MAKE A BLAST IN MAKING THE BEST REAL ESTATE DEALS - Rehab-Real-Estate

As consumers, we always want to buy stuff that is worth the money. Most often than not, we engage ourselves to something that is worth our time. Right? So, let me tell you about a product that is not only worth your money but also worth your time. Well, I’m going to talk about Jason Medley’s training in looking for a private money lender.

As someone who is into real estate industry, to take part on that event will shed not just knowledge and skills but definitely enhance your profit in the long run. Why? Given that you have the knowledge and skills gain from this one-of-a-kind product, then it follows that you make the right move and decisions and eventually reap remarkable profits.

Let me give at least two products of Jason Medley which I personally used. Well, until now I refer to it as a guide. Here are the two effective and worth the dime products which I would like to recommend:

Find Private Lenders NOW Home Study Course

This product has given me the unlimited access to trained staff to help answer to all of my questions regarding the Find Private Lenders NOW System. Well, this product, if you have this a bit of tight schedule, is the one for you. If you feel like to continue learning everything at home still, this product is a good buy.


4 Week Live Training Calls with Jason Medley

This product, as it was described by us who have availed it, is a “kick in the pants” that many of the real investors need to assure that we get the adequate guidance for us to execute the learning immediately.

This training will provide real estate investors the know-how to find private lenders so that they can use their funds for their real estate deals. Have you ever thought that if you had private money (and not hard money), funding your deals would be much easier, and you could close many more deals than ever before? Jason Medley will show exactly how to find private lenders who have already funded real estate deals and want to fund yours.

However, you may find the following products focusing on the same stuff when it comes to the content as all of them are pretty much engaged on learning the ways to locate private lenders and the do’s and don’ts if you are to close a deal, which you may ask yourself of this question: What’s the point of availing those products that will just talk about the same thing? Or Isn’t that a waste of money? Well, I for a time, have asked myself that question BUT then took the risk to avail both the products and found the answer.

The products may seem to be containing the same information but indeed, they are interrelated that both will give you the boost in closing the deals with your chosen private lenders.

I can really guarantee you that this training will serve as your primary tool in making a big leap in your career in real estate. Become one of us who transcend in making the best real estate deals!

Avail this product/training at its affordable price! I can attest that it’s indeed worth the money and surely worth the time.

How to Find Motivated Home Sellers When Flipping Houses

If you're going to ask a real estate investor what's the biggest challenge he has encountered while starting out in the business, you'll probably get this answer: finding leads to motivated sellers. Indeed, many investors are having a hard time finding homeowners who are willing to sell their properties at discounted prices.  But if you're going to let this particular challenge discourage you, you won't be able to reach your full potential as real estate investor.

For those who are having similar problems, here are some hints and tips that will help you find motivated home sellers when flipping houses:

• Look for FSBO (For Sale By Owner) signs. If you have lots of time to spare, you should drive around neighborhoods and look for FSBO signs. These signs are like an open invitation from motivated home sellers for you to buy their homes. Therefore, you shouldn't be afraid to talk to homeowners who have such signs on their lawn because these people are in dire need to sell their properties.
• Check out online classified ads. Online classified ads, such as Craigslist and Kijiji, are great sources of leads to lucrative real estate deals. As you may know, many people who want to get rid of their properties, including houses, post ads on these sites to find potential buyers. By taking a look at these sites, it would be easier for you to find homesellers who can provide you with profitable investment properties.
• Search for vacant houses. This is probably one of the lead generation strategies used by those who make money by flipping houses. To locate the owner of abandoned homes, write down the address of the vacant property that you want to invest in. Then, look up the names of the owner by checking out the office of public records. Once you've got the pertinent information, you should contact the homeowner and express your intent to buy the property.
• Send mail and tell people what you do. Although some people think that sending snail mail is a little bit old fashioned, many real estate investors agree that it is one of the most effective ways to find leads to motivated home sellers. So don't be afraid to mail those letters, especially the yellow ones, because it can help you secure a profitable investment property.

For more tips on flipping houses and making real estate investments, log on to www.RehabList.com.

