I received an email from a friend asking about real estate investments. Now is the opportunity of a lifetime for some investors, and a nightmare for others. It’s a question I get asked from time to time, so I thought I’d post my email to “Jane” with the hope that others find it useful as well.
On Tuesday, February 1, 2011 at 12:52 PM, [a friend] wrote:
I’m trying to diversify my income by learning more about investment properties… By the way, do you know where real estate auctions take place?
Maybe if we met, and talked with you about your goals, I could send you to some people investors/lenders/title folks who are already doing what you want to do. I don’t work with many investors personally (by choice) but I could certainly guide you through some of the thickets and introduce you to the right people.
Information on Denver County Public Trustee sales is here:
There seems to be a lot of inside baseball with auctions. I’m not sure of your financial standing, but the folks doing the best right now are buying with all cash at ~60% of value, investing $35K in a complete gut remodel and selling quickly at 85% of value. When they can’t find enough buyers, they teach investment seminars… You see where that goes. Lot’s of quick turns of money and you don’t want to be the last one in the chain. If you beat these guys in an auction or on the open market, you probably overpaid. By the way, the “fix” is often clearing title clouds rather than remodeling. That’s what the Denver fix and flip market looks like to me today.
Buy and hold, probably offers better, less-risky opportunities for non-professional investors right now. The homes that are coming up on foreclosure lists are traditional family 3bed/2bath 1500SF homes… perfect for renting to people whose homes have recently been foreclosed. Of course, you can finance these with decent terms if you can put down 20-30% and maybe even cash-flow a little, plus the usual tax benefits.
If you want to go after homes that have been served a Notice of Election and Demand (NED) but haven’t yet been foreclosed upon, there is also a lot of wheeling and dealing going on. This requires door-to-door knocking and confronting people that are losing their homes. They’ve long since stopped opening their mail or taking phone calls, so this is the only way to reach them. With their cooperation, you might be able to convince their bank to do a short sale. Again, cash is king as it comes with the promise of no-hassle, fast closings — and no appraisal conditions.
The “normal” home-buyers and home-sellers are suffering between these two markets. For example, in many communities you will see lots of homes selling for $85,000 (trashed house, hardship sale) and lots of other sales for $200,000 (same house completely gutted and updated). Someone trying to sell a nice, but not completely updated house for $180,000 is going to have a very difficult time in this market. Especially if they owe $175,000 on it.
So, if you’d like to chat more about your intentions, I’ll get you pointed in the right direction and connected with the right (ethical) people who have experience doing what you have in mind. At the very least, you should hear their war-stories and who knows, they might even throw you some little ones for fun.
|:: Christopher Price, MBA
:: Managing Broker/Owner
:: DenverBoulder.com Denver Boulder Colorado Realty
:: O: 303-922-3000 x300 | C: 303-921-3850 | F: 303-302-0935
Experienced real estate investors, have any other advice? Care to share local resources, clubs, etc? Please don’t spam my comments. If it smells fishy, I’ll can it.