As I’ve stated in my previous posts, I’m a complete newbie at real estate investing, looking to acquire a 3-6 unit building.
Since first posting here a few weeks ago, I have read some books and done some research (and read a lot of threads here, not just on this forum but on others). And I think I know enough about how this works to realize what my first major problem is.
Looking at listings in my area, the buildings I’m looking at seem very much overpriced. Generally, 4-unit buildings are listed for between $360,000 and $400,000.
I understand that a true investor would never buy a building at that price, but would only buy at discount. But how are these discounts found?
Find desperate sellers. Find properties that need work. Too many “investors” just want turn-key properties. The discount from market rate will be found when there’s an issue - the seller is at a point where they pretty much have to put a bunch of money into the property or just sell it as-is.
Our banker has given us a couple leads. The more you get your name out there as someone who buys houses, the more chances you’ll have to pick the good deals. If you find some buildings you’re interested in, punch the addresses into your county property tax website and find out who the owner is. If you find a 4 unit that looks like it needs some work, maybe the owner wants out of it.
Find a Realtor. Tell him what you want. Have him provide the comparable sales that shows you the property is indeed selling at a discount. Ask her/him for a list of all the bank/lender owned multifamily in the MLS.
Derek,
Keep your old want-ad papers with rentals listed in them. See how long those properties stay advertised. Make note of how long “for rent” signs stay up. Many people don’t put their names on their mailboxes anymore. Some local Realty companies may have rentals advertised as well. See how long those take to fill up.
Hi Justin, I guess that’s a very nice suggestion. I’m a newbie too. Failed to see things the easy way. I will practice this now on. Thanks for the advise.
I just read that bank defaults on multi-family are up 3 times from a year ago - so we may have more distressed multi-family showing up soon. So maybe watch the foreclosures. loopnet, and MLS. Call the loopnet Realtors they sometimes do not list their best deals. But with interest rates so low and many multi-family sold based on “cap rate” it seems they are all overpriced.
Find motivated sellers that may be in a financial situation and can know longer make there payments. absentee owners that live out of state and may be using a management company to manage there property long distance. Properties that need work that the owner is not willing to repair. These are people with motivated seller on there forehead :banghead
Call ‘for rent’ numbers and ask the owner if they’re interested in selling, or have any properties they’d be interested in selling. Call all sorts of ads and ask, ask, and ask questions. Some of the best deals are the ones that NEVER make it to the paper/ for sale ads. The minute a good deal makes it public, a more experienced and faster investor will have already closed on the property…
I used Lis Pendens from the local county clerk. In Erie County the clerk’s office is about 2-3 business days behind in filing docs BUT in most cases its faster then most people receive their notice of foreclosure in the mail. I created a quick spreadsheet to capture owners name (per the TAX ROLLS), orig mtg amount and orig mtg date (important), Lender name, property address, & Lis Pendens/Mtg book & page.
Every two weeks I spent a day getting all of the lis pendens that had been filed. After drafting a form letter (thanks to most of the posts on this site) I sent out mailings to each address that fit my criteria or the criteria of someone on my buyers list. I either (A) sent letters to my preferred properties (B) sold the list to investors as leads (C) sent letters for my buyers with their contact info (for a fee). I received a 68% return call rate from the people I mailed. The remaining portion were incorrect addresses on the tax rolls, people that didn’t want help, or landlords that had the bills sent to their property and I couldn’t chase them down at their personal residence. On the positive side, I was able to discern what was investment property and what was a personal residence by the tax rolls (mtg on prop A taxes go to prop B). I also was able to get property info on the first call as they knew EXACTLY why I wanted to talk to them. On the negative it was VERY time consuming but hey, you gotta work for the $$ right?
As a side note, I sent all my letters out in bright colored envelopes (yellow, orange, blue-$.76 at officemax), all hand addressed w/hand signed letters. They appeared as birthday card type letters when they were received in the mail and I sent them out on thursday so they would be received on saturday when it was a gaurantee most people would be home. The hand signatures made it look as though they were the only person I sent the letter to. In their mind, who would be crazy enough to hand sign a TON of letters like this? I had to be someone interested in ONLY THEIR PROPERTY. This gave me a ton of deals and made each seller seem extremely personalized. Plus it brings the motivated sellers to you (in a way).
talk to a title company and ask then for a list of all out of state owners of properties that meet your criteria in your area. Or for that matter, ones with trust deed dates before 1990 so you know they have equity. Some cities have this info online, and do some driving to write down address of complexes with deferred maintenance.
Foreclosed properties with desperate sellers would do the work. Find them and make your profit. It seems your new and want to make rapid money. Remember the higher the return the higher the risk.
Do you know how to tell the value of multi-family buildings? Most ads are “pro-forma” In latin means “as if” These are not usually actuall numbers the property is opertating under but rather how it could perform. Check out "ABC’s of real estate investing by Ken Mcelroy. He also has an advanced guide, I got the audio books and love them. Also he will teach you about “due diligance”
the most inexspensive way I know of to purchase a property is at a tax deed sale/auction. The tax deed sales are held by the county or similar office, and the bidding normally begins at just the unpaid property taxes. I know of no cheaper way to possibly buy a property than for just the unpaid taxes.
You may or may not live in a state that has these sales, although even if they don’t, the county may be overstocked and may have surplus lands or something similar available. the perwon who does the most research and asks the most questions to the officials in charge wins the game.
What state do you live in? Some states right now are near impossible to get a good deal at the auction right now. For example: California, the investors bid up the properties way too high for some reason, really not sure why. maybe too much sun.
Also, developed land, and commercial, and muti family homes will be available…you just have to see what’s available, attend a few sales, wait for the right proeprty, dont overbid, and have some fum and make some money
