All Forum Posts by: Robert Haney

Gerald,

Schooling is not usually fun, but should helpful.   Let me make some comments for you to think about. 

- At the foreclosure auction a group of both seasoned and unseasoned investors judged the property to be a deal too poor to buy.  Therefore the bank was FORCED to buy it due to the price they set.  Therefore the bank became the homeowner.  The foreclosure was then over.  

- The property was no longer available for foreclosure purchase.

- If you sold the property and paid your selling costs, would you have $6k equity or less, even a loss?  I always look at all costs including selling costs even if I'm going to hold the property.  That's so I don't fool myself about day-1 profit Or "equity".

- Be aware of allowing your RE Agent to talk you out of making (lower) offers.  The agent has "an ax to grind".  Only you have your best interest at heart.  They may be right or they may be just trying to do a deal quickly to earn a commission.

- How do you know "the bank came on strongly"?  Did you negotiate directly (unlikely)?  Did your agent tell you this to apply pressure to you?  

 Judner,

I  didn't see that you received an answer.

Yes, you can wholesale a foreclosure that you have purchased at the county auction. I have done this a few times when I decided I didn't want to do a fix and flip - usually because the fix vs profit ratio was too low. I always list the wholesale on the MLS instead of "an investor list" since the MLS is where new investors tend to pay the highest price.

I've never been threatened nor have I physically threatened anyone.  I'm always respectful even if they are not.  I never lose my cool, but I am truthfully direct.  I never point out flaws (like living in filth, etc.)

There are good, fair, bad, and very bad experiences.  I've never had a "very bad" experience.  

About 65% of the prior owners do not do what they promise and 35% do what they promise.  Some prior owners are just skillful liars (good actors). Some are honest.

I believe that some of the people make promises and believe they will fulfill them when they, unknown to me, have no practical ability to do so.  In other words they are out of touch with reality.  This gives them an amazing ability to mislead because they are not "acting".  They believe their own crap.  Instead of paying for a place to live they end paying for a party dress - a real experience.  Breaking their promise is "excused because, obviously, the party dress is more important and was not considered when the promise was made."  So it is never their fault.  They get evicted.

Odie asks a good a question.  

The average person on the street thinks foreclosures are purchased from banks/lenders which is not true.  The industry calls these REOs (Real estate owned) since the bank is the HOMEOWNER who bought it at auction.  Sadly,  even many (most?) RE investors don't understand this.  The bank NEVER owned the property until they bought it at the foreclosure auction.

Every foreclosure is bought at auction, period.  Either a 3rd party (such as me) buys it or the bank buys it.  At that point the foreclosure sale is done. Over.  

If I buy the property at the foreclosure auction and sell it later, is the new buyer buying a foreclosure? He is as much as someone buying an REO from the bank. Strictly speaking, the new buyer is NOT buying a foreclosure and anyone buying an REO is not buying a foreclosure either. Again, the "courthouse steps" are only where foreclosures are sold.

@Kristen Twomey is so correct.  Stay away from Sugar Land and all the areas anywhere close to it like Richmond, Rosenberg, Missouri City,  Stafford, Fresno, and Houston in Fort Bend county.  Don't waste your time or risk your money.

I AM NOT AN ATTORNEY AND I AM NOT GIVING LEGAL ADVICE.   SEEK LEGAL ADVICE REGARDING ANYTHING SAID BELOW.  

It appears that many landlords are unaware of how to stay out of costly County Court after a tenant appeals a Justice Court (JP Small Claims court) judgment in the landlord's favor.  It is easy for a landlord to represent himself in JP Court, but he often uses an expensive attorney for County Court if the tenant appeals the landlord's success in JP.  The County Court will likely cause another 2 months lost rent delay too.   

What I am about to tell you will often save the attorney fees and 2 months rent.  Your attorney does not tell you this because he loses the business or he doesn't know it (I don't know which is worse.)

After the JP judgment the tenant has 5 days to appeal to County Court.  He has to pay a bond to the court or claim he has no money and complete a "Pauper's Affidavit" to avoid the bond.  The tenant nearly always claims he's a Pauper.  However, when he does this he is required to pay 1 month's rent into the court's registry instead of the bond.  Tenants rarely pay this to the court which is the key to this tip.