Back to Basics on Buy and Hold

This past week was spent catching up with friends we haven’t seen in awhile. When these old friends ask what we’re up to, they aren’t surprised to find out it’s real estaterelated, given that we began investing in real estate in 2001. While most have heard the stories of ourcrack house adventures in the early days, they are startled to learn that my husband Dave and I are full time investors.

A few made comments about how “lucky” we were to begin investing 2001 because we rode a really rocking wave of value increases on those properties. And a few commented on how they wouldn’t be buying houses right now because they think the values are going to go down again.

I tried to explain to a few interested folks that appreciation is icing on the cake but it’s not actually the foundation of what we do. But most people seem pretty hung up on house values and what the values will do in the future … and I suspect there are still real estate investors out there that get caught up in these thoughts too so I thought it was time to remind everyone of the basics of buy and hold real estate investing.

There are three ways to make money as a buy and hold investor and one big bonus many forget to think about too!

Appreciation is the way that captures an audience. Who doesn’t love hearing stories about home prices doubling and people making big bucks on a quick flip? It’s a great story.

But we never set out to make money through big property value appreciation. Because we do a lot of market research and carefully select the areas we buy in, we often see solid growth in the value of the properties we buy, but that is not our number one focus for making money. We’ve always focused on a more long term strategy which sees us making cash flow each month and building our wealth by other people (our renters) paying down our mortgages.

That’s it. Appreciation is obviously pretty nice but it’s not the foundation of what we do.

Let’s look at a basic example. Pretend you found a nice property for $100,000 two years ago, and you bought it for 25% down ($25,000). Today, here’s how your investment looks:

1) Depreciation: Bad news, your property went down in value by 5%. It’s now worth $95,000.

2) Cash flow: Rent each month is $1,000. Your mortgage, insurance, taxes and miscellaneous expenses are $800/month. Income minus expenses = $200/month. 24 months x $200 = $4,800 in income so far.

3) Other people’s money paying down your mortgage: Assuming you have a mortgage at a 5% fixed rate and 25 year amortization, at the end of the two years you will owe $71,805 on your $75,000 mortgage. You have now built an additional $3,195 equity into the property ($75,000 – $71,805 = $3,195) using the rent money you collected to pay down the mortgage.

Your property may be worth less than you bought it for, but you’ve still made $7,995 from it in two years (from the positive monthly cash flow and the principal your renters have paid down).

And – remember – you only actually realize a gain or a loss in property value when you sell the home so you really haven’t LOST the 5% the property went down. If you haven’t sold it and you’re still making money each  month don’t worry about it!

Focus instead on the fact that you’ve made a 32% return ($7,995 divided by $25,000 invested) on your money after 2 years. And if you hold onto it, and ride the market cycle back up, when you do go to sell you’ll likely enjoy a nice lift in value to add to the other two ways you’ve made money on it.

On some of our properties we’re paying down as much as $1,000 per month on the mortgage using the rent money we’re collecting plus we make $500 to $1,200 per month in positive cash flow! Even if the value on those properties never changes we are making money each and every month through the cash flow and growing our wealth by $12,000 a year.

Plus, the big beautiful bonus of buy and hold investing is that you’ll have been enjoying some nice tax deductions along the way that can help offset income you’re making with this property and with other sources too!

I tried explaining this to some of our friends but they kept coming back to the question “What do you think house values will do in the near future?” so I eventually gave up and said my crystal ball is broken but they will eventually go up in most areas. Then I quickly changed the subject over to their jobs, kids and travels. It was easier … but for my fellow real estate investors remember that appreciation is just one way to make money with buy and hold real estate.

Realtor Leads: Can They Really Help You To Make Money?

Do you know anything about the realtor leads? Do you have some ideas about what they do and their many services that you can acquire from them? Do you also know about their specific functions and as to why they do exist? If you don’t know any sort of things about the sad matter then reading the entire content of this blog post article would definitely be a helpful sort of way for you to know some things about it. For your great information, there are actually several and various sorts of alternatives on how you can possibly be able to find the most efficient and or formidable type of realtors today.

One of the most effectual ways on how you can possibly seek-out for the most formidable and or efficient sort of leads is through the utilization of the email leads, phone verified leads, internet leads and so many more types of leads.

