A Guide For Buying Properties At Government Auctions
There are many government agencies selling foreclosed homes to the public. Government foreclosures on properties can be for one or more of a variety of reasons. Generally speaking the most prevalent reasons for foreclosure are the inability to make mortgage payments and the non payment of Federal, state and local taxes or all three of these. However the government is also able to foreclose on a property for non payment of assessments, homeowners’ association fees, utility bills, and believe it or not mechanics liens.
The major government agencies who have thousands of foreclosed homes on their inventory, include HUD, VA, IRS, FDIC, and CBP, but there are also many others. These homes are dead weight just sitting in their inventories and have to be liquidated into cash flow. Government agencies such as the IRS, US Customs seize the property of people who have violated the law in some way or other. The way these properties are sold is through government auctions.
If you are new to this market never buy at your first government auction, first gain a little experience of the auction process before you buy. Attending auctions is a really good way to learn about the systems and processes before you dive in the deep end. Once you do decide to buy a property on sale at government auctions, don’t buy unless you are able to make at least 10% profit when you have deducted all relevant expenses. Set a budget limit for yourself, do not get auction fever, stick to your limit!
If you are buying a property from a government auction that you want to live in yourself, it is a simple matter buy one requiring extensive repairs. You obtain the property cheaply and it can be gradually fixed or redesigned while simultaneously living in it, this allows for tremendous savings. Remember to immediately change the locks and obtain insurance as soon as you receive the title.
When buying a property on Government auction to re-sell, bear in mind the market is not really a seller market at present. But if you think you can do it at a good profit, then don’t buy a property that requires more than just cosmetic repair. If fixing the leaking faucets and a good lick of paint will do it, then that is what you need to invest in. If anything more serious is required, you might find that you have landed a money pit.
Buying multi family units are a great way of investing in properties for leasing purposes. But you will have to ensure that you have enough money available to work with a handy man or maintenance contractor to have the property ready for renting.
Bear in mind that tax liens have a redemption cycle of 120 days. You have to obtain title insurance to protect your interest in case the IRS decides to exercise its option. Many title insurance companies want you to wait out that 120 days before they will issue insurance.
The ABCDE of Flipping Houses
All new things can be a little frightening or intimidating at first glance. The same is definitely true when it comes to flipping houses. Many people feel several times during their first flip that they have gotten in over their heads. The truth is that it will take more than a few flips to feel comfortable with the process. Most people make very little, if any real profit on their first flip and write it off as a learning experience only to enter into the next flip with newly learned lessons and a positive attitude. Learning the ABCs of flipping houses is a great place to begin and can help you avoid costly mistakes made by many first time flippers.
1) Appraise. You need to have a proper appraisal performed on the house you intend to flip and compare it to other houses in better condition and of similar size and style within the neighborhood. You do not want to buy the best house in the neighborhood, in fact it is best if you can find the neighborhood eyesore and turn it into a competitive house for the neighborhood in order to get the most for your money. More importantly you want the appraisal to reveal the actual value of the home now as compared to the price you are paying and talk to the appraiser about what the home would be worth the with improvements you are planning to make.
2) Bold Moves. Sometimes it takes bold moves to make the impression you want to make. The decision to flip houses is a bold move in and of itself and while you do not want to necessarily enter into risky waters you do not want to play it too safe either. Be cautious with your financing and guard your expenses and your budget well but make the changes that will catch the eye of the next owner for the property.
3) Can do Attitude. You absolutely must believe you can do this in order to get it done. A house flip is not an undertaking for the timid or those that lack self-confidences. You will need to stand up to your contractors, inspectors, and even some vendors in order to get the best price and the most bang for your buck. In other words you need to believe in yourself and what you are doing in order to get it done. This doesn’t mean you shouldn’t listen to the advice of those with more experience and expertise, especially when it comes to structural issues within the home and bringing the property to code but you also need to stand up for yourself to insure that you aren’t paying for things you aren’t getting.
4) Determination. You must also be determined to see your project through to completion. It takes a certain sort of pigheadedness to get through the first few flips. It should be stated here that flipping houses is certainly not an easy way to make a living. It does have the potential however, to be a highly profitable way to make a living and that is what most potential flippers are looking for. If you want those profits you are going to need to push yourself out of bed even on those mornings when you feel as though looking at the property in question is going to make you wail and moan and pull out your hair.
5) Excitement. This may be the most necessary of all ingredients. You will find that excitement is in short supply many days but it if you can recapture that initial excitement over your decision to flip houses then it will sustain you on those days when the plumber brings bad news or you just learned that a solid weak of rain is forecasted for the weak the roof was to go on.
This is a small start on the ABCs of house flipping and real estate investing but I think you get the picture. Good luck!
Cheap Repairs, Big Profits
You want the most profit you can get for that property you sweat blood to buy. Is there anyway to improve your chances, without investing a lot more? Fortunately, there is.
Even a person not very skilled in carpentry, plumbing, and other traditional trades can improve the saleability of a property with modest effort and a few common tools.
One of the first things a potential buyer will notice when viewing your property is the condition of those around it. Encourage your neighbors to clear away children’s toys, junk cars, or other unsightly objects before buyers come looking.
Offer to mow the lawns of those to the left and right, or take their trash to the dump as an incentive. A small cash offer on successful sale will also motivate cooperation.
At the same time, show them you’re getting your own house in order. Mow the lawn carefully and repair any bare spots. Trim the edges. And invest in a few dozen inexpensive flowers and plants if the season permits it. The exterior is always what is seen first and first impressions linger.
Since a home inspection will almost always be done prior to a conclusive bargain being struck, take the opportunity to make those inexpensive plumbing repairs BEFORE showing the house. Some of the more expensive ones might wait, to be used as a bargaining chip. But fix that leaky sprinkler head that sprays the sidewalk and replace that dripping bathroom faucet.
Replacing carpeting throughout an entire house, or even one room, can be expensive. But getting it cleaned costs very little, typically. And repair any small damage or try to cover it with a piece of furniture. Eventually, you’ll have to show every flaw when you have a concrete deal. But it needn’t be the first thing they see. Replace those old welcome mats and small entrance rugs with new ones.
New screens are low priced and can make the exterior look fresh and new. To save even more, you can remake the screens with mesh and rubber kits, provided the frames are still in good shape.
Replace any cracked or broken windows. You’ll usually have to do this anyway as part of closing the deal. Of course, all the windows should be cleaned thoroughly to give that shiny new feel. Even a brand new house that’s dirty will fetch a lower price.
If you have air conditioning and heating ducts, replacing defective or worn conduits can get very costly. But many parts in a house that are not seen use silvered duct tape anyway, so patch any holes carefully to give a professional look. Replace old filters to give the appliances a newer look and the air a fresher smell.
A bit of spackle and a coat of paint on those rooms that have seen accidents needn’t cost a lot and don’t take a lot of effort. Be sure the work is done carefully, though, or it can come out looking worse than before you started.
A buyer that sees that you’ve made efforts to keep the property up will be more inclined to offer a better price. Think of the last time you bought a car. Didn’t you favor the one that was well maintained? You were probably willing to pay a little extra to get that one. They will be too.