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Foreclosure homes to re-sell - any tips for finding worthwhile opportunities?

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Topic by Bill posted 04-09-2008 07:45 AM 5491 views 0 times favorited 19 replies Add to Favorites Watch
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Bill

131 posts in 4212 days

04-09-2008 07:45 AM

Topic tags/keywords: foreclosures homes rehab

For the past few weeks I have been looking at foreclosure homes, to find a few to fix up and re-sell. Maybe it is our area, maybe the times, maybe who knows, but the prices still seem to be out of line for the market today.

For example, some of the homes I have seen need quite a bit of work inside to be re-sold. But, their prices are at or above market price for homes in the area which are in good shape. I understand the bank wants to make something on these, but I do not think they have looked at the shape some of the homes are in. If someone paid the asking price, and then fixed it up, they would have negative equity in the home. And most people today do not want to buy a fixer home, but one to live in. So, someone has to fix it up, which adds to the cost of the home.

So, how do you find a foreclosure that you can rehab and re-sell? There are a bunch of them on the market, but it amazes me the price some of these have on them. Are the banks thinking they will hold these homes until the market prices return? Doubtful, but what other reason can they have. I think they are still living in the time when the homes were going up 25% a year. Around here, they have dropped as much as 50% from their all time highs in 2005-2006.

Anyone have any tips on where or how to find something to make a little on the re-sell? I am not trying to make a killing, just a little to cover my costs, time, expenses, etc.

-- Bill - Turlock, Ca. - http://www.brookswoodworks.com



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MRTRIM

743 posts in 4212 days

04-20-2008 11:47 PM

no help here bill , ill say theres tons of repos around but even if you rehab one theres no one to sell it to . for the first time ever theres a lot of peop;e leaving fl. its getting too expensive to live here

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Bill

131 posts in 4212 days

04-21-2008 12:56 AM

Funny thing, homes are still selling here. Obviously those are ones that do not need so much rehabbing. I know a RE broker who can look them up, and many are selling within a few days of listing.

It is hard to figure out where the money is coming from, but probably a lot of people on the sidelines during the run up can now afford a house.

-- Bill - Turlock, Ca. - http://www.brookswoodworks.com

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MRTRIM

743 posts in 4212 days

04-21-2008 01:34 AM

probably so bill , plus its a good time for the very wealthy to take advantage of the market , rent it out and wait for a rebound . the people that are displaced by forclosure still need someplace to live

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Dadoo

30 posts in 4211 days

04-21-2008 02:17 AM

I agree with MrTrim on the rent it out idea. Houses aren’t really selling good right now but people always need a place to live. I think we’ll see some changes in this after November’s elections. But then again, now is the time to buy due to this recession. You can get houses cheaper than last year and the rates are still low. So if you want to flip a house, it might be a year before you’ll see profit. That’s 11 months too long for regular flippers. Means having to make payments. Renting would help subsidize those.

-- Dadoo!

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Bill

131 posts in 4212 days

04-21-2008 09:46 AM

I am looking in the surrounding areas. So far the ones around here have been real fixers, or in areas that would not have a good re-sale value. But, I will keep looking.

-- Bill - Turlock, Ca. - http://www.brookswoodworks.com

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Dan Lyke

331 posts in 4211 days

04-21-2008 08:11 PM

The part of the “Rich Dad, Poor Dad” spiel that a lot of people missed was the bit about analyzing your investments as income versus speculation. I think that’s also the part where most people are getting burned, in this ludicrously “up” market it was easy to mistake the gains from price speculation, ie: “flipping”, as income.

So no matter what, I’d make sure that rental income makes economic sense for the price you’re planning to pay for the house, because even if you don’t end up renting it, that gives you a good idea of where the real value of the property lies.

Given that, I think there’s room left to fall, especially in the bubbles that happened around your area. But if you can find something where the rental income makes sense, then it might also be a decent flipper.

-- Dan Lyke, Petaluma California, http://www.flutterby.net/

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dennis

90 posts in 4212 days

04-23-2008 02:46 AM

If the price of gas keeps going up, will the price of homes keep going down?

-- http://woodsongsfurniture.com

View Bill's profile

Bill

131 posts in 4212 days

04-23-2008 05:11 PM

A good question Dennis. So far, it has not made a difference. But, when gas is $3.79 plus in our area, filling up all those pickups will take a load of cash out of someone’s wallet.

I think house buying has picked up a little because of spring. It gets warm and sunny and people go out house shopping. That does not happen so much in winter. So it may be a temporary thing, that slows down again later this year. Or the recovery might be at hand. Who knows, but at least things are selling out there.

-- Bill - Turlock, Ca. - http://www.brookswoodworks.com

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Catspaw

35 posts in 4195 days

04-24-2008 01:21 PM

First of all, the “news” we all hear applies to certain areas and does not necessarily reflect the market everywhere. RE problems are getting fairly widespread, though. So you still need to be wary. You need to really tune in to your market.