How can you specifically and efficiently check-out if you have been able to find and use a formidable sort of realtor leads? How can you specifically be able to know if what you have chosen is high in quality and or profitability and not just a certain senseless data that had already been used and tested by several individuals to be such of an inefficient sort of lead?
To let you know, you can surely be able to get the best type of leads through simply using the internet as the main passage of getting what you need and want about the said type of matter and this is according onto the experiences of certain brokers.

You should know that there are already many brokers today who had been very successful through the great help of the real estate broker leads that they have got out from the internet.

In fact, aside from that of the successful independent brokers today, there are also certain broker firms and companies that had also been successful through simply using the realtor leads that they had acquired out from that of the usage of the internet. You should know that relying onto the internet in getting reliable broker leads is such of an efficient sort of approach and this is because of the matter that there are already numerous numbers of brokers who have been triumphant in each and every time that they had conducted a particular sort of broker transactions such as that of selling, buying and commercializing and or endorsing certain kinds of properties.

Through simply depending onto the internet, you can definitely make your search for the best types of realtor leads a certain kind of success. You should know that there are several and various real estate broker companies and firms that had been successful in all of their attempts to meet their expectations upon selling, buying, endorsing and or commercializing particular kinds of real estate properties such as that of the homes or houses, condominium units, apartment homes, commercial buildings and a lot more.

Despite of the fact that you really can be able to seek-out for the best sorts of realtor leads via internet these days, there are certain sorts of considerations that you greatly need to have in hand and this is because of the fact that all things have its own advantages and disadvantages.

If you have some plans to start doing a real estate business, you greatly need to start purchasing efficient sorts of realtor leads coming only from those that are formidable and professional real estate brokers.

You should know that the there are certain problems that you can possibly encounter most especially if you have chosen a low-quality type of broker lead. You also need to know that there are certain mortgage and or real estate broker firms and individuals that are just greatly efficient by its name but not really by its deeds, services and actions.

This kind of matter is just like that of buying a wrong kind of medicine for a certain sort of illness and or ailment. However, if you are just able to look out for the most efficient and recession-proof kinds of realtor leads then you can definitely say that succeeding in the said kind of business would just be like that of eating a piece of cake.

Moreover, can you really entrust your confidential real estate business schemes and or plans onto your chosen broker personnel and or firm?
Well, trusting a certain sort of broker firm and or individual is greatly a helpful way for you to seek for an efficient kind of realtor leads and this is because of the matter that they can really provide the best sorts of ideas, tips, advices and suggestions on how you can possibly meet your real estate business goals and or targets.

On the other hand, you greatly need to ensure that your chosen broker really has what it takes to be considered as a reliable source of accurate and efficient types of realtor leads. Because if you will not do this kind of thing then it is very certain that you will just waste your time, money and effort upon searching for the aforementioned kind of matter.

You should specifically know that not the entire realtor leads that you can seek-out over the cyber world are efficient enough to help you in meeting your real estate business dreams. There are just a few that are really efficient and the rest are just pure scam. Therefore, you really should be very careful in choosing the kind of lead that you want to use in your real estate business. In this sort of way, you can be sure that you are investing your finance, time and effort in the right kind of way. Lastly, you should make it sure that you have selected a legitimate kind of broker firm so that you can assure to yourself that you are in good hands.

Buy Foreclosed Houses With The Help Of A Good Real Estate Agent

Most investors and home buyers know that to be able to buy foreclosed houses that suit their requirements, they should have the help of a dependable and market-savvy real estate agent. Choosing a real estate agent can be as important as choosing the property that a buyer would purchase. To make sure that a buyer is only hiring the best, there are certain details that he should find out about the agent first.

Experience and Reliability

The first question that a home buyer should ask a prospective agent is how long he has been in the business. It is also advisable to choose specialist agents, which means that if a buyer is leaning towards purchasing a government foreclosure, he should find himself an agent who specializes in government foreclosures, while those looking for REO or bank foreclosures should look for agents who are associated with banks and lenders.

A buyer should also find out the agent's records, particularly the number of properties he has been able to acquire in behalf of his clients who buy foreclosed houses. Buyers should also ask what the average difference is between his purchase price and the list price of these properties. Requesting for references and taking the time to talk with the people who provided the references will also help.

Agent's Strategy

Home buyers should also ask real estate agents about their strategies or how they usually get a client's offer accepted by the seller. The process and resources used by the agent to find the suitable property for his clients is also important. 

