When I was little (and by "little" I mean 15) I wanted to be a philanthropist. What I really meant by "philanthropist" was having a lot of money to do with what I pleased, which included giving exorbitant amounts to those less fortunate than I. I did not have a game plan for accumulating said mounds of money. Working at a particular vocation or marrying, which, in my opinion is redundant, hadn't entered the equation.
What I did not know at the time, but have since realized, is that I actually wanted to discover my passion and entrepreneur-erize with it!
Having come a ways down the thicketed path of entrepreneur-ism, I find myself home on a Friday night, blogging as I procrastinate on the more important aspects of my business that are demanding attention almost as loudly as my bed. I am blessed, truly, to have had many mentors encouraging me to pursue my passion instead of a 9-5. Discovering the vast and intricate world of real estate investing is hard but rewarding and I wouldn't trade it for the world.
However...
We've hit a wall. We have properties; they are GREAT deals! We just need proof of funds from an investor(s) to put the purchase contracts through. To get investors, however, it would generally be better to have the properties lined up so they don't feel like they're blindly giving us funds so we can vacation at length in Acapulco. Quite the catch 22.
Additionally it would be fantastic to actually have a prospectus printed but that first needs attorney review (we're interviewing lawyer #3 Monday), who will require a retainer to review our documents and create contracts, which requires funds. It would be fantastic to acquire some dough through making some buck on a property but we first need the investor. (like the deer pun there? eh? okay it's late, give me a break!).
If any of my silent fans are also secret millionaires, drop me a line. We can use code names and everything.
Saturday, August 22, 2009
Thursday, August 20, 2009
Detecting Mortgage Scam Comps or If It's Too Good To Be True....
Hello Fans!
Although none of you have left comments, I am sure you've been screaming for my return. My absence is the result of finding the deal of a lifetime only to be crushed by the reality-check wave. My partners and I were recently alerted to a two-flat property in Inglewood, on the dicey southside of Chicago for those of you not from around here. The property was a shortsale that an investor we knew was processing for a distressed family and they were looking to us as an end buyer.
The asking price was $35,000 with $50-$55k in repairs needed, basically a total rehab. The comps were....wait for it! $300-$350 ARV! For those of you non-math geniuses out there, that means we'd be in it for $85-$90k and could sell it for $250, giving the new owner $50-$100k in equity, and we would still make a $160k profit! We were practically peeing in our pants we were so excited!
And then the balloon popped.
RS, our astute numbers guy, posed the following question: Only an investor would buy these properties so that they could cash-flow them as rentals. Why would anyone buy these at $350 when there is no possible way they could cash-flow positive at that price? And yet we had at least 6 comps within a few blocks that sold in that range in the last 6 months. It just didn't make sense!
Fortunately we are connected with other savvy investors who gave us the downlow with what's what's up in Inglewood. Unfortunately the asnwer was not thrilling. Apparently a cartel of slimy investors started buying two-flats in Ingelwood/Back of the Yards for foreclosure prices, $20-$40k, and then selling them to other investors, i.e. a trusted friend, for $300-$350 but then giving a kick-back after closing of $150-$200k to the "friend" and splitting it outside closing. This, friends, is mortgage fraud. Don't try this at home or Lisa Maddigan will eat you alive!
We were blessed to learn of the scam before getting in WAY over our heads but a little bummed that what seemed like such an amazing opporunity was in fact not. We are now investigating other REO's we located through our realtor in the western suburbs. The profit margins are not quite as large but at least they're legitimate and we won't have to risk prison time to complete the deal!
Stay tuned!
Although none of you have left comments, I am sure you've been screaming for my return. My absence is the result of finding the deal of a lifetime only to be crushed by the reality-check wave. My partners and I were recently alerted to a two-flat property in Inglewood, on the dicey southside of Chicago for those of you not from around here. The property was a shortsale that an investor we knew was processing for a distressed family and they were looking to us as an end buyer.
