All Forum Posts by: Roy Oliphant

This would be worth watching the vid or webcast!  Good luck with it.  Hope you will post the top 10 or so.

@Hattie Dizmond

Still available?

@Denise Ashby

Great questions!  Based on my experience, some of the answers are 'it depends'.

1.  Occupied vs. Vacant will dictate whether you can enter the property immediately.  Also, some counties, and even some auctions, place specific restrictions on when you can enter the property.  I have seen the auction rules state you may not even contact the occupant until you have a recorded deed in hand.  We usually post a notice on all properties the day of the sale and change locks on vacant properties within 3 days.

2.  How good are you at research?  If the property was vacant at the time of the sale finding all the parties that may have a right to the property can be daunting.  Even if you find them, getting them to sign may be more expensive than you think. 

3.  Even if you have been assigned the Right of Redemption, most title companies will still not insure due to the Contestability period.  This right exists specifically for unknown parties; the Unknown Unknown is unknowable.  Thus title insurance is exceptionally difficult to obtain until this 2 year (minimum) period is up.

4. Lien searches can be done for free if you go to the county records office. Some counties have online records and some are available through paid services. You can even pay a title company to do it. Records searching should be a basic skill for REI. It can be expensive to have someone else do it for you.

@Ashley Pitre, @Karl James

Lease Purchase, of course, has its own pit falls if it is over 6 months.  Since the Contestability period for ALL tax sales in Texas is 2 years, it is very difficult to get a title policy on any tax sale property in less than that. 

@Jay Hinrichs

It appeared to me to be in the Marketplace.  I thought you were talking about an SEC issue with advertising for investors for a shared investment in an open environment.

@Jay Hinrichs

What is she advertising?  She says it a 'to-be-formed' entity for a deal that hasn't even been done yet (obvious, as there is no entity to do it).  And she mentioned she only wants accredited investors which means under some interpretations of the JOBS act means she can openly advertise.

Still, it does seem like there is no there, there; at least not yet.  And I would be REALLY reluctant to put my name on a similar ad! 

 Not a big number?  I saw a site that shows properties with delinquent taxes in Philly that says about 90,000 properties ( just in Philly )  have delinquent taxes, some as much as 20 years!  I don't know how many total properties there are but I'm guessing that is 7-8% of the total.

In the Texas sale, the mortgage (as with most other liens) does not survive the sale except the holder may redeem in place of the previous owner.  I assume this is like your judicial sale?

In Texas, the mortgage holder generally has a right of redemption if the property is sold at a tax sale.  Some states do not have redemption rights so you are right to be concerned.  One more thing for the checklist!

Please keep the updates coming.

I couldn't find where you got an answer to the correct discount to ARV for buy and hold properties. Please excuse if this is a redundant answer.

As buy and hold investors, we really don't focus on ARV. The question is, "Does it cash flow at an acceptable rate of return". This calculation starts at the other end and works backward.

     1) What will it cash flow; Period Rent (ie annual) - Period Expense and Allowances

             $24,000 annual rent - $3000 taxes and insurance and $3000 vacancy and

              maintenance allowances = $18,000 annual cash flow

     2) What is the maximum investable to achieve the desired rate of return?

        Desired return 10%  so $18,000 / 10% = $180,000 Max Investment

3)  Is Acquisition Cost less than Max Investment?

        Max investment $180,00 - Repairs $30,000 and Purchase Costs, etc., $12,000

        = $138,000 Max Purchase Price

So for the 10% buy and hold investor, buying the house at $138,000 or less meets their investment goals. 

As long as the Cash Flow and Costs will remain stable and there is no need to sell the property ARV remains unimportant. However, since we cannot predict the future and there may eventually be a need or desire to take cash out of this investment, if the ARV is less than the Max Investment amount ($180,000) you risk lowering your overall return when you sell. Of course, if the ARV is actually $220,000 it means nothing to the cash flow investor until they find another investment that meets their cash flow goals. 'Equity' isn't real until it is monetarised.