2 pre-foreclosure deals - Posted by linda

Posted by linda on April 03, 2002 at 14:13:35:

If I had time for a diary, I’m sure I would be a millionaire already:)

I’ll just keep a log of all of my creonline posts. I’m sure eventually that will represent my “truthful” journey through Real Estate Investing!

Thanks Again! (I’m sure when I learn just a little more I’ll be begging you to show me the ropes, too!)As for today - My lesson is “Just when you think you’ve got it all figured out, you realize how much more there is to learn:)”


2 pre-foreclosure deals - Posted by linda

Posted by linda on April 01, 2002 at 23:57:44:

I’ve just started getting calls on some pre-foreclosures. What profit % should I insist on when I’m helping people out of their financial problems. How much does owner financing fit into the equation. And do I want to rely on owner financing in pre-foreclosures?

House #1 - Sought after neighborhood, MVs range from 50,000-150,000, Owner just wants out before problems start. He got behind due to health problems, but the bank allowed him to catch up with 1-1/4 payments. He owes 70,000, the house is worth 70-75. It has new paint/carpet, etc. a little landscape might help. He tried to sell for 76,000, but did very little to market the house. He needs nothing down & payments of 600 per month. Should rent for about 750-800. T&I is about 110. Since financing isn’t an issue, do I use the same profit formula? This is close enough to home that I could keep it in my portfolio, but the MV’s have stayed pretty flat out here.

House #2 - Nicer neighborhood, Good schools, a few miles from University. MV’s range 150-210,000. This house was appraised at 184,000 -2 years ago for a re-fi. He owes 152,000 but is behind 6200 in payments + 1700 for taxes. He just wants out with enough money to get into an apartment and move his stuff. He wants to get his good credit & reputation back. This is in “mint” condition except for a sidewalk that was removed, but not replaced. He’s willing to take payments that will cover his mortgage. I could probably convince him to lease-option house #1. Major health problems & bad advise got him where he is now. His health is back, but it’s too late to catch up. Can I help here, or is the profit too thin? This is too far from home & little too expensive to keep in my portfolio.

Ed, if you read this - We spoke just before the convention. Looks like you’ve gotten back-logged on your calls. Call me back when you have time so we can finish our conversation.

Linda from Ohio

Re: 2 pre-foreclosure deals - Posted by Ed Garcia

Posted by Ed Garcia on April 04, 2002 at 10:34:50:


You’re right, not only have I been backlogged. But I’m working on one of Mr. Gutierrez’s loans. His wise cracks about me napping, puts me in a mood for a point hike (Smile). After going through partnerships, LLC’s, BBV’s, and XYZ, I still can’t find Angel in the deal. I know he’s here somewhere in his deal because he told me he is, and I will continue looking until I find him. I’ve got 2 skip tracers, and 3 private investigators helping me look for him on this deal and we feel confident we should find his name somewhere in the deal by Friday.

Meanwhile Linda, Angel gave you good advise on how to acquire the properties you have mentioned. When you are doing deals with little or no equity as you are, you should never put financing in your name. However, he should have spent a little more time looking at your deals.

Linda, before you do any deal you should have a game plan. I won’t kid you I’m not fond of your deals, especially in Ohio. I see deals in Ohio at 50 and 60 cents on the dollar. As you said many times appreciation is flat and so you must make your money on the buy or with cash flow.

Deal #1 has a debt service on it of $600+110 for T&I, which totals $710. On the high side you tell us you can get $800 a month. So with your numbers you’re showing a positive cash flow of $90 per months.

I’m a little more conservative. I’m going to use the $750 figure and take 25% off the top for T&I, expenses, vacancy etc, which by the way is very conservative, because the expenses or vacancy if experienced could be higher, and that leaves me $563. I see this deal with no real equity and a $37 negative cash flow, so I don’t see a deal here.

