All Forum Posts by: Tom Scott

County records show a few other parties to the property so I'm probably going to step away. I think I'll still go the day of the auction and take a look and see what it sells for just for kicks. It's a shame though, this could be a really good flip if the price was right. I hate to see good real estate go to waste.

Tom

Yeah that sounds like the one. 

Also just reread the terms of the auction and you seem to be right about the possibility of additional liens. How would one go about verifying the title before bidding?

Tom

A house just popped up in my farm area that is being sold at IRA auction next month. In order to bid, I need a cashiers check for 20% of my bid amount on site the day of the auction with the remainder to be paid within 30 days. If I plan to finance the purchase how would I go about getting the cashiers check to bid on the day of the auction? I have pretty good idea of ARV based on comps in the area and I can estimate the rehab with a cushion since the open house isn't until the day of the auction. With all this I can obviously come up with my maximum possible bid amount, but if I don't want to pony up the cash for a bid deposit how would I get a cashiers check? Would a hard money lender possibly issue a check for 20% of my max bid amount? If I was outbid, I would simply return the check and if I won I would have 30 days to either find alternate financing or get another check from the hard money lender.

I do probably have enough cash for the 20% down but I would need to take a 401K loan to get it so I'd rather bid with borrowed cash and take the 401K loan once I knew I had the deal wrapped up. Thoughts? Is it possible? 

Tom

Wow guys thanks for all the input. Right now it is all theoretical but I am going to do some homework and try to see if it could actually work. The property has been on the market a while and they keep dropping the price so I am guessing the place probably isn't cash flowing because of poor management. 

The strange thing is that the project is so large that if I did manage to get investors and proceed, there would really be very little risk to me other than my credit and lost time should it fail. I have nothing other than sweat equity to stand as collateral for the property so financially I would have very little exposure. 

Tom

The details aren't clear yet, but this is what I know. There is an existing 3acre property with 36 units on it. Mostly 4plex and 8plex it appears to have been managed poorly and it is probably section 8, if it isn't it should be from the looks if it. The property is surrounded by much nicer apartment complexes that serve a hospital and university. Using the 2% rule the rents would justify a purchase price of 1.25 million. They want more but the place is pretty bad. Here's the real tempting part. The land is zoned for 80 units per acre with only 2 of the 3 acres built on currently. I'm thinking you could build mid range student housing here and do pretty well. The issue I see is you would either need the cash to plow the whole thing under and rebuild or you need to try to stage the building in such a way as to allow the existing units to support the new construction until you can fill the new units and get rid of the old. Each option has its challenges. Option 1 means you have to let leases laps before you can build and therefore need enough cash reserves to carry the property and build. Option 2 is problematic because even if you could build in stages, the new clientele is unlikely to want to move in right next door to the old tenants and their run down buildings. With current rents in the area and building the land to max occupancy you're looking at a property worth around 6 million using the 2% rule. 80 units an acre is probably high, but even at half that your not doing too bad. Tom

What are the chances a complete real estate novice could put together a deal in the 1-2 million dollar range? Is it feasible to try to buy a complex of that size with essentially no experience? How would you finance something that size? Tom

@Andrew S. 

If it's not very deep, maybe 2' or so then I would say it is most likely a lift station for the old septic system. Basically if your septic tank is higher than the main house drain, then you need a lift pump. All the houses fluids dump into this basin and then a float switch activates when the levels are high enough causing the pump to turn on and transfer the slurry up hill to the septic tank. If it is deeper than that it could be a shallow well but in my experience it's diameter is too large to be a well of any kind. Personally I'd fill it in, it looks too shallow to be potable and the last thing you need is for someone to step in the barn thing and break a leg. 

Tom

So far I've received 10 calls from people wanting discuss selling. 9 have been other investors who "might sell if the price is right" and the 10th was a nice lady who had a house rented out to her kids. She wanted me to come take a look but called back later and told me she wasn't able to proceed, I think her kids probably got a hold of her and convinced her to keep the house. No calls yet from that perfect seller that has a tough story to tell and a hard need to sell his home. I'm sure calls will keep rolling in later today and the second half of the list will be going out in a week or so. 

I'm thinking I need to adapt my style a bit to try to take advantage of the large percentage of investors I'm talking to. I'm following the general outline of a script I got from Jerry, but it really doesn't work well when talking with investors. I feel like the investors open up more when I try to ask about their business and experience.

Overall it's been a positive experience, I'm going to do some research on a few of the properties the investors might sell and maybe make some offers, though I kind of doubt any will be accepted since I will be sticking to my price criteria pretty firm and none of them seemed like they needed to sell. 

Tom

My first mailing was sent out by @Jerry Puckett on Saturday and I'll be darned if I don't already have 5 voicemails and a handful of missed calls as of 2:40pm on Tuesday afternoon. I just need to say that I was honestly a bit skeptical about the whole yellow letter thing but I saw what some of the other successful folks on here were doing with them so I took the leap. Jerry has been great to work with and has set me up with a simple yet effective way to track everything. I am super excited and will begin returning phone calls after work today. Wish me luck. Tom

Perhaps it would be best to run 2 blogs? 1 for public viewing connected with my website and a second, most likely here on BP, for all you other investors to get a look at. On the public blog, I would do the before and after pictures and some other details about the job and on the BP blog, I could go whole hog and post pictures and price data that you all would enjoy. I think perhaps that would be best to keep the details of every little deal private. Maybe I am overestimating the desire of some people to investigate whom is trying to buy their home? 

Tom