How he deals with multiple competitors and make sure that his client has at least a good chance of being considered is also another question that a good real estate agent should be able to answer. A home buyer should always listen carefully to an agent's answers and deduce from his tone whether he is just putting on airs or whether he really is capable of delivering on his promise.

People who wish to buy foreclosed houses should get the help of a real estate agent who has a good track record in the field of buying foreclosed properties. Asking friends, family members and other people who have tried the services of certain real estate agents is also a good way to find a reliable professional.

Making Real Estate Money-How Investors Can Benefit from a Real Estate License

If you could easily and cheaply acquire a tool to turbo blast your real estate investing career, wouldn't you do it? 

I started investing in real estate about 10 years ago. I found an agent who was willing to comb the MLS listings everyday, set up showings for me to view properties, and work for very little commissions from my low-ball offers. And I thought that worked out all right. 

But I soon came to realize that I was depending on someone else to be on the look out to scoop up the good deals as soon as they hit the market. Now my agent was good, but why was I depending on someone else in my quest for real estate wealth? 

Good question. And besides, a smart agent would probably keep the best deals to herself--I would! So, I decided to get a license myself. It is fairly easy, relatively cheap, and requires very little time. I did four weekends a month, while I was still working my full-time job, or "trading my precious hours for dollars" as I call it. 

Doctors need at least 10 or 12 years of education and training and usually start their practices owing hundreds of thousands in student loans. Lawyers must go to school at least 7 years. 

But you, a real estate investor, can get a real estate license in a little more than a month with about a $1,000 investment. Now you may not make what a doctor or lawyers makes. Then again, maybe you can. But the initial investment is a whole lot more enticing! 

With a real estate license, I was able to unearth some very goodcreative financing deals that netted me at least $500 per month in cash flow. I also got a property management contract from an investor in California. 

I had made an offer to lease option their apartment complex. They did not accept, but in the course of the conversation they expressed that they were very dissatisfied with their local property manager. Ding, ding, ding, I am a property manager. 

I had never managed anyone else's property, but I had managed my own, and that qualified me as a property manager. I told her, "Hey, I do that, too." So we got a lucrative contract managing their properties. 

We also made money rehabbing their properties, and we made more money (real estate commission) when I sold them another property, which of course, I will make more money at managing their new property. See how it all fits so beautifully together. But the license was the key, that started the whole thing. 

What does a real estate license do for you? Most importantly, it gives you access to the MLS. Not only can you find out what is currently available, you can find out information about properties listed in the past, the expireds, the withdrawns, and the solds. This gives you the permanent parcel number, important when you are doing research on potential deals. 

The active listings are really the easiest way to find investment deals and the most prolific. You may think that the MLS lists only the "nice" and "pretty" properties. Not so. The repos, fixer-uppers, estate sales, short sales, and the plain, old junkers are almost always listed on the MLS. 

And part of the property information contained in the MLS listing is the method of purchase, such as cash, conventional, FHA, and VA. 

However, now more than ever, due to the crisis in the housing industry, (always the best time to buy investments) many listings are being offered on land contract, lease option, or some other form of creative financing. Made to order for the serious investor. Is that you? 

OK, now you have access to the MLS. What else can a license do for you? Well how about legitimizing yourself? You have put yourself out there as an expert. The premise of Real Estate Investing 101 is the market value of a property--the "comps." Hey, you have access to the "comps." Kind of gives you an advantage doesn't it? 

As a real estate agent, you are out there moving around in the circles that will naturally spawn more opportunities for the smart investor. You are a "Player." 

You will be surprised at all the paths of opportunity that open up for you when you have that valuable tool, a real estate license. That license will take you places you never even thought of. It will change your future, it changed mine. Please email me atdianeleeprice@msn.com. I will be glad to answer any questions. 

Making Real Estate Money-Priced to Own--Probabilities Producing Profits

There is an old expression that comes to mind: "You can fool some of the people some of the time, but you can't fool ALL of the people ALL of the time!"

Regardless of what the National Association of Realtors (NAR), the government, the lending industry (or even economists who should know better) are saying, the current housing market is still artificially high.

If people could truly afford current home prices--on the basis of their actual incomes--the word "crisis" wouldn't appear in conjunction with the present housing market.