“Normal” areas are still acting normal. These “hot beds” of forclosures are often in areas where all these young junior execs were buying McMansions and stuff, where they couldn’t build fast enough, suburban sprawl, etc. But also other areas, too, like where [no offense intended to ANYBODY, just a common thing] poor people who were taken in by unscrupulous mortgage people by sucking them into stupid financing packages. Areas with people with level heads, decent working conditions and such are still operating at a status quo.

In any case, I would say, treat them like any spec/investment would be treated. What is the bottom line? Can you afford it if it doesn’t sell right away? Can you afford the rehab? What is rent like for what you’ll have in it and would your expenses be covered if you did have to rent it? All the normal questions.

My philosophy is always “Is it a deal?” I mean a “DEAL” or is there some hype in it? There will ALWAYS be another deal coming along.

Don’t be afraid to low-ball the bank. If it’s a $100,000 property under “normal” conditions and they want $95K…offer them $55K. I won’t hurt YOU if they laugh at your offer. You shouldn’t be surprised if it turns out it’s the ONLY offer they’ve had in 6 months!

A house is ripe for flipping when the worst is cosmetic. If the foundation, structure, mechanicals, etc. are solid then the rest is easy. Replacing drywall is cheap, shoring up a foundation is not. I would look for something that requires mostly fixing you can do yourself rather than needing a specialist/heavy construction. The dog of the neighborhood is almost always kicked-in holes in drywall, stains and dog crap on the carpet, busted cabinets, bad lawn, leaky faucets, etc. Those are easy fixes. Termite damage, cracked foundations, rotted roof framing and stuff are bad and expensive.

And yes, gas is affecting prices. The farther away from these downtowns of the larger markets you get, the faster the price falls. NPR just had a presentation on D.C. (I think) and they were talking about how long the commutes were and stuff. The realtors had a specific price factor based on how many miles away from downtown the property was.

Lastly, look at my project here, and you’ll see what I’ve just said is a bunch of crap. LOL. sort of. But, my property was a real “deal” and I ran the numbers through my head for about 3.71 seconds and new I would buy this place.

short story about my project:

My brother is a mortgage banker, he called me for an estimate for repairs for a buyer so bank could factor in repairs for the asking price, standard procedure during financing…etc. I spent about 30 mins. at the place, submitted my estimate, got paid $100, deal fell through, my brother said “You should buy that place.” I ran the numbers through my head, thought for 3.71 secs. and said …”uh….o.k., I guess.” The “numbers” are a longer more complicated story. Next time you can’t sleep, maybe I should type it in as a post….it actually might be relavent to this site.

Once again I’ve managed to go on and on and on…...sorry.

-- arborial reconfiguration specialist

View Joey's profile

Joey

82 posts in 4209 days

04-29-2008 08:23 PM

The prices of houses here in Ohio are still going down, foreclosures are up. I was watching one economist who said they have no models to base any forecast on what is going on in the current housing industry, since we have moved into a investment type market, rather than housing being a basic need where a family bought a house and lived in it though the rise and fall of the market. my money is on prices dropping back down a more reasonable rate and if it was me I think I would wait before I would invest, I’m betting there will be better deals coming. but thats in my part of the world and it may be different in yours.

-- Joey ~~ Sabina, Ohio http://sleepydogwoodworking.wordpress.com/

View Bill's profile

Bill

131 posts in 4212 days

02-13-2009 08:40 PM

As a belated update, I did find a house in the spring of 2008. I spent the summer fixing it up, which mainly involved patching drywall, painting, and cleaning. Once this was complete, I put the house up for sale in September 2008.

For those watching that housing market, things were going from bad to worse about that time. In short, I still have the house on the market in February 2009. It has been shown several times lately, but with so many foreclosed houses still on the market, selling it is proving to be the toughest problem of all.

-- Bill - Turlock, Ca. - http://www.brookswoodworks.com

View dennis's profile

dennis

90 posts in 4212 days

02-13-2009 11:15 PM

Sorry to hear that Bill. A lot of people have been hurt by these money men’s games. Guess all we can do is give them a couple trillion reward and bitch when they take it to Los Vegas….

-- http://woodsongsfurniture.com

View MRTRIM's profile

MRTRIM

743 posts in 4212 days

02-14-2009 12:39 AM

have you considered renting it bill ? lots of folks losing their homes but they still need a place to live .

View Bill's profile

Bill

131 posts in 4212 days

02-14-2009 06:54 AM

I haven’t rented yet, as I did not want to be a landlord. I just wanted to fix a place up, sell it, and move on to the next one. If it drags on too much longer, I will rent it and wait till next year to try selling again.

-- Bill - Turlock, Ca. - http://www.brookswoodworks.com

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PaBull

694 posts in 4158 days

02-14-2009 06:11 PM

Bill, for a 10% management fee you can give the headaches to someone else. These people have a bigger pool to draw people from and they are set up to take legal action if needed. It might be worth looking into if MrT does not rent from you and you want to tie over till the market gets better.