The asking price was $35,000 with $50-$55k in repairs needed, basically a total rehab. The comps were....wait for it! $300-$350 ARV! For those of you non-math geniuses out there, that means we'd be in it for $85-$90k and could sell it for $250, giving the new owner $50-$100k in equity, and we would still make a $160k profit! We were practically peeing in our pants we were so excited!
And then the balloon popped.
RS, our astute numbers guy, posed the following question: Only an investor would buy these properties so that they could cash-flow them as rentals. Why would anyone buy these at $350 when there is no possible way they could cash-flow positive at that price? And yet we had at least 6 comps within a few blocks that sold in that range in the last 6 months. It just didn't make sense!
Fortunately we are connected with other savvy investors who gave us the downlow with what's what's up in Inglewood. Unfortunately the asnwer was not thrilling. Apparently a cartel of slimy investors started buying two-flats in Ingelwood/Back of the Yards for foreclosure prices, $20-$40k, and then selling them to other investors, i.e. a trusted friend, for $300-$350 but then giving a kick-back after closing of $150-$200k to the "friend" and splitting it outside closing. This, friends, is mortgage fraud. Don't try this at home or Lisa Maddigan will eat you alive!
We were blessed to learn of the scam before getting in WAY over our heads but a little bummed that what seemed like such an amazing opporunity was in fact not. We are now investigating other REO's we located through our realtor in the western suburbs. The profit margins are not quite as large but at least they're legitimate and we won't have to risk prison time to complete the deal!
Stay tuned!
Wednesday, August 5, 2009
Property Limbo or What Happens Between Auction and REO
Hi Fans,
Pardon the delay in posts; the life of an entrepreneur is not always exciting. In fact many days are filled with chilling to bank hold-music, seeking answers no one wants to give and chasing your tail to the point that you want a stiff drink long before noon rolls around. But I digress. I finally nailed down a status for the Oak Forest property, which as you may recall went to auction several weeks ago. After weeks of phone tag with the lawyer who, to her credit, was playing the same game with the bank's I'm-on-a-permanent-vacation loss mitigation guy, we finally connected.
So here's your golden nugget for the week: what kind of offer can you put on a house that has been to auction and not sold, but is technically not an REO since the bank does not yet have the deed? Answer: the bank will only accept the starting auction bid plus a minimal amount to cover legal fees. In the case of OF, the asking price is $100,000 and the bank wants $1,000 to cover the vampire's er lawyer's fees;-) We would have to buy the house as-is, like in a judicial sale, and there would be no BPO or opportunity to negotiate the price down.
Knowing how much work needs to be done on this particular property we will, of course, not be submitting an offer. The good news is that our contact info will be filtered down to the bank's realtor co. and we will be contacted once the bank gets the deed. How exciting. I'm seeing many follow up calls in my future.
Okay kids, that's all for now. File this away 'cuz not only did I not know the answer to this situation, but neither did the lawyer with whom I've been speaking.
Pardon the delay in posts; the life of an entrepreneur is not always exciting. In fact many days are filled with chilling to bank hold-music, seeking answers no one wants to give and chasing your tail to the point that you want a stiff drink long before noon rolls around. But I digress. I finally nailed down a status for the Oak Forest property, which as you may recall went to auction several weeks ago. After weeks of phone tag with the lawyer who, to her credit, was playing the same game with the bank's I'm-on-a-permanent-vacation loss mitigation guy, we finally connected.
So here's your golden nugget for the week: what kind of offer can you put on a house that has been to auction and not sold, but is technically not an REO since the bank does not yet have the deed? Answer: the bank will only accept the starting auction bid plus a minimal amount to cover legal fees. In the case of OF, the asking price is $100,000 and the bank wants $1,000 to cover the vampire's er lawyer's fees;-) We would have to buy the house as-is, like in a judicial sale, and there would be no BPO or opportunity to negotiate the price down.
Knowing how much work needs to be done on this particular property we will, of course, not be submitting an offer. The good news is that our contact info will be filtered down to the bank's realtor co. and we will be contacted once the bank gets the deed. How exciting. I'm seeing many follow up calls in my future.
Okay kids, that's all for now. File this away 'cuz not only did I not know the answer to this situation, but neither did the lawyer with whom I've been speaking.
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