All Forum Posts by: Calvin N.

BostonHome, I learned a lot going through this the past 20 months. Here is a little more of what happened. Over two years ago the house was purchased by an out of state investor who began rehabbing. They failed to get the proper permits and a STOP WORK order was issued by the city. That is when I first noticed the property.

The owners owned several properties in other states. They ran into some financial difficulties and filed bankruptcy. Since the property appeared to be abandoned the city set a court date to determine if the property should be demolished. There was another investor that tried to purchase the property, but due to complications of it being tied up in a bankruptcy they were not able to close the deal.

Almost a year after that I contacted the city and got a contact at the lending institution. The orginal mortgage and the second mortgage was with Suntrust Bank. The first mortgage was sold to EMC Corporation. Since the loan was not being paid on EMC sold it as a non performing note to a holding company in Arizona. Suntrust still held the second mortgage.

I talked to the holding company and explained that the house was condemned by the city and they were going to bulldoze it. I offered a very low $22,700 for the $140K note. They didn't accept and didn't even counter offer. I waited a few weeks and called them again. I asked what they would consider for this note and reminded them of the approaching demolition date. If the property was torn down, they would be lucky to get 5K for the vacant lot. They then countered with 30K.

We then appeared before a municipal court judge to get the demolition order suspended. We presented our estimates for repair, showed proof of funds from our bank and a complete list of all the renovations we planned. He gave us the extension we asked for. Then we were able to go ahead with the purchase of the note. I could not buy it until I knew the city would not bulldoze the house.

After we purchased the note and recorded the deed we started the foreclosure process. Our attorney handled the details. On the first Tuesday in May, we met on the courthouse steps. No one else bid so we "bought" the house for 30K. The second mortgage is wiped out by the foreclosure on the first note. So, to finally answer your question, we are "all in" for 30K. The house is probably worth 90k as it sits now. After we finish the rehab we expect it to be worth 180-220K, depending on the market here. With all our estimates our budget for this flip is 55K.

Like I said, we learned a lot during this process. It will be our second flip, but the education we received in going through the foreclosure process was great.

If I could find one or two deals like this each year life would be good! We have all the estimates for the repairs (had to show that to the judge before he gave us the extension); will get the permit this afternoon and the roofer should begin first of next week.

For many of you this may not be a big deal, but for me this was a great deal. I located a property 20 months ago and started researching it. Finally, today, we foreclosed on the house and now own it.

We found out who held the note; it had been sold twice and was a non performing, first position note. The orginal loan amount was $140,000 with a second mortage of $40,000. We bought the 140K note for 30K. After many up and downs from dealing with the title search - assignments not recorded, businesses using DBA names that were not on record, to going before a municipal judge to delay the demolition of the property to actually taking possession, this has been a blast! Now the work begins this week on the renovation. The property, once repairs are complete, should sell for 180-220. As many will tell you, you make the money when you buy, not when you sell. More details to follow.

As an investor I did work with 2-3 agents at one time. I let them know I was talking to a few others. One explained to me that most all agents use the same resources to search for homes so it is really a waste of time to have several looking. However, there are a few agents that do seem to have more of the so called "pocket listings" that are not advertised. That was before the buyer's agent agreements became so popular. Now, knowing what I know now as a licensed agent myself, I would get one agent, sign the buyer's agent agreement with him/her, and let them get to work.

I would check to see what similar rentals are rented for. Don't go by what you were "told" they rented for. Call other places for rent and ask about their units. Compare theirs to what yours will be when you have finished the repairs. If it was rented for 425 per unit why would you figure on 400 after you fix them up? Maybe you are just being conservative on your numbers; if so, ok.

As for all the other numbers others will have plenty to add. Just get solid rental income numbers so you really know what it will bring in.

John, How long has it been on the market? The longer the time usually the more willing the bank is to accept a lower offer.
Is it in foreclosure or has the foreclosure already taken place?
Does an agent have it listed?
Are you working with an agent?
How is your local market doing? Are there a lot of homes that are REOs listed?

Provide us a little more detail and you will get a better answer.

Best of luck!

Mike, To state an average time for foreclosure may be difficult since it is such a wide range. Each bank or financial institution has its own procedure. I have attended some auctions that the owner was 2 months behind and others that were 6 months behind. In Georgia the foreclosure is started by filing in the local court and advertising for four consecutive weeks in the county seat's newspaper. Then the sale is conducted on the court house steps on the first Tuesday of each month. Check the foreclosure procedures in your state on this website. Look for the Foreclosure Resources at http://www.biggerpockets.com/foreclosurelaw/

Best of luck!

Hey Kathy, Thanks for the comments. The paperwork must be turned in by next Wednesday in order for the attorney to have the ads run in the paper for 4 consecutive weeks, advertising the sale on the courthouse steps. Then, the first Tuesday of the month, the sales take place in our county.

I have spoken to my attorney and have another meeting with him tomorrow. We will not initiate the foreclosure this month. I have to make sure the municpal judge will give me an extension on the demolition before I will file. We go before the judge on March 10.

This is fun! I have invested in rentals and done a flip before but never one involving all this. Whatever happens, this is a great learning experience for me and my wife. I will pay more for all the services of the attorney but it is worth it to make sure I am doing everything correct.

Aly, Yes, since he knows of the defects he is required to disclose it on the property disclosure form. Of course, that doesn't mean that he will.

As to when you should walk away: only when you feel it is not a value for you anymore. You said it is below market value so you have to make the decision if paying the extra 5K is worth it. Will the numbers still work for you? If the numbers still show you can make the profit you are looking for continue on to closing. If it is a loser, walk. I would certainly see if you could get the buyer to make a concession on the repairs, preferably through a reduction in price. Keep us posted of your decision. I am sure you will get several more opinions on here.

First, I commend you for having saved $5000 at your age. In fact, there are a scary number of people that are 30 that don't have $5,000 saved. As for the Rich Dad seminar: I have not been. I have read many of his books and feel they are very good. Personally, I would save my money and just take in what you can from the books. That is your choice and it might be a good one for you.

I am glad to hear your mom is supportive. She obviously knows or you have convinced her in the power of investing in real estate. You will convince your dad in several years when you are consistently and successfully making real estate deals.

Now to your age. Of course some people will not take you serious. That goes with any business you are in. The youngest person at a law firm does not usually have the respect of the older partners. A newbie real estate agent may get the cold shoulder from more established agents. So what? You deal with it and move on. Everyone was young once and went through it. If you partner with someone that could help your image, if the partner is older.

Don't let the age thing concern you. Best of luck and keep us posted!