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Sounds like an overly broad question to me. There's a big difference between empty land (not close to a city), and typical houses in the 'burbs.

I'd image the cheapest raw land is going to be land that is very undesirable, in a very remote location. Desert land far from roads in a remote part of an unpopulated state.

If you're looking at land averages for an entire state, that could be misleading. I could certainly imagine some Montana land being pricey (chi-chi ranches for the glamour set), and other land being dirt cheap (remote, unattractive land in a relatively poor area).

It would be helpful if you were more specific as to what you are looking for and why.

You mention targeted lists. Are there lists/tools, perhaps more expensive, with better info/screening?

There are many many web sites offering access to foreclosure and related data. Most allow free 7 day trials, then cost ~10/week. Most appear to contain very similar data.

So I signed up for one of them, and it presents me with a very large list - over 3000 listings - mainly single family home foreclosures. (BTW, I live in a midwestern city with a population somewhat over 2 million).

The site helpfully shows a listing price, and, for most listings, an estimate value from Zillow, for whatever that's worth. When I scan the list for apparent mismatches (i.e. house listed for $200K, Zillow estimate of $300K), then look closer at Zillow, I find as often as not that Zillow's estimate is likely off, either because there are few comps close to the house in question, or because there is a significant difference between those comps and the house in question (i.e. the comps are part of a new subdivision, the target house is much older).

What is the best way to get from this 3000+ house database to a manageable number of viable prospects that I can spend more time evaluating (including, eventually, a drive by)?

Also, for houses that are foreclosures, I assume they are mostly bank owned, correct? How much negotiating room will there typically be on these houses? None? 5%, 10%?

Background: I am not active, at present, in the real estate investing field. Did a bit of it in the mid-90s and got out after a couple years. I started looking again a couple months ago (some posts on this forum), then put it on the shelf. And yet, I return here again :)

I think what I would be most interested in is flipping fixer-uppers. Emphasis on the fixing up - that is more appealing to me than the transactional stuff - buying cheap and selling at a good price, though I know the latter is important, too.

One problem with any relatively short buy/sell scenario is transaction costs.

Conventionally, a real estate agent takes a ~6% commission. You can envision this being split between buyer and seller as a sort of spread. Yes, I know normally the seller pays it all, but effectively the buyer is likely paying about half, in that for a deal without any agents, the two parties could meet in the middle, each saving about 3%. Regardless, since you will be buying once, then selling once, your round trip commission cost will be about 6%, assuming use of agents on both sides.

On top of that, there are other hard costs - title insurance and inspections, in particular.

On top of that, there are *soft* costs - things that both you (the first buyer), and the second buyer (the one you sell to) must do - due diligence to make sure you're not being hosed by a bad house or a bad deal. These may be more time than money costs, but still, they're duplication.

The net of it is, by nature of the house being sold twice in a short period of time (once to me, then, after some fixups, once to an ultimate purchaser), there are a lot of one-time transaction fees that are absorbed two times. Perhaps 6% in agent fees, 1-2% in closing costs, title insurance, inspections, and the like, and perhaps 1-3% in 'time costs' - the due diligence I've mentioned. Fortunately, I have my own money so bank financing costs don't factor in for me, other than the time-value of the money tied up during the process. But with short term rates so low anyways, those aren't **too** big a factor.

Still, add it all up, and there is a basic 'flip' cost that seems to be around 10%.

This means that to make a profit as an investor, the price gap between what I pay and what I sell for must be perhaps 10% + fix up costs (call that 10%) plus profit (being VERY conservative, let's call that 5%). For a 25% minimum pricing gap, in order for me to invest 10% in the actual fixing up.

It seems excessive. I know some sellers are not in a position to invest that 10% (financially, or because of their time or expertise), but still...

I guess my point/question here is - does the above logic seem correct?

And in particular, have I been about right in my cost assumptions of the actual transaction costs?

Do folks use agents on both the buy and sell side, incurring ~6% in agent fees?

What about inspections and title insurance?

I've read that the payout ratio on title insurance is ludicrously low - would it be cheaper to simply self-insure and do the raw research myself (go to the county courthouse and verify good title)?

(Yes, I know some folks will say "Just do it and find out for yourself". But 'just doing it' even once requires a fair amount of time and money, and I'd rather be as fully informed as possible before doing so.)

Thanks in advance.

Two reasons:

1) The deal side of things is just less interesting to me than the rehab side (I like the idea of creating something that is tangibly, physically better than what was there before).

2) Pursuing the deal side too aggressively starts drifting into areas like the last post in this thread. That type of thing may be ok for some, but not for me. I'm not interested in making a fortune via someone else's misfortune (or mistake).

(And by the way, I don't mean to assert that the only way to get a good deal is by actions such as that poster's, nor that all, most, or perhaps even many folks on these forums do things like that. But I *do* see some folks in the R.E. field, either on these forums or elsewhere, advocating stuff that may not be that blatant, but still strikes me as a less than fair transaction...)

I have time and money to lose.

The point of going in with eyes open is to have some idea of whether or not it will be a fruitful venture for me - one that I will both make money at, and enjoy doing. Part 1 may perhaps be true, but for me it's not worthwhile without part 2 as well (i.e. would I enjoy it?).

Ryan, thanks for the info.

Unfortunately, it sorta confirms what I suspected - that the bulk of the profit is in the deal itself (particularly favorable purchase or sale price), rather than in the improvements made to the property.

I'd be more interested in this biz if I thought that focusing on smart rehabbing (i.e. good choices of what to improve, and a good job of doing it), drove things a bit more.

I'll keep kicking the tires a bit, but I sorta doubt I'll make the plunge...

This may be a simple/stupid question...

When a bank owns an REO property (which I assume is always post-foreclosure, post-auction, right?), do they own it 100%, and therefore have a profit incentive in maximizing price (potentially above what they have it on the books for?)

Consider a house with a true value of $150K, and only one mortgage of $100K. If an investor buys that house at the foreclosure sale, for say, $120K, then the bank gets is $100K back, plus expenses (we'll say those are $5K), and the homeowner gets a bit of his/her equity back: $15K, right?

Now then, same scenario, but the bank itself buys the house at auction for $100K. Thereafter, the bank has an incentive to sell the house for as much as it can get. If it sells the house for $150K, it keeps the whole amount, right? (less of course it's expenses...)

The financial stuff is not an issue for me. Again, the issue is:

Purchase Price
+
Purchase costs (commissions etc)
+
Repair costs (including my time)
+
Selling costs
+
Profit

must be >= Sale Price.

Without relying too much on home runs in either the purchase or sale price (finding a screaming bargain or getting a stunning sale price), is it realistic to find a deal flow of houses with purchase prices low enough to make the whole thing profitable, assuming you're looking to sell at the end rather than hold for rentals...

So what's the best way to find properties at such large discounts? I know, roughly, of

1) Regular MLS
2) Pre-Foreclosure
3) REO
4) Real estate agents feeding you deals

Which of these (or others), is likely to be most productive?