One of the most common questions I get is, “should I be buying properties at auctions? What are its pros and cons?”
What Is a Foreclosure Auction?
At a foreclosure,you must understand that you will be going in, usually bringing a certified check for five or $10,000. They will also expect you to be able to do any type of due diligence.
Furthermore, you are more than likely not going to be able to enter that property. You won’t know what condition it’s going to be like.
But they will typically tell you if there are renters in there or not, and you might have holdovers you have to deal with.
At the end of the day, you must know a few major things when buying a foreclosure property.
Guide to Buying Properties at Auctions
1. The 30-day Deadline
Typically, you will have to come up with all funds to purchase the property within 30 days. They don’t care if your bank is waiting for appraisal or you don’t have the funds.
They will take your deposit and keep it if you cannot close during that time frame.
2. Property Liens
In addition, you will want to double-check that there aren’t any types of liens or taxes owed on the property. Liens represent unpaid debts, and a property cannot be legally sold until these debts are settled.
These liens might be attached to the property because the owner has not paid them. It could also be because a government agency or another entity owns it.
Ensure that none of these properties has unpaid debts associated with them. Should there be any standing liens, you will have to come up with paying them as well.
3. Buyer’s Premium
And many times, auctions will require a buyer’s premium. And that’s very unlike the normal market, where if you are represented by a buyer’s agent in the normal market, that agent is paid by the seller’s agent, and you don’t have to worry about that.
In an auction, the auctioneers will sometimes charge a buyer’s premium. They might not even charge the seller.
And what will end up happening is that you will have to come up with that percentage. So if you are buying a half-a-million-dollar property and it’s 2%, you might have to come up with $10,000 in addition to it.
The Landlord Tutor Promise
If you or anyone else you know is looking to buy a foreclosure property and more guidance with it, join the Landlord Tutor community and sign up here.
People always ask me, “why did you get into owning investment properties, and why should I?”
Where It All Began
The story behind this is that my grandmother bought a property for $10,000 in a brown paper bag in one of the worst parts of Boston. When they came over as immigrants, they did not speak English.
Over the years, this building has helped feed my family. It has provided so much for every single generation after my grandmother. The building is now worth over $3 million, which is just crazy to hear.
To think that this all started with one person buying a property—one property—and to be able to pass it through generations where I am still benefiting from it. My grandchildren hopefully will as well.
And all you need to do is to take care of it. Whether you do it yourself or hire a property manager is up to you.
Freedom With Owning Investment Properties
Now, think about it. If you buy a property every few years or every year, what you can do for the next generation is to be able to give them a choice.
I saw this, and I started buying investment properties myself because I want to have the freedom of choice and the ability to do what I want.
So now, my team takes care of my properties, and I can do what I love: travel the world and serve.
I can do this remotely because most of the time, all I need is an admin staff to be in charge of the property: making sure the maintenance is taken care of and that we lease it out once a year (because it’s a 12-month lease).
The Landlord Tutor Promise
If you or anyone else you know is looking for this type of freedom of choice to be able to give and, perhaps, benefit the future generations in your family, join the Landlord Tutor community, and I’d be happy to help you.
Renovations usually add value to a property, so is it better to buy a newly renovated one? In this article, we go over the factors that come with buying renovated versus unrenovated properties.
Renovated or Unrenovated?
When buying properties, it depends on your taste and how much money you can pay out of pocket.
If you buy a property that is already renovated, you are paying your premium. You are paying the building and a premium for someone who has already done the work.
Whereas, you can put that equity in if you buy an unrenovated property. However, you will need an excellent general contractor, or you need to be handy yourself and know the process.
Because, unfortunately, sometimes renovations drag on. They go over cost and can’t be financed right typically unless it comes with a 203 loan. But in most cases, you will pay for those renovations out of pocket. You can’t loan it and borrow it as if you were buying the house.
So, what ends up happening is that sometimes these renovations go over, and the timing is messed up. Before you know it, you are already into the winter months and having a hard time renting out the property.
The Right Way to Decide
You want to figure out when to close your properties so you know how long it will take to renovate your property, get it on the market, and rent it out.
Personally, I love buying properties in January, February, or March, depending on how much work the property needs. I timeline out that work, get it on the market for the spring and summer months, and rented out at full cost. It doesn’t always happen, but again, it depends on the size of the renovation.
The next thing is picking out a team to achieve that timeline. As a real estate agent and general contractor, I help many clients and guide them through the renovation process. Even if they’re not doing it with me, I assist them in finding out how much it costs and how long it should take.
The Landlord Tutor Promise
To know more about buying a property that might need some work, join the Landlord Tutor community and sign up here.
