15 August 2008
Back to Business
I haven’t written anything interesting in a while, but that’s because I haven’t had anything interesting happen related to investing. Actually, I did receive an e-mail that my silver has been shipped and should be arriving on Monday, so that’s exciting.
Update: What we’ve been doing
The last time I wrote about trying to close on a property was way back in May and that deal totally fell through. We weren’t able to get the utilities turned on for the inspection due to back payments due and other issues, so we canceled the contract, assuming that we would sign a new one once the issue was resolved. Well, long story short, we never really heard from the seller again. Little more has happened since then. We actually did make an offer on a 4-plex last month, but were a little late getting ours in, so the bank had already sent a counter-offer back to one of the bidders. The price had drastically dropped a couple of weeks before we noticed and put our offer in. As far as we know, we are not in the consideration for that property. It would have been another great cash flow opportunity. I’m dedicating myself to spending more time several times a week, if not daily, to searching for properties so we don’t miss opportunities like this.
Change of Focus?
What we’re finding as we evaluate each deal is that it is always going to be more difficult to get a multi-family property in the current market unless you have a lot of cash to put in. With a minimum of 20% down, plus needed repairs, every purchase drains a lot of available capital. With the limited inventory in our area, we are beginning to shift focus a bit. Currently, we’re looking at several single-family homes that would make for potentially good rehab/resell opportunities. In fact, we are putting in an offer on one today and it has only been on the market for 6 days, though it probably already has offers. If we get it at our price, it will be at about 60% of the after repair value (ARV). Hopefully we can keep the repairs down to about another 10% so that we will have a total investment in of about 70%. I’ll try to keep you updated on how each potential deal is going.
Bidding Strategy
As investors, do you have a specific bidding strategy when it comes to bank owned properties, or any MLS listed property for that matter? For example, if you find a property in an area that you love, but the bank has drastically overpriced it, do you put in a lowball offer right away, or let it sit on the market for a while first. It seems that I notice a trend with the way that bank-owned properties are sold and wonder if there is a way to hack the process in a way that puts me at an advantage over other bidders. Here is an example to contemplate: The bank lists a house in a great neighborhood that needs lots of work. The ARV is $150,000 so the bank feels justified in listing if for $125,000. In my eyes, I would maybe pay $100,000 because I feel it needs $20,000 in repairs. Should I make an offer that is 33% below the asking price as soon as it hits the market? My gut feeling is that I shouldn’t do this unless I enjoy rejection (or waiting for a response that I’ll never get). One month later, the bank drops the price to $110,000 and the offers start flooding in from investors. At this point in the game, it’s almost a matter of luck whether or not my offer is going to have a chance to make it to the bank’s desk. What if I had made my $100,000 offer just before the bank lowered the price? Wouldn’t I have had a much better chance of getting a response than if I had offered right away. It seems that once the house has been sitting for a month or two, banks get pretty aggressive in slashing the price until they start to get some offers. Well, that’s just something to think about. Feel free to comment if you have any ideas or responses.
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Photo courtesy of 
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If you like, or can at least stand to read what I write,
make sure you add my RSS Feed to your list so you don't miss a single post.
If you have no idea what I'm talking about, read this.
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