TIP #1

When the tenant files the "Pauper's Affidavit" the court formally notifies the landlord of his right to fight the pauper claim in JP Court.  Here is what you, the landlord, do:  

1. Don't contest the pauper claim as this is rarely successful and eats up time & effort. 

2. Do NOT answer the JP Court's notice to you.  Do not say yes or no.  Do nothing.  You have 5 days to answer and the tenant's 5 days will end before your 5 days.  This is important as the case file MUST stay in the JP Court for this tip to work.  The JP Court cannot send the file to County Court unless you answer or your 5 days are up.

Call the court at exactly the end of the TENANT'S 5 days to pay the 1 month's rent to the court and confirm he has not paid it and that the JP still has the case file.  Tell them that you will be there ASAP to get a Writ of Possession.

Go to the JP office before your 5 days are up and pay for the Writ of Possession which you will get to be able to evict the tenant quickly (a week or 2)

The JP court will send the case file to County Court but you don't care since you have the writ!  Tenants rarely show up at County Court since they will lose and don't want to spend the money.  They just wanted more free rent.  And you will usually have them out of the house before the County hearing. 

TIP #2

Work with the Constable to time his posting of the Notice to Vacate.  Try your best to get a Friday posting and a Monday eviction.  If you have to wait an extra week to get this timing by the Constable it is wise to do so.  Why?  The tenant will know nothing about your getting the writ.  The Constable's posting will be his first alert.  But it will be too late for him, if he's sophisticated with an attorney, to get his attorney to go to court for a temporary restraining order to stop you.  The court is closed on the weekend during his vacate period!

TIP #3 FOR FORECLOSURE PROPERTIES 

Tip #1 above will not work for you if you bought a foreclosure property and need to get people out.  You need a rental agreement so that the people must pay 1 month's rent to the court if they appeal eviction.   The JP court will not require rent for a foreclosure (the County Court will allow a rent claim for a foreclosure).

So here's what I do:  I have a simple 2 page lease roughly based on a short term TREC seller lease back agreement, but significantly improved.  I then get the occupant to sign it by offering a very low lease amount for a short term (usually a month or so) and no deposit.  I also give them generous time, as noted in the lease, to pay the small lease amount so they don't have to pay anything at lease signing.  This takes away their excuses for putting off signing even if they never intend to pay.  They get rid of me without having to pony up.

If they don't pay the small lease payment on time when due (usually a week or so) they are in default and the lease terminates.  If they do pay and don't get out at the end they are holding over with no automatic renewal.  With default or hold over, the rent increases to market amount!  

Now when I  evict I am NOT evicting for foreclosure.  I am evicting for non payment of rent.  So now if they appeal eviction they must pay a significant amount to the court or I'll get my writ.

These tips have worked in real life for me and I've never heard them discussed by anyone, even the "old timers".  I hope they help you save $$ dealing with people wanting free rent at your expense. 

What a post! If you're going for humor you got me giggling.  🤪 

The common accepted dogma is that landlords can (and usually so) pay more for a specific property than flippers.  I think this CRAZY.  

My strategy is to buy rental properties that could/can be flipped for 10% to 20% net cash profit the day they are ready to be out on the rental market.  My goal is monthly rent of 1.2% or more of my total investment in the property.

For example: one property I have $81,000 total invested, rents for $1230 per month. 1230/81000= 1.52%. I don't look at the ARV for rent return. I look at ARV for flip return. The property is worth $122,000. It would cost me 4.5% of ARV to sell it which would leave me $35,510 profit. But I don't have anywhere to put the profit so why sell and put it in the bank for 2% annual return?

Another I have $112,000 invested.  It rents for $1400.  1400/112000= 1.25%.  It is worth $165,000.  If I sold I it my net profit would be $45,575.

The key is my strategy to buy flip properties and rent them, unlike common "wisdom" of landlords paying more than flippers for properties.  

Can landlords pay more for properties and still come out ahead?  Absolutely!  But their rate of net worth growth will be far slower than my approach.  It will take them (read "typical landlord") much longer to reach their net worth or return goal.  At least they can reach their goal.  Doing something is much better than doing nothing.

I invest only in Fort Bend county in all cities within a 25 minutes driving distance of the intersection of Hwy 59 and Hwy 6.

PS: If I wait one year and then finance a property my cash on cash return generally goes to infinity since I'll get all my investment back.  That is a reason to be weary of putting too much emphasis on cash on cash returns.  Having very little money in a property sky rockets the return unless something drastic happens and it goes back to the bank in foreclosure (flood, hurricane, etc. )