Deal #2 is appraised at $184,000. The first is $152,000, back payments $6200 and $1700 for taxes, which totals $159,900. So on this deal you’re at 86% LTV. On a leveraged deal, this could work. You don’t mention what this property will rent for in the event you get stuck with it just like the current buyer. That would definitely be a consideration to me. Remember Linda; you make your money on the buy. You want to make sure that in the event there is a change in the economy and you get stuck with it, that it will debt service and help you weather a storm.

Now you must excuse me, but it’s time for my nap. Oh and by the way, if you should run into Angel, tell him that I said interest rates went up yesterday.


Ed Garcia

Re: 2 pre-foreclosure deals - Posted by Angel Gutierrez

Posted by Angel Gutierrez on April 02, 2002 at 09:27:40:

I know this message is for Ed, and if you don’t mind, I’d like to answer this one for you. Also, try to remember that Ed is a senior citizen and he’s kind of slow in the morning, his afternoon naps tend to be “a little more” than just naps, but he’s a sweetheart and a good man.
The deals you’ve encountered, based on your dialogue, are both slam dunks. Both people are willing to give their houses to you to “solve the problem.” All you have to do is ask. Both house are “deed over” candidates. (BTW, this is the only way I acquire houses). I don’t buy 'em, people give them to me. You already know the answer to your questions, so stop fiddling around. Search for the answers, don’t wait for someone to show you the way. You’re way ahead of the game already by coming to this board for answers, the finish line is nearby. This method of acquiring house is “extremely” effective. It is not out of the ordinary to pickup six or seven ± each month. I do.
So…chop chop!
Go get 'em. Before you know it, you’ll be a millionaire!
Let me know what happens.

Dallas, Tx

Re: 2 pre-foreclosure deals - Posted by linda

Posted by linda on April 05, 2002 at 05:43:14:

Hi Ed,

Unfortunately, I can’t find Angel either, that annonimity of hanging out on creonline says it all:) (by the way “smile” is just a colon: with a right parenthesis)

I’m sure you could tell from my post that I’m a little nervous on these. In fact, I’m going to try to help deal #2 find the money to make up his back payments - the house is his baby and he doesn’t want to loose it. He’s back to work now and has no problem making the payments and he’d filed Chtr 13 when he became ill, so we may be able to work with the lender on this.

The 70,000 house is in my target area. I’ve watched this area for a while and want a property to get me “involved” in the neighborhood. When the “foreclosure market” we’re in, turns into a “buying market” this neighborhood will be a great place to be. All this house needs is a powerspray cleaning outside, a few bushes and grass in the backyard. It’s outward appearance definitely hindered it’s sale. I’m sure with a few hundred bucks in clean-up it will be very marketable at closer to 80,000. I’m negotiating this one on terms based on future value. The second mortgage on this house was used to buy his current residence so there’s a lot of room for negotiation on payments. (I’ll use your figures to lower the payments)This hasn’t gone into foreclosure yet, so he’s not behind in payments. He wants nothing down and will hold it as a lease-option, so I could walk away if the market doesn’t increase. I see this as a way to gain tons of experience without much risk.

Oh, by the way, I’m still waiting for your call.


Re: 2 pre-foreclosure deals - Posted by acwebb

Posted by acwebb on April 07, 2002 at 08:43:52:

It seem like the only rational person here is Ed…and he’s right, the numbers don’t make sense.

Angel, where is the upside potential in this deal?

Re: 2 pre-foreclosure deals - Posted by linda

Posted by linda on April 02, 2002 at 13:51:59:

Thanks for the response Angel,

I’ll keep the “napping Ed info” to myself for now. I still need his level headed advise and don’t like to iritate anyone before I’ve met them:)

I contacted seller #1. I’ll get some legal help writing a contract and finish it up by Monday. It’s only someone elses money anyway, right? I’m really a novice at this, but I didn’t miss a beat when I started my graphics business. I’m sure I can be just as successful in Real Estate. Thanks for the support.

