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Buying Auction Homes, fixing them, and renting

Discussion in 'General' started by tony 340, Mar 14, 2016.

  1. tony 340

    tony 340 Well-Known Member

    Any of you guys do this for a living/on the side?

    Any advice?

    This will not be my primary source of income.

    Do you guys run an INC. or LLC?

    I can fix just about anything, fixed capacitors/control boards in HVAC, swapped light fixtures, water heaters, fixed gas lines, water pipes, valves, pool pumps, floors, ceiling fans, toilets, etc.

    Thinking of buying a auction house under 75K, fixing it and renting it out.

    Good neighborhood, no section 8 stuff.

    Currently have enough money to pay off my house free and clear, and have about 50K left over. Still getting a good paycheck out of the shop as well.

    My house is at 2.75% so I don't really see the need paying it off. Won't be able to borrow money that cheap again.
     
  2. shakazulu12

    shakazulu12 Well-Known Member

    I flip for a living. Never rent these days because Oregon landlord law gives the tenants more rights than the owners. But to answer your question, you should find your local real estate investment group or look on Biggerpockets etc. Most investors are perfectly willing to let you buy them a cup of coffee to pick their brain. Local economies make it different enough that it's worth networking with those in the know.

    For example, the auction market here in Portland is tapped out. I haven't bought a property directly at auction in over 5 years, haven't bought off MLS in probably 4. The one exception was one I just bought recently via redemption rights that was actually sold to someone else at auction, but that was kind of a sideways avenue into it. When I was buying at auctions you literally had to go with a gun and at LEAST 20k in cash strapped to your stomach to pay off the organized element that had formed. Occasionally they bought me off though which was kinda nice.

    I run an S-corp, but talk to an accountant about that kinda thing.
     
  3. Gino230

    Gino230 Well-Known Member

    What state are you in? In FL (Broward County, anyway) the auctions have all moved online, even the foreclosure ones. No more "courthouse steps" sales. It's almost like eBay where you put a proxy bid.

    The problem is the banks outbid everyone so they end up with the property. Then they sell it through their REO process. So it must go to MLS for a certain period, then they do the "highest and best" BS. You will pay close to market for the property minus some repairs. Some deals are better than others but the days of buying at a 40-50% discount are over, at least in my local market. There is too much investor money chasing property down here in general.

    I am a fan of buy and hold, but that means less about your fix-up skills and more about being in the landlord business. I like this model because it is the only way you can get paid in perpetuity. I have flipped a few properties before but the last flip is your last payday, whereas keeping the property is a potential annuity, and a very nice wealth building tool if you are using rents to pay down debt.
     
    MELK-MAN likes this.
  4. The Great One

    The Great One Well-Known Member

    Biggerpockets.com has got to be one of the most information-wealthy forums on the internet. They will answer and and all of your questions related to real estate.
     
  5. TurboBlew

    TurboBlew Registers Abusers

    LLCs for our rental stuff. Even the newest stuff needs constant attention.
    If you havent been in the business before... read up on your State tenant laws.
    Learn how to screen tenants.
    This biz is not for the shy or indecisive or emotional.
    There are still operators that can smell a noob landlord a mile away.
     
  6. nigel smith

    nigel smith Well-Known Member

    Been doing this for a living for close to thirty years. Run like hell!
     
    shakazulu12 likes this.
  7. Razr

    Razr Well-Known Member

    Fix it up and sell it, take any profit and run.
     
  8. casjoker

    casjoker Refusing middle age

    renting can be rough, never did houses had a 4 plex. Even before the area started going down hill tenants were rough to deal with. The apartment house and area got run down and went section 8 with it fucking worst scumbags ever and literally destroyed the place. From what I can tell from a friend of mine is flip them as quick as you can unless dealing with multiple units and can dedicate time to just managing those units. He sold all his house because the renting margin wasn't great and he was running all over town maintaining them. He only does 4 units or higher for rentals and then flips houses when he finds the right deal.
     
  9. Rico888

    Rico888 Well-Known Member

    ^^^This^^^

    Same down here in SD....prices up...guys operating on thinner margins...inventory low....This applies to the single family market here....

    I had a high end vacation property in Palm Springs a few years ago....I thought since I would be dealing with a higher caliber tenant, they would naturally take care of the property....boy was I wrong....

    You need to have a certain mind set if you want to get in the land lording business.

    To the OP...If I were to start over again and I wanted to get into buy and hold mode, I'd probably get my feet wet with a 4 plex and see how I liked being a landlord....look for a project that has some upside with a value add proposition. Example: Building has been poorly maintained and does not show well, under market rents, etc.
    Better leverage with apartments....

