What’s Old Is What’s New

April’s foreclosure auction put Kim and me on a quest: To discover where the best real estate investing deals can be found.  Due to a huge increase in the number of bidders, a significant decrease in the number of foreclosures and rapidly shrinking profit margins, the most profitable deals are no longer happening on the courthouse steps.

To solve the mystery: “Where to find the best deals now?” Kim and I made a goal on April 5^th to knock on doors and talk to 60 sellers by the end of the month.  We started by knocking on every homeowner’s door whose home was slated to be sold at the May 7^th foreclosure auction.  In addition, every time we saw a For Sale sign in a yard, we knocked on that door, too.  (NOTE: You can read about our daily door-knocking results by going to North Georgia REIA’s Facebook page.)

What is the result of April’s door knocking?  We bought one house last week, we’re closing on a second this week (it’s a subject-to deal), and we have two short sale offers pending on properties that were due to be cried at May’s foreclosure auction.

To be clear: At the April 2^nd foreclosure auction, Kim and I got outbid – and outbid by a lot – on every one of our target properties.  In other words, we got our teeth kicked in and walked away with no deals and had none in the pipeline.  Knocking on doors immediately turned on the spicket and caused deals to gushed forth…and best of all, we had little competition!

As promised in last week’s column, here are the details on how we found and financed the property we bought last week on Green Acre Lane in Cartersville, Georgia.

Kim and I found this property while out knocking on sellers’ doors.  The home was NOT for sale – there wasn’t a For Sale sign in the yard, nor was it listed.  What caught our eye was a small Estate Sale sign next to the mailbox – plus the van they were selling in the driveway.

Turned out, the owners of the property had just moved to a nursing home.  Darla, the owners’ friend and power of attorney, was handling the estate sale.  Someone there told her that we buy houses.  She asked us if we’d be interested in purchasing the property.

As always, we asked Pete Fortunato’s famous question: Why are you selling such a nice house like this?  We learned that the owners needed $2,000 within a few days to pay their monthly nursing home rent.

Darla told us the sale price was $65,000.  We asked, “What’s the all-cash, close-in-three-days sale price?”  She told us $50,000.  This win-win deal was sealed after we agreed to pay all closing costs.

With a purchase price of $50,000, plus $10,000 for rehab, we needed $60,000 to close this deal.  Only one problem: We were exactly $60,000 light of having the $60,000 we needed to do this deal.  We called one of our private-money lenders who agreed to loan us $60,000 at 6% interest, and bought Green Acre three days later.

Just like now, from 2004 to 2006, Kim and I were regularly outbid at the foreclosure auction.  To overcome that obstacle, we found 95% of our deals by knocking on sellers’ doors.  Today, we’re doing it again.  It’s a simple case of what’s old is what’s new.