I HATE Foreclosures

Pretty strong I know. But I do. I hate ’em.

Now don’t get me wrong, I LOVE the real estate business. I LOVE looking at houses. I LOVE buying houses. And I LOVE renting houses. I just HATE foreclosure. I must confess that I’ve become spoiled. I realized that in spades this weekend.

You see, since about August I have shifted my focus to looking at regular listings. No foreclosures. No HUD homes. None of that. I now only look at houses, excuse me HOMES, that are listed, have the utilities on, and sometimes have the sellers still LIVING there. (I know I know – it’s a radical concept)

And do you know what the darnedest thing is? I’m buying these homes that usually need less than $1500 in rehab, for LESS than I bought REOs for a year ago. I’m buying them with $50,000 in equity – and I’m renting them out almost immediately after I close on them.

So let me ask you this – if I can buy these types of homes and have them appraise NOW for the same After Repair Value that my competitor gets after a 90 day rehab on his properties, why would I choose to go the rehab route? More to the point – I can get at least two months of rent in the time it takes him to do his rehab! What’s wrong with this picture?

(For those of you keeping score at home – this is Item #6 on my wife’s List of Things That Should Be Illegal But Aren’t in my real estate business)

So as a result – I HATE foreclosures.

And it really hit home this weekend. I had been watching a particular property and corresponding with the listing agent for a couple of weeks when I saw the price drop again. I emailed the agent again, and she called the seller, who finally agreed to consider a price in my offer range. I booked a showing to see the inside. While I was at it I booked appointments to see three additional properties that had either come on the market recently or had dropped into my target price range – none of them foreclosures – just to maximize my visit to my target area.

So my son and I jumped in the car to go see them. The primary target property was ok. Oversold by the realtor as a zero rehab in move-in condition. She somehow just totally forgot about the $2000 in rehab, and she forgot to mention that the seller was a smoker and had pets. Nice smell. Definitely not a zero rehab deal. The next one was more of the same. Too much rehab and a wet basement.

The third one was the kicker. Billed as a “total remodel”, the pictures looked great, and the price was at the high end of my negotiation range. I thought for sure that this would be my First Property Purchase of 2008.

What a disappointment!

You wouldn’t have believed this one. A “total rehab” – and the owner hadn’t even bothered to turn the utilities on! It was cold. It was dark. It was wet. It was dirty. It was priced at full retail. AND it needed $15,000 worth of work. This was exactly like looking at a foreclosure. It looked like the owner had found a foreclosure and simply painted the inside, then relisted it for twice what he paid.

Talk about putting lipstick on the pig.

This was WORSE. I had been tricked into looking at a foreclosure.

And it was miserable. That’s why I HATE foreclosures.

Why do you subject yourselves to them? It’s time to STOP! There are simply too many non-foreclosure deals out there to waste time on them!!
 

For those of you that, like me, are too dumb to do rentals “the way they have always been done”, I’m working on some training materials that will walk someone through my “misguided” way of doing it. I GUARANTEE that you’ll get a rash of grief from the “experienced” landlords. I GUARANTEE that every experienced buy-and-hold investor that you talk to will tell you that it will NEVER work. And I GUARANTEEE that you’ll be blown away when you see the details for yourself. My refi strategy ALONE will knock your socks off. That’s Item #1 on my wife’s list.

But hey – what would you rather be -  popular or wealthy?

Watch this space. And get ready for CashFlowDennis.com