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All Forum Posts by: Jim K.

Jim K. has started 77 posts and replied 5307 times.

Post: Foreclosed Homes-Help Please

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

You're describing a short sale.

The homes you're looking at are going to be auctioned. Foreclosure is extremely state-specific as well as county-specific and sometimes city-specific, and you need to study the process carefully before you wade in and bid. This is NOT an attempt to dissuade you from doing so -- bidding at the local sheriff sale on foreclosures is a major part of our business model. But you have to learn about the process in your state and county. This can take a long time.

With that in mind, this is what we do here in Allegheny County, PA with a mortgage foreclosure we're interested in. We track the foreclosure in the county's online court records system. We read the case thoroughly. We look at the property's deed and any outstanding mortgages through the online property records system of the county. We do research on the current owner, and we research the title. Learning how to do all of these things took a great deal of time and effort.

On the day of the sale, we go to the lawyer representing the mortgage foreclosure entity and we learn what they're willing to sell it for, what their bid instructions are from the people foreclosing on the home. If their maximum bid instruction is acceptable to us, we tell the lawyer, as a courtesy, if we plan to bid higher than their bid instructions, and we immediately bid a dollar higher than their minimal bid limit when the sale comes up and the lawyer representing the foreclosure entity bids the minimum amount to start the sale.

As another courtesy, I also talk to other regular investors at the sale whom I have done business with or whom I have another business relationship. I inform them that I want the property. The wholesalers who are willing to bid on the property know that I am not a wholesaler and can therefore afford to outbid them on the property and still make money on the deal. For most of them, the maximum bid instruction is too much anyway. They know me and I know them, and we both know that this is not the last sale we'll be attending together. Sometimes we horse trade -- I won't bid against you for that property, you won't bid against me for this one. Sometimes we just trade information: "That title isn't clear, I saw bad cracking on the back wall of the foundation of that place, FYI, that one was just postponed." That sort of thing.

If all goes well, I bid the minimum bid plus one, and the officiating sergeant ends the sale. If not, I will bid against whoever bids until I hit the maximum amount I am willing to pay for the property. In most cases, I will have had at least a month to come to that number. If I am bidding against obvious amateurs with their hearts on their sleeves at the auction and I sense that they are willing to go significantly higher, I have no qualms about bidding them up a bit as a bar to entry into the group of experienced  auction buyers of the county who get things done in a civilized way and don't waste each other's time and energy when acquiring properties. The 100+ seats of the Gold Room at the Allegheny County auction are overfilled each first Monday of the month with rubberneckers who will never successfully acquire a worthwhile property at a decent price in that room. They just don't know it yet.

There are at least six regular wholesalers and ten more people like me at every monthly sheriff's sale in this county. I can't imagine St. Louis is much different from Pittsburgh. I do not know the foreclosure laws in Missouri and St. Louis. I do not know if you are looking at mortgage foreclosures or tax foreclosures. I hope I have convinced you to investigate the laws in St. Louis thoroughly and not think of the auction as a one-off place to buy properties. You can get a great deal, you can get lucky, but the people who repeatedly succeed at the auction are not quite normal. Most of them have formal research and investigative backgrounds, in addition to being bright, organized, knowledgeable, hardworking, highly competent, good at taking calculated risks, and, of course, quite wealthy.

Post: What are realistic expectations of a property manager???

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

@Mike Abramov

My take on this is pretty straightforward and why we self-manage our local properties: property managers work in an almost completely unregulated business. They are trying, as all businesses do, to maximize their income by leveraging their strengths. If they do no do this, they are not competitive and go out of business. They sell convenience in a service-based industry. It is very easy for those who sell convenience to develop a deep sense of contempt for those who buy convenience. It is the rare individual in the convenience-selling segment of the service industry who can recognize this tendency and stoutly resist acquiring it over time or allowing it to fester in the people who work for them. If you find this person or business entity, you can expect to pay a premium for their efforts.

