Hi everyone. I’m very new to investing, I took a Robert Allen seminar, read a lot of articles on the internet and I’m very nervous and need much help in getting started so, please be patient with me as I ask a ton of questions from time to time.
I live in California in the bay area and I wanted to start with Preforeclosure homes. The reason being is that they seem to me to be the most motivated, the most in need of help. The following is based on finding a preforeclosure home.
Do I contact the home owner first before I do any of the following steps? Do I contact via mail or phone call?
What kind of information would I need to gather to provide to an investor that I will eventually assign to regarding the preforeclosure info? (such as default tax amount, ARV, loan amount, docket number, case number, etc.)
After I get some comps, since I’m not a contractor, how do I best “estimate” any repair costs?
Do I need to factor in any holding expenses?
How do I determine any hedge expenses?
what is the best estimate for closing cost in bay area california? (not sure if there is a difference based on location)
Do I need to gather what the home owner’s current loan information is? (such as loan amount, interest rate, term, monthly payment, number of payments)
Any pictures of the property? (inside and out)
ARV amount versus my discounted purchase amount percentage? Basically, what percentage of a discount should I be purchasing any property for based on the ARV?
I’m not sure if there is more that I need to gather but those are some of the issues that I thought about that I assumed investors will need to consider my deal if they want to buy the contract from me.
If anyone can help me out so that I can accomplish my first deal, I would appreciate it very much. If a preforeclosure is not the best for a newbie to start out with, can anyone recommend what kind of property I should be looking at then?
Contact however you can. My home was posted recently and I received about 30 post cards and letters. I did not get a phone call this time. Another member suggested stuffing an envelope with facial tissue and start the letter off with " You must be near tears because …
The number 1 thing needed is there any equity. What is the house worth and what is owed and what will it take to cure the default. All the other info is superfluous without a deal. I would look for loans that are 10 years or older to start my search. When you get to know the area and values there you will be able to pick out bargains quickly.
Call a contractor or several sub-contractors and get bids.
I would help the investor try to figure his potential profit and include carrying costs in the formula. They will probably have their own ideas but t would not hurt. Use the average days on market as a guide for how many months carrying costs to calculate. Be sure to figure taxes too.
Add 10% to the construction bids.
Get estimates on the big ticket items here, title fees, commissions are the two giants. Most of the other fees are related to getting the loan and these will depend on the financing used to purchase the property. Hard money fees can get expensive. I pay my lender 4 points and a minimum of $3K.
Yes all the loan info is important especially if the property will be bought by reinstating the loan and bought subject to the loan.
Pictures are good. Getting the investor to visit is better.
I buy property at 70% of ARV. The 70% includes all my expenses. As an example of a deal I am finishing now. I paid $165K for a building that appraised at $700K after the rehab of $220K. I also had about $50K in carrying costs and closing costs. I borrowed 100% of the funds being used from hard money lenders and private investors.
REO’s are good too and estates owned by banks. Th example above was part of a huge estate.
Just one question for you. What did Robert Allen teach in his course. I have read one of his books but not taken any courses. The above question are pretty basic and should have been covered in a foreclosure course.
Thanks for the information. I plan on contacting other investors to build my buyer’s list and start looking for some preforeclosure homes to begin my due diligence.
Robert Allen’s seminar was a 3 day course with tons of information. I felt lost through most of it because of the fact that I’m so new to investing, I couldn’t really grasp the strategies that they were sharing but after reading further strategies on the internet, I’m beginning to understand more of the stuff that I learned from the seminar.
The class was pretty expensive but I think it was money well spent because of the fact that I would have never known about hard money lenders, rehabs, assignments, real estate investor clubs and a whole host of other information if I didn’t take that seminar. Besides, once I have accomplished my first deal, the money spent would really be worth it.
Thanks again for your advice and for systematically laying it down for me. It was easy to follow and I’ll be sure to keep your suggestions in mind as I start my process.