The reality is that in most parts of the country, households earning the median household income for their area cannotlegitimately afford to buy a median priced home where they live and work.

And there is no chance of rents or incomes increasing at a rapid pace in the near future--which means home pricesmust fall before the nation's affordability crisis can be solved. Home prices are way too high--and NEED to come down drastically!

If you believe the Wall Street Robber Barons, politicians, and others who argue otherwise, the time has come to step away from the Kool-Aid. As creative real estate investors, we need to come up with a healthier concoction, and it ain't Red Bull--nor any other "bull," for that matter!

How far down?

Why must housing prices plunge deeply from here? House prices have been propped up for at least the past seven years, through a combination of low interest rates, unsound loan programs, and now, by nonsensical government bail out programs--which has led to a serious disconnect from the basic fundamentals of affordability.

Because the cost of buying has more than doubled in the last ten years, there is now a huge gap between rents and residential real estate prices. The Center for Responsible Lending projects that 2.2 million MORE homes are facing foreclosure by mid-2009--which works out to be about one in every 45 homes), further adding to supply.

And many people have lost the desire to buy until prices are lower. "A down market is getting baked into expectations," says Chris Flanagan, head of research in JP Morgan Chase's (JPM) asset-backed securities group. Flanagan predicts prices will fall about 25%, bottoming in 2010. Merrill Lynch forecasts U.S. home prices could decline 25% to 30% nationwide over the next three years.

Shocking though it might seem, a decline of 25% would merely reverse only partof the market's spectacular 130% appreciation during the boom. Interestingly, it would also put the national price level right back on its historical long-term growth trend line, a surprisingly modest 0.4% a year after inflation.

Show me the money?

The historical ratio of median house pricing vs. median household income was consistently between 2.6 and 3.0 over the past 40 years. But, as homebuyers scrambled to avoid being left out of the "housing-mania," national median home prices jumped 130% (45% when adjusted for inflation) from 2000 to 2006.

By contrast, according to reports out of the World Economic Forum on Jan 23-25, 2008, weekly earnings for full-time American workers last year were unchanged from their 2000 levels, even though productivity grew by 18% in the same period!

According to the Economic Policy Institute, the news is even bleaker. Their research indicates that the median income for working-age households actually declined 4% since 2000.

The Census Bureau indicates that the median U.S. household income is $48,201. Multiplied by 3.0 = $144,600. This is what the maximum U.S. median home price should be right now, given historically low interest rates. But the actual median home price ($218,900) is about 34% higher than that (or approximately 4.5 times the price-to-income ratio).at

Though prices have always been slightly elevated in the Golden State, California's median home price ($402,000), at 7.10 times California's median household income of $56,645--is 58% higher than it should be ($169,935). In parts of the state, median home prices have inflated to more than 11 times the median household income.

But forget "local bubbles." Median home prices are inflated in every region of the U.S. In the overall West, where the median household income is $52,249, the median home price of $309,800 is nearly double what it should be, using a maximum price-to-income ratio of 3.0 ($156,747).

The situation is similar in the Northeast, where the median home price of $258,600 is approximately 5 times the median household income of $52,057--or 40% higher than what it should be when compared to a 3.0 price-to-income ratio ($156,171).

Median home prices are not quite as high in the South ($173,400 vs. median household income of $43,884) and the Midwest ($159,800 vs. median household income of $47,836), respectively. Even so, prices are still 24% higher than what they should be in the South ($131,652), and least 10% higher than what they should be in the Midwest ($143,508).

Surprisingly, a number of folks question the validity of the price-to-income metric, including several of my successful students. But the 40 years' history behind it holds up well when evaluated in sync with several other important fundamental metrics, including back-end DTI, interest rates, and rent vs. own costs.

Other metrics

Back-End DTI (housing cost as percentage of monthly income). Traditionally restricted to 25% of gross monthly income, increased to a "soft" 28% by FNMA/FHLMA over past 15 years; FHA allows 31%; and as high as 41% allowed by subprime lenders.

Interest Rates Though presently at 5.47% (2/8/08) the FHLMA average for 30-year fixed mortgages over the past 440 months (4/01/71--12/31/07) was 9.18%. Eliminating the 72 months (11/01/79-10/31/85) of rates 12% and higher, drops the historical average to 8.17%.