Post: Risks involved with buying up foreclosures?

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

@John Krasner You write: "Are there any risks involved with purchasing on foreclosures sales that I am not aware of?"

Well, what are the risks that you are aware of?

Post: Quick Survey: How Did You Discover BiggerPockets?

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

I went to a guru real estate seminar five years ago and the speaker somewhat disparagingly mentioned BiggerPockets as a source of free information and a way to network with real estate investors. I got on the site and started reading the forums. Considering that at the time of the guru seminar I had no rentals and I currently own two duplexes and three SFRs, I've increased my net worth four times over, and my wife and I look forward to the future with great anticipation instead of dread, yeah, I can't complain. BiggerPockets has been a priceless source on what to do as well as what not to do in this business.

Post: Tenant is late and has cancer

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

@Markus C.


All you would need would be the tenant going to the media with that story and even the hint of a shred of proof, and your name would be mud as a landlord where you live. If your cancer-patient tenant can set up a website and host it on a free server...small businesses do not survive long by abusing their customers.

Post: 2 years and still nothing!

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

@Sherman M.

I do not know the one best way. I am sure that there are multiple good ways. But what I'd do if I were you is to buy a small, cheap investment property, or better yet, an inexpensive, run-down house for you and your family to live in that has an additional apartment to rent. Even two extra bedrooms or even one would fine nowadays in the age of Airbnb. I would buy that investment property/house hack and move into it and/or rent it. Then I would aggressively focus on paying down whatever financing it took to get the house, fixing up the house in my free time, and learning how to be a decent landlord or Airbnb host.

I would learn how foreclosures work in my county and state, doing the research and spending the time to figure it out. I would choose a target neighborhood in my area to invest in, and I would learn the area frontways and backways, walking the streets, taking notes, printing up a big map and making notes on it, visiting the shops and stores, eating at the restaurants, learning my way around the municipal building of the place. Of course, you should already have been doing quite a bit of this in your attempt to become a wholesaler. I would get to know agents in my target neighborhood. I would take them out for lunch to pick their brains about the neighborhood. Above all, I would use public records to find out who the tradesmen that most frequently service the area are, starting with the master plumbers and locally licensed electricians, and I would get to know them and ask them about the agents they most frequently work with.

All properties that you consider will need to be renovated, in some way. Either they need to be renovated as durable, hardened rentals or they need to be renovated as high-value for-sale properties. I would spend a great deal of time and energy learning the nuts and bolts of how this is done and what it typically costs. The more effort and energy you spend here, the better flipper you'll be and the fewer times you'll be taken advantage of as a novice in the field.

If you have any questions, don't be afraid to reach out, OK?

Post: 2 years and still nothing!

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

@Sherman M.

Here's my take on wholesaling as the first step into REI:

You're not going to become a good wholesaler with two years of experience. Wholesaling of course involves finding deals that other investors can't and passing them on to investors who pay you for them.  By definition, these deals have to be better than the deals that the investors might find themselves. They have to be spectacular deals, special deals, awesome deals, super-duper deals.

An awful lot of guru training seminars tell you that the way to get into real estate investing is wholesaling. They call it all kinds of things, but really, it's finding deals for well-established real estate flippers and passing them on. The well-established flippers are supposedly too busy flipping to find their own deals. This is wholly untrue, of course. It also only works reasonably well in an up market, where there's plenty of money to be made in flipping.

The reality is that everyone is exposed to unexpected real estate deals in various ways, through our jobs, through our network of family and friends, through living in the neighborhoods that we live in, through our various professional contacts. A great deal of real estate exchanges hands under the radar. The guru training seminars that tell you that the way into REI is through wholesaling really just expect you to be able to mine a deal or two from your little slice of the under-the-radar real estate market and pass it on to flippers who would otherwise never be able to find it. It's the same sort of reason why Kirby keeps training vacuum salesmen for the opportunity of a lifetime. The Kirby people don't really expect you to be able to sell dozens vacuums door to door. They expect you to be able to sell one or two of their vacuums to your own friends of your family, whom they could not otherwise hope to reach as customers.