The 185,000 house still makes me nervous - This isn’t California where people will buy anything under a million dollars! In Ohio, 185,000 buys a pretty nice house and $1200 house payments might hurt if I don’t turn this quickly. Do I buy this one with the intent to flip it at just below retail? There’s not enough money to flip it to an investor and it’s too far away to manage as a rental.

And while we’re on the subject, are these “subject to” deals or do I write them up as l/o or l/c?

Thanks Again:)

Re: 2 pre-foreclosure deals - Posted by Ed Garcia

Posted by Ed Garcia on April 05, 2002 at 09:34:42:


I wish you well. The reason I say that is because you choose to go with emotion over good judgment.

There is no such thing as buying a property just to get into a TARGET AREA. That’s an excuse you’re giving yourself. You speak more about the looks and condition of the property then you do the economics of the deal. The numbers tell us what to do. You disregard the numbers and talk about future appreciation after telling me how the area has been flat. I call that an IF, COME, MAYBE.

When buying, you buy based on existing numbers, if the market should appreciate like you feel it could, then that’s just icing on the cake.

This property has no real equity and is negative cash flow; it’s time to walk.

I know the reason you’re looking at this deal so hard is because you can get into it easily with no money and you want to do a deal. I understand that, but that still doesn’t change being able to recognize a deal.

The way I worked the deal for you in my last post is the right way to look at the deal. You’re going to end up being a property manager and not even a property manager making any money.

As I said Linda, I wish you well,

Ed Garcia

Re: 2 pre-foreclosure deals - Posted by Angel Gutierrez

Posted by Angel Gutierrez on April 02, 2002 at 20:14:11:

Time to go to school. This site has TONS of information. It’s time to invest in YOURSELF. First, learn the ropes, then get out there and make it happen. Join your local real estate club. They’ll have more info for you. They will probably have a library where you can check out their books and tapes if you join their club.
As far as your deals are concerned, sounds to me like you’ve already talked yourself out of getting involved so nothing I write will make a hoot of difference, I might however, be wrong…it’s up to you.
So, I think you get the picture. Get to it, and soon enough you’ll have cash comin’ out your ears!

Dallas, Tx

Re: 2 pre-foreclosure deals - Posted by linda

Posted by linda on April 03, 2002 at 05:05:56:

How dare you!

After your message, I talked to 20 more people, 2 of them additional pre-foreclosures. I might already have a buyer for the “expensive” house, I talked to three private lenders who will loan me the cash to catch up the payments and get me some cash to focus on real estate instead of graphics, I went out to look at two more houses, met a buyer at my current investment and made an appt with my title co/lawyer. Now add to that - I have 4 kids at home for spring break & I do still have clients who need their websites updated - I’d say I’m definitely moving on the real estate business. - Don’t underestimate your powers of motivation, Angel. I’ve been visiting this site for a year now. You and Ed are my idols (ok - you getting scared yet:) I make the website for my REI group and have been contacted to make sites for two more. I talk to everybody -good or bad - but short of a motivational seminar - No one has ever inspired me to to get out there & work like you did! - THANKS

Re: 2 pre-foreclosure deals - Posted by Angel Gutierrez

Posted by Angel Gutierrez on April 03, 2002 at 09:04:15:

That’s what I like to hear.
As a side note, A close personal friend of mine has been after me to “teach” her the ropes. I said no. I told her she didn’t have what it takes(not true). She was furious with me. Secretly, I know this woman is capable of wiping the floor with me given the opportunity. I finally caved in. Am I gonna teach her the ropes? You bet! She has the most motivation and energy as well as skills I’ve ever seen in a person. I told her to give it a year, she’d be a millionaire. There’s no doubt in my mind about that.
Get 'em lady. Just so you know, women tend to be a lot more focused and dedicated(in my experience) than men. I admire that. You’re on the right track…continue. Smile and enjoy the ride all the way through. Life is your movie, you are the director and the staring lead. You decide what will happen next. Got it?
Keep me posted on your progress, oh yeah, keep a diary.


Angel Gutierrez
Dallas, Tx