    It can be a lot of fun putting a deal together and it can also be a pain in the ass....one thing for certain, along the way you will learn a lot about the human psyche and how it works... :)

    And yeah....Bigger Pockets is a great resource and forum to explore....lot of folks down in your neck of the woods you could connect with...

    Good Luck!!!
     
  10. Shenanigans

    Shenanigans in Mr.Rogers neighborhood

    I never knew there were this many slum lords on the beeb. :)
     
  11. BigBird

    BigBird blah

    My cousin does this and is constantly in court with tenants. In NYC, the tenant holds most of the power. When he started he was doing some flips, got attached to a couple properties (the emotion part of it) kept them, and now are headaches, and it's so hard to get people out.

    He has made a lot of coin doing it, and ended up becoming his full-time gig right now, but it is stressful with calls at all hours of the night.
     
  12. nigel smith

    nigel smith Well-Known Member

    This. I have been changing my business model to owner finance via vendor's lien deed. While the monthly payment I receive is always less than the rent I would get for the property, at the end of the year my average income is greater from the owner finance units. I aim to produce paper equal to twice my investment, plus interest. The single biggest issue on the gulf coast is obtaining and keeping insurance coverage, whether it be a rental or owner financed property. We have to stay on top of the buyers to ensure they maintain coverage.
     
  13. SteveThompson

    SteveThompson Banned by amafan

    I have been doing this for years. My wife and I have 35 units now. Some are multi's and some are single family homes. My wife runs the day to day part of it. We also have a full time maintenance guy.

    I'd be glad to answer any questions but otherwise it's hard to know where to start. To answer the questions you asked, we use an LLC (actually more than one) for liability protection. They were set-up by an attorney who knows what he is doing, not just an online app. We have had some good luck with Section 8 so I wouldn't rule that out. At least in our area those are not "the projects". It is just an allowance per month. I don't know what $75,000 will buy in your area but I don't buy anything that I can't get 2% per month return on my total outlay. That means the search is very difficult.
     
    MELK-MAN likes this.
  14. SteveThompson

    SteveThompson Banned by amafan

    Do you have SAFE act issues or are you a registered lender?
     
  15. Dave K

    Dave K DaveK über alles!

    Really a cool thread. I've flirted with giving this a try but this thread and posts tell me that you can't go into it half cocked.

    Thanks for the reality check. :)
     
  16. SteveThompson

    SteveThompson Banned by amafan


    You need to be careful but some casual investors have made good money. The worst spot for me was when we had 7 or 8 properties. It wasn't enough to support any significant employees but it was too much to do on the side.
     
    MELK-MAN likes this.
  17. BigBird

    BigBird blah

    From what I see Real Estate investing has become a quick way to increase wealth if done right. It's like the stock market but even better. It's just amazing how it seems to be no bottom to the real estate market again. sell to someone, they foreclose, buy it again, sell again at even a higher price...rinse and repeat.
     
  18. Mongo

    Mongo Administrator

    I've always wanted to do it but we're on the road too much.
     
  19. Dave K

    Dave K DaveK über alles!

    Yeap and just running the numbers in my head tells me that the number of properties to do it and do it right are way beyond my comfort level. Steve kind of confirmed that in my mind.

    and then there's the whole dealing with people aspect. You could go through a rental agency and let them handle the PITA factor but that cuts into or eliminates your profit (if there was any).

    Nah, I know (or knew) flipping watches, antique shotguns and other such junk but houses and rentals is sounding like it's not for me. Wanna buy my Panerai? :crackup:
     
  20. rd400racer

    rd400racer Well-Known Member

    After 20 years of renting my one house I've finally hit my nightmare.

    The current tenant is a middle age woman that been there two years. I did not renew her lease last year; instead told her we'd make it month to month. Well, my 24 year old son is getting ready to graduate so I'm going to rent it to him and a friend, just like my dad did for my wife and I when he originally owned this house.

    I called her yesterday to say that I would like her to move out by June 1st...plenty of time to find something else. Her response blew my mind.

    After we talked on the phone she texted me to say that she was living paycheck to paycheck, and could I defer her paying the rent until June so she could use that money to find a new place to live AND (I'm not making this up) write her a reference letter saying she was an excellent tenant and always paid on time.

    I was dumbfounded. No clue how to respond. She wants me to give her $2400 so she can find a place to live. Since when did I become a f&*^ing charity!

    I will no longer correspond with her. An attorney can take it from here.
     
    MELK-MAN likes this.

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