Court House Advice for New Investors
In my line of work I do a lot of wholesale real estate deals. Currently in San Antonio I average about 20-25 deals a month. I see quite a few investors who get frustrated after a while and begin to think that they are smarter than the system. They get the idea that somehow, while juggling a full time job and one or two rehab projects that they can get better deals by going to the courthouse auction to purchase property. Let me give you some stats for December of 2012 to put this in perspective for anyone who this idea has occurred to:
In December 2012:
- 863 Properties were posted
- 274 Were actually called for sale
- 211 Houses were purchased back by the lender/lien holder
- 63 Were purchased by private investors
- 23 of these houses were purchased by national REIT's
This means that 4.6% of all properties posted were sold to individual investors.
I work as part of a team that looks at every single property listed and runs title work on every single house in order to obtain even a small slice of that 4.6% of houses that have investment potential. These 40 houses get competitive. Many times rookie investors will bid properties up to the point that they no longer make sense as an investment. I spoke with one of the larger buyers who had purchased two houses in a neighborhood off 35 and 1604 that I am very active in. The last two houses I had bought I estimated being worth about $100,000, needing between $15-20,000 in work. This means I sold them at $53,000- $58,000. The houses that they had bought were around the $65,000 price mark.
A good lesson to take away from this is that often times deals that your professional real estate investment firms can find you are more than often better than deals that can be obtained elsewhere. Don't discredit a lead source because deals may have come from actively listed houses. If you purchase at the auction there's a high probability that you're over paying on a percentage wise basis for a house you can't even verify the condition of. It equals a lot of work for minimal reward.