If you also eliminate the 65 months (06/01/02-12/31/07) of rates 6.65% and lower, the overall average increases to 8.57%. I'll leave discussion as to why interest rates are sure to rise in the near future (2 to 5 years) for another time. But consider how it plays into the DTI scenario below.

Using the "soft" 28% FNMA/FHLMA DTI metric and applying that to median income (28% housing expense x $48,200 U.S. median income / 12) leaves $1,124.66; less Taxes/Insurance $167 leaves $957.66 available for monthly Principal & Interest payments. How much 30-year fixed rate loan will $957.66 per month pay for?

$957.66 @ 5.50% = $168,665
$957.66 @ 6.00% = $159,730
$957.66 @ 6.50% = $151,512
$957.66 @ 7.00% = $143,944
$957.66 @ 7.50% = $136,962
$957.66 @ 7.50% = $130,513

Many families will have to drastically change their spending habits to reach this 28% ratio in their budgets.

Numerous studies indicate the average American familyACTUALLY only has 23% to 25% of gross monthly income available for housing expense--and generally tend to run at negative cash flow in their household budget as a result of overborrowing!

What about interest rates? As creative real estate investors, we have to account for reasonable probabilities.

At today's low rates, a median buyer would need to have $50,235 down (23%), plus approx. $4,400 for closing costs, to purchase the $218,900 median priced home. If rates rise to 7%, they'll need to have $75,300 (34%) down.

Americans have averaged between 5%-12% down payments for the past 25 years. Now, in the face of declining incomes, their down payments will have to somehow increase drastically, unless home prices drop significantly. Forget lending requirements. Forget tax rebates too! These are the numbers.

Rental Rates Historically, monthly rental costs over the past 10 years have run approximately 92% of monthly costs to own, or about 5.5% of the house value, annually. Now, in many communities, rental costs are as low as 40% of ownership costs--and below 3% of house "value."

Here's an example of how disconnected the housing market is in relation to local affordability factors, that brings to life the data I shared in my December 2007 article: Beware The Blue Sky

As in many housing markets, a number of homes listed for sale in Bend, OR are also available for rent, as the sellers try to hang on to their property "until the market recovers."

To own this sample home, you would have to pay $544,900, 6.5% for a jumbo mortgage, plus tax and insurance (2.0% annual), plus maintenance (at least another 1%) for a total of at least 9%--more than three times the cost of the $15,000 yearly rent sought (which is only 2.75% of the asking price).

It would be financially insane to buy this house, given that the rent is so cheap by comparison.

The rental rate implies the property is worth about $235,600 (assuming $188,500 30-year fixed mortgage at 5.67% with 20% down). If you apply the current Global Insight valuation "metric" for Bend, the market value is $163,500 in today's current marketplace, based on true affordability for that area.

Admittedly, Bend is currently ranked as the most "overvalued" metro area housing market in the U.S... but many communities are in the same quandary, albeit to a lesser degree. There are millions of renters and potential homebuyers (including CREIs) who would benefit from lower, more reasonable home prices.

Most real estate investors want to turn a monthly profit from real estate ownership. Since we do not want to merely break even, the price must be low enough for the prevailing rental rate to exceed the cost of ownership by enough to provide a return on our invested capital.

Historically, GRMs from 100-120 are required to create the conditions necessary to attract a CREIs capital. Using the national median income housing expense figure from above ($1,124.66 rounded up to $1,200 to include maintenance reserves), we could pay a maximum of $144,000 for the national median property (rather than $218,900).

For those sellers (homeowners, builders, or REO holders) believing they can hang on "until the market recovers," be aware that the recovery is happening already--and its name is "correction." Unfortunately, it is going in the opposite direction, and it still has a very long way to go.

Real estate investors form a durable bottom. If prices drop low enough for this group to get into the market, the influx of investment capital can be extraordinary. 

Making Real Estate Money-Rewards in Flipping

Big risks, rewards in home 'flipping'


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By Jim Wasserman

jwasserman@sacbee.com

Published: Wednesday, Jun. 23, 2010 - 12:00 am
Page 1A

This is no work for the faint of heart. Inside the real estate business, investors talk of unwittingly buying uncleaned scenes of suicides, taking on unexpected and expensive tax liens, finding air conditioners missing, and paying occupants nearly $2,000 to leave.


