The Power of Foreclosure - Posted by Hugh James

Posted by Ed Copp on February 21, 2000 at 18:37:16:

HOMEWORK, to me is the well refined art of keeping your ear to the ground and being able to find out things that are going on (right around home) that will make a profit for you. The agent involved in your post probably did a lot of homework, to find out who is selling. Who is buying, and why. Then he positioned himself to make a handsome profit. Some folks do only one deal a year or so, and make a nice living at it, they do a lot of homework. I hope this explanation helps you, I know it helps me. It makes me think… Thanks ED.

The Power of Foreclosure - Posted by Hugh James

Posted by Hugh James on February 21, 2000 at 14:00:52:

Thought some of you folks would appreciate this deal. This one is a good lesson for me. This deal was right in my own backyard and I was asleep at the wheel. No excuses. The numbers are awesome. Here’s the story:

Chicago frame three unit taken back by a national lender. In an area beginning to gentrify, but the building is a mess. Structurally probably OK, but a TOTAL rehab. Was listed on MLS last August at $98K. Was purchased by another real estate agent in one day at $91.5K. He got a 3% commission, so his net cost is $88,755.

The building sits on the north side of a lot 50’ wide by 125’ deep. A standard Chicago lot is 25’ by 125’ so after closing in August, 1999 he applied to the county to subdivide the parcel and get a separate PIN for his new vacant lot.

Last week he listed the house “as is” at $189K and the new vacant lot parcel at $110K. Both sold in under a week.

Now at this point I’m just guessing, because these sales have not closed yet. But knowing the area I think I’m close in saying he probably got about $95K for the lot and about $170K for the building. That’s $265K less his cost of $88,755 for a gross profit of $176,245. He did NOTHING to the house. It’s in the same bad shape it was when he bought it last August. He did have to pay taxes, insurance, attorney fees and some closing costs.

$176,000+ profit for knowing value and moving quickly and being able to wait 6 months for his profit. What’s the yield on this investment. Yes, “Good enough.”

You’ve got to hand it to an investor who had all his ducks in a row and then went for the gold.

Re: The Power of Foreclosure - Posted by Ed Copp

Posted by Ed Copp on February 21, 2000 at 16:21:16:

He did his homework… Homework pays wery well $$$

Re: The Power of Foreclosure - Posted by ernest

Posted by ernest on February 21, 2000 at 17:50:19:

Would you explain “homework” to me? My question is how do you know and how do you find someone willing to buy like that. Sure, this is an agent who has maybe been in the business a long time and knows the market. But I am not and have not been in the market a long time. How do “I” know when a property will sell for so many times more its current asking price? How do you find a buyer so handily?

Just To Clarify… - Posted by Hugh James

Posted by Hugh James on February 22, 2000 at 07:25:55:

Hi Ernest…

I’m not a friend of the fellow who did this deal, but we have met at Realtor functions. He watches this particular neighborhood very closely, so he knows his market and the property values in that area very well. He studies sales in the area and knows value. And I think knowing value is the key. It’s sort of like the lady on “Antiques Roadshow” who bought that $50,000 lamp at a garage sale for $200 bucks–she knew the real value. And as Joe Kaiser says (I think it’s in his foreclosure manual) “Sometimes you get paid for what you KNOW.” And in this case what this investor knew was worth about $175,000.

This investor not only knows his market and values, but he was prepared with cash to buy when the opportunity struck. I’ll bet 50 cents cash money that his offer to buy at $91,500 was cash, no contingencies. The property was listed on MLS, so anyone (myself included darn it) could have bought this deal.

You ask, “Where did he find willing buyers” for the property after he bought it? Same place–MLS. And I think that’s key to this discussion. This stuff, the good deals, aren’t some well kept secret. You don’t need (IMHO) hand held guidance to find these opportunities–they’re right out there for all to see and go for, IF you’ve done your homework. In this case, this deal was just a block away from property I own, and I missed it. It has certainly made me rethink my daily routine.

Good Luck!