View Catspaw's profile

Catspaw

35 posts in 4195 days

02-15-2009 03:35 PM

You should rent it right away. Make sure the tenent knows it could sell and include that in the rental agreement. Every day you have to pay for the house is less you get in your “flip” profit.

Be careful of management companies. We’ve had rentals and what happens is, everytime something goes wrong they call in a plumber or electrician and you’ll get charged big bucks for even the simplest repairs. A leaking float valve in a toilet can cost you $75 for a $10 and an hour of your time repair.

One of our tenents really pissed me off one time. I had to go and check out a “possibly” moldy HVAC vent. I had to go there, pull the ceiling vent, and show the tenent that what he saw through the vent was the practically brand new insulated duct work (it’s gray on the inside). This idiot didn’t even know how to stand on a chair, get a screwdriver and check it out himself. Good thing a managment company didn’t have to call in a pro HVAC service for a $75 minimum house call.

Just as an update on the housing situation….my brother, being a mortgage banker, was telling me that banks aren’t dealing. They’re standing buy their pricing (meaning it’s hard to get that “deal” from the bank.) He doesn’t know why they’re holding on. Maybe they’re deciding that they should hold on and suffer the expense rather than just dumping their toxic assets.

-- arborial reconfiguration specialist

View Jim Reeves's profile

Jim Reeves

29 posts in 3517 days

03-21-2010 01:31 AM

Hi Bill, l live in Ontario, Canada 1.5 hour drive east of Toronto, Ontario.
I have been a self employed drywaller since 1978 worked on some flips as we call them here.
A few successful flipers here l did drywall for l pumped them for info they say when not really low priced deals out here they often say to buy a property if you can for about $ 40,000 – $ 50,000 below market price.
The home if you can get buy wwith mainly cosmetic spend 10% of the above price yard clean up flower beds etc paint trim etc that you could be in and out in 5-6 weeks.
They say if you can make $ 25,000 – $ 30,000 in less tghan 2 months work and sell fairly quickly can do 6-10 a year and do well.

I myself amy looking for a duplex that l can turn into a trriplex or 4 plex and be in and out back on market to sell in 4-5 months estimate about $ 20,000 per unit live there same time in one side work on other if l can do 3-4 a year my son and l then would gbe ok for a starter.
So best maybe check around what others are doing good luck

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GrowMap

9 posts in 3482 days

05-09-2010 06:24 PM

I know this is an old thread but it is still relevant today – or even more relevant. First I have an idea for Bill. I know someone who did extremely well with fixer-uppers by doing what no one else was doing. He didn’t want to be a landlord either so he sold houses and carried the loan himself.

I should elaborate by saying that he specializes in buying starter homes from elderly people ready to sell out. Originally they would let him make payments to them when they were ready to move in with family or move to assisted living but now he has the cashflow to buy them outright.

He would level the house, re-roof, fix it up, paint inside and out and then sell it to someone who really wanted a house for little down and he carried the note.

He now has dozens of houses. He said he only ever had one damaged. The families he sells to are happy to be able to buy without dealing with banks and take good care of the homes and fix them up. Over the years he has had some who wanted to move because of jobs or personal reasons who gave their house back to him in better shape than it was originally.

This idea worked well because he started with little cash and a lot of sweat equity. He bought two bedroom one bath homes in old but still decent neighborhoods where mostly elderly lived. Banks and real estate agents don’t like small old homes or these specific “mixed” neighborhoods so he filled an existing demand.

He originally made payments to the original owners but now buys them outright. He is well known in that area and when someone is ready to sell they call him first. He has a waiting list of families who want to buy from him – working class people who know how to maintain their own homes and are grateful that he works with them.

Bill, since you already have this home you could adapt his strategy and find someone who will buy it from you with little down. That way they maintain the home, you aren’t a landlord, it isn’t sitting empty risking vandals and you aren’t losing money every month.

I am not an attorney so do make sure there are no legal reasons you could not do this such as existing loans that preclude this strategy. I suspect that he may choose who he sells to based on his other business which sells insurance in that same neighborhood. He would know who always pays on time. You would need to qualify your buyers somehow.

I thought that foreclosures would mean rental prices would go up because those losing their homes have to live somewhere but property management companies tell me rental prices are going down because they are having trouble keeping properties rented. They say it is because those who can not sell in this market are forced to become landlords.

Some of that is their own doing. The number of people who can not pass they type of background and credit checks many management companies and owners require is enormous. They probably COULD rent but WON’T and those people know better than to bother applying. Most people live paycheck to paycheck so any emergency from their car breaking down to an injury to being laid off = bad credit = unable to rent from many agencies.

People who want to fix up homes can fill that need too. There is a big difference between someone who can’t manage money or doesn’t want to pay on time and someone who had a temporary emergency or got laid off but is now working again.

For those who want to find fixer-uppers there are some excellent resources and tips in this Shoosing a Home Restoration Project post including how to research the neighborhood, estimating costs and more.

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sophia2019

3 posts in 88 days

07-18-2019 09:54 AM

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