But oh, the upside to buying from banks that sell short on the courthouse steps.


From December through the end of April, 23 real estate investors and limited liability companies collectively earned $1.4 million in the capital region for less than a month's work, according to data from Onboard Informatics, a home sales tracker.


These investor groups bought severely discounted houses at auctions held by banks that had repossessed them from homeowners. Then, within days or weeks, but always in less than a month, they resold the houses. The average price gain: $40,000.


These lightning fast resales represent less than 1 percent of all transactions in the region, but the profit margins – even taking into account money spent on repairs – have made auction sales one of the hottest niches in Sacramento real estate.


"Being an auction investor is a good business if you have access to the capital," said Sean O'Toole, president of Contra Costa County-based ForeclosureRadar, a website that caters to such investors. "Most of the guys make good returns. But it's hard work. It's not a get-rich-quick thing."


Critics call the game "flipping" and blame it for a housing bubble that triggered the real estate crash in the first place. But others view it as Business 101, a critical piece of digging out from the crash. Houses with troubled histories get bought, repaired and quickly resold, generating cash for new business entities to do it again and again.


"It's something that's really taken off. We started seeing it popping up about the second quarter of last year," said Gold River attorney Eric Graves.


He found a new specialty setting up limited liability companies for auction investors and steering them funding from a Montreal equities firm.


Most investors don't resell their foreclosure properties in less than a month. But flipping within six months was back to 2005 levels early this year, researcher MDA DataQuick reported.


The Bee examined 35 real estate transactions from December 2009 through April 2010 in which investors bought houses and sold them within a month for more money.


Nearly every house examined shared some version of the same story: owners buying as prices peaked, or loading up on home equity debt at the height of the housing boom. Nearly all defaulted as home values crashed, sending their dwellings to the courthouse steps for bank auction.


The region's standout investor for quick resales was James York, agent for Sacramento's Palm Estates Mortgage Inc. He bought five houses at auction in late December, and resold them by mid-January to five Bay Area buyers for $198,000 more than he paid.


York is the courthouse-steps investor who made headlines in 2008 after buying the foreclosed Curtis Park home of U.S. Rep. Laura Richardson, D-Long Beach. Though York invested money in cleanup and repairs, Richardson prevailed on her lender to overturn his purchase. York sued the bank but later dropped the lawsuit.


York didn't return a telephone call to his real estate business, York and Associates. Neither did several other investors or agents called by The Bee. Several buyers of their homes also didn't return calls.


Auction investor Michael Blasquez of Folsom said that's because the business gets a bad rap in the media, and in public.


Early this year, he flipped two Sacramento houses within a month: one for $49,900 more than he paid, and another for $64,100 more.


"I had to stick money into both of those," he said. "Trust me, I didn't make anywhere near that amount of money."


Blasquez, Graves and O'Toole say the fast compensation is appropriate for a high-risk business.


"You have to pay cash in full. You don't get title insurance. You don't get to inspect the house, and you probably have to evict the current owner or occupant," said O'Toole. "It's because of these things that properties at the courthouse steps are sold at a discount."


Graves said one of his LLC clients discovered that "the prior owner (a drug dealer) had committed suicide in the home, and he had basically just bought a crime scene that had not been cleaned up." Though he sold it for $40,000 more than he paid, Graves said he still lost $12,000 after paying for the cleanup and an unexpected tax lien.


Money made on one deal can be lost on another deal, said Blasquez, a longtime real estate agent with Capital Income Properties. He said, "I'm a small guy, and I can't afford to make a mistake."


Most area courthouse-steps investors are locals, said Blasquez. Most of Graves' LLC clients are veteran area property managers, he said. But Onboard Informatics transaction records also show several LLCs, investors and a real estate investment trust from Hollywood, Phoenix, San Francisco and New York.


Even these out-of-town firms have local agents.


For auction investors, nothing beats knowing more than the banks about the neighborhoods where houses are located, said real estate agent Bruce Slaton in Elk Grove.


"Sometimes the banks get it wrong and let the property be sold too cheap at auction," he said. "The investor benefits."




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