction since.

I'm always looking to buy real estate, good times, bad times, everywhere in between. I tell people that I want to buy property. Have bought a bunch of property that was not for sale, not listed, not FSBOed, not advertised, no sign, etc. The second property that I bought was a multi-unit that was owned by the grandmother of the janitor at the school where my girlfriend taught. Only 3 degrees of seperation. The grandmother had passed and the family wanted to sell the property and settle the estate.

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