Buy Low; Sell Low

Foreclosures, Short Sales, Tax Foreclosures
1

Hi,
I apologize in advance if this topic has already been covered. so,

I’ve been through that infomercial up there in the banner (web seminar, what have you) and while I’m not buying whatever product he’s selling, I became interested in the following mechanics:

Buying Foreclosure or Pre-Foreclosure properties - do nothing (no rehab no dear tenants) and just selling them as a bargain.

I’m a pretty (financially) conservative guy and I don’t buy that whole flip properties in 10 minutes.

But I do have actual proof of funds (not just the piece of paper) and was considering just going forward with it.

I’m not married with a state, but the market I’ll be choosing will probably be Florida.

Again, while I intend to flip properties, buying from the bank, selling to investors and rehabers, and repeating the process, I don’t fall for simultaneous operations - I’m not that seasoned.

What kind of unexpected difficulties might I encounter?
How is this different from a short sale (if it is)?

I stumbled (in this forum) upon http://www.finestexpert.com and find it almost too good to be true. What’s the catch?

Would I do myself a huge favor if I got into this business with a partner?

2

I just read your post twice and haven’t a clue what you said.

3

That’s terrible, I guess I need to work on my communication skills. Thanks for the feedback!

I’m interested in purchasing bank-owned properties, and selling them almost right away at bargain prices. And repeat the process.

In other words, instead of buying bank-owned, and waiting for the market to bump back; just flip them over an over at slim profit margins each time.

4

Unexpected diffuculties;
Bankruptcy
property liens
delinquent taxes
clouds on title
hidden structural defects
excessive carrying costs
mis-judging the market price and/or direction
incomplete or false owner information to the loan deliquency
deceptive owners attempting to conceal financial holdings/records
forced owner evictions

Foreclosures only occur for delinquent loans. Foreclosures can happen to homes that still have postitive equity - the home can still sell for more than what is owned on the loan (+ seller closing costs). They still could walk away from the sale with cash in there pocket. There are always some owners with positive equity that are just too unlucky, to greedy, or to stupid, to sell before the foreclosure occurs.

A short sale is when balance on the loan is higher than what the home can sell for in the current market. The equity is negative. You still owe money on the loan after you sell the home. Theroreticaly you can do a short sale and not yet be deliquent on your loan, the existing lein on the home would be encumbered to the new home owner who would be at risk for the “due on sale” acceleration clause. The reality is that no buyer is that stupid and no lender is going to agree on a note reduction without the owner of the property going deliquent 1st.

5

For one thing, there aren’t all that many good REO deals out there to flip. It is being done, but you’d have to find the REO properties that are way below all the others for a given area. Do you know how to flip REO properties?

6

BDJ, thanks for the input, that’s a very useful list of things to be prepared to expect. I notice there are some threads on each specific topic as well.

Demos,

No, I don’t know how to flip. I’m a real newb here, and maybe it’s time to introduce myself:

I’m 25 yrs old, European but residing in South America and about to move for good to the states. I feel more American than Euro, and it’s time to put my money were my mouth is.

My only (worthy) job experience is in marketing, and my only REI experience is in beachfront land deals (in South America). I made some money with both and I want to invest it in the US - I suspect there’s a slim window of opportunity I don’t want to lose.

I certainly don’t know how to flip REOs but I’m trying to learn how to just purchase one. I live on a modest budget and never appeal to credit, and thus I do have hard money and proof of it.

I want to make a plan and I’ll be needing your feedback.

So far it consists on

  1. spending some time and money driving around and analyzing in detail the market of some 3 counties of my choice. I think Florida because it seems to have 10x more REO properties than any other state. Meanwhile continuing studying how this works.

  2. Once I feel comfortable enough, make a first purchase. I have a lot of time, so I plan to be really hands-on when selecting the “turd blossom” (in reference of only a handful of REOs being worth buying)

  3. When I mean flipping, I don’t mean simultaneous transactions. I’d always have a sound proof of funds.

some questions:

a) since I just want to begin investing in the states and prices are rather low in general: would you say beginning with REOs is a risky long-shot and I would do better with traditional, or market, transactions?

b) I know I can only trust myself, so do you think a partner is a risk worth taking?

c) Do you believe an internship in some adequate company would provide me actual tools or rather a waste of time?

you don’t have to answer all at once.

7

Pleased to meet you, Campidogli. You sounded like a newbie that may have been trying to do too much, too soon. You’re right, Florida probably does have more REOs than other states, but the number of REOs will be on the rize as the another wave of foreclosures is about to occur (if it hasn’t started already).

Your window of opportunity may be larger than you think. I missed the 2004 boom, but I think a new one is beginning. :biggrin

Start wholesaling (quick flipping) non-institutionally owned properties first and then move towards “flipping” REOs. I use quotes because it’s not done the same way as with non-institutionally owned properties.

I never heard the term, “turd blossom” before. Is that similar to a “diamond in the rough”?

8

Demos,

The pleasure’s all mine.
I’ve been looking at some listings and you might be right. REO properties are not always at a lower price than privately owned homes and I wouldn’t need a realtor in all cases.

I guess Florida has more bank-owned properties because of that same boom you mentioned pushed for more second homes. Plus I believe Orlando and Las Vegas are the two fastest growing cities in the state.

he, Turd Blossom is the way W calls Karl Rove, after a Texan flower that grows in manure. Some people would argue it worked the other way around. :rolleyes

9

"Plus I believe Orlando and Las Vegas are the two fastest growing cities in the state. "

Las Vegas is in another state… It’s several thousand miles away. It’s called Nevada.

If you’re coming to Orlando that’s where I’m currently restarting my business ventures as well.

10

Most ingenious idea to flip over and over again. Never thought of. There are thousand of laws and policies that control your idea of flipping. It’s just not possible.

11

It’s illegal to flip properties?

Please show factual data to support this.

12

Even though you have cash, you need to be very careful, you can lose it very quickly with a few wrong moves. I would suggest to:

  1. learn the process
  2. work on your buyers list
  3. come down to Florida to scope out the scene

Florida does have alot of REO’s but there are also alot of buyers too! According to my source the majority of them are being bid higher than the asking price because there are so many bidders! And some seem to go to certain buyers very frequently because of the relationship that was formed between agent and buyer!!!

Just be careful, you need guidance. Email me separately, as I may have a few more ideas…

Be patient, as i am not on the site very often! (Although I will try to get on a little more.)