So the gurus are feeding you a lot of hype about how to find deals when all they really expect is for you to tell an established flipper that your Aunt Martha's friend Juanita's neighbor Billy Ray just died and Billy Ray's sister told Juanita's hairdresser Marq that she just wants to get rid of Billy Ray's old house because he had a huge stash of transvestite porn in his basement that she really, REALLY doesn't want to go through and throw away to get the house ready for retail sale.

What do you want to do in real estate? Let's start from there.

Post: Tenant is late and has cancer

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

You're being forced to pay a compassion tax that the people who don't want to change heath care in this country are never in a position to be forced to pay -- they're not hands-on landlords. The compassion tax is levied rather unfairly and haphazardly on people like us, as you can obviously see.

Here's my solution: find her a nicer apartment/house than the one you're renting her. The place should be closer to her care centers than your apartment or house. It should cost more to rent than what she pays you. Go to her and offer to let her out of her lease. Offer to subsidize the difference between your rent and the new rent for the next year. Offer to reimburse her for a moving truck.  She hires it, sends you the bill, and you'll pay it. If she asks why you can't just pay for that moving truck, well, explain that the truck and mover's rental has to be in her name "for tax purposes." Trust me, she'll never ask what that means. Offer her the world, just put nothing in writing.


Go with her to sign the lease for the new place. Give her the money for the security deposit, cash up front. Subsidize the first month's rent as promised, cash up front, if you need to. That's your minimal tax.

The moving truck will come, you'll say your cordial goodbyes, and voila, she'll be living elsewhere. As she left, she probably told the whole neighborhood what a fine fellow you are. Your problem is solved.

Change the locks on the rental. Change your phone number. Throw the mover's bill away when it comes. If she comes out to your house, call the cops. If she vilifies you in the old neighborhood, you should sadly shake your head. "It's really sad, but she couldn't hear what she didn't want to hear. It doesn't matter that I paid (insert inflated number here) to help her. People in pain get that way..." Get your alternative narrative out there.

What, does the taxman always get nothing but God's honest truth from you at tax-time? Or do you work to avoid paying the highest tax rate if there's any possible way to do so without running afoul of the law?

In closing, I'd like to point out that this sort of promising and alternative truth-telling is obviously the royal road to success in real estate investing. Just look at our President.

And if she gets too mouthy, you can send a guy to talk to her in a parking lot.

Post: Replacing the flooring in my rental.

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

@Gilbert Lugo

This is one of those things that people seem to wildly disagree about. We do our own flooring installations in low-cost units, and it's been six years since I've done anything other than triple-polyurethaned hardwood and high-strength (PEI 5) tile.

This is not worth doing unless you handle your own flooring installations AND handle your own maintenance AND you plan on holding the rental for a long time. If these three things are true, tile and hardwood are absolutely the best way to go. It took me a long time in this business to understand this. PM me for details.

Post: PM is keeping security deposits rather than charging monthly fee

Jim K.#3 Investor Mindset ContributorPosted
  • Handyman
  • Pittsburgh, PA
  • Posts 5,456
  • Votes 13,764

No, never, and it sounds amateurish and shady as hell. I manage and work on my own properties. That security deposit stays in escrow, and is returned in due course or used to pay for repairs made. Often, it's more trouble than it's worth to treat that money correctly. That's how it's supposed to be. In Pennsylvania, you're supposed to return the security deposit after a year passes.

We've run up against story after story here of landlords pocketing security deposits from tenants who feel powerless to stop it. Our business model is to have long-term, well-vetted tenants in our properties and monkeying around with security deposits is a bad-faith gesture beloved by fools who can never quite grasp that the rental business is by definition largely a people business.