This is the article every real estate investor we know has been waiting for.
The secret to how we (and probably thousands of other people) have been making a consistent return on investment flipping properties. As fair warning, let me say that I can’t give away all of our operational details over a blog post. (Not without meeting you at least!) Those of you who already know this method and have disregarded it will most likely see this from a skeptic’s point of view, simply because it seems so basic. I’ll point out though, that if executed correctly, our system can, and probably will, be the safest, steadiest and most efficient way to invest in real estate. This particular investment strategy especially holds true typically for areas such as Glendale or Burbank, CA that have a robust local commercial and housing market, with strong middle-to-upper-class demographics.
Before getting into the basic steps of how this plan falls together, first you need to know who we are. We’re a father and son brokerage team. That means, between the two of us, we have an arsenal of experience in almost every aspect of the real estate world. We put it to good use when it comes to making money grow. Also, we’re surrounded by great people. We’ve built a solid team of industry-related professionals; real estate and eviction attorneys, accountants, lenders, title experts, escrow companies, contractors, managers, leasing specialists, bankers, private investigators, and so on. It’s imperative to have these people want to work with you. So, consider this step one in your own process.
So essentially, all we do is purchase properties from Trustee Sale (also known as a foreclosure auction), fix what needs to be fixed on the property, solve any problems with it, put it back on the market and make a profit. Sounds like the oldest concept ever, right? It is. However, the way in which we go about choosing which properties is ultimately the key here.
My father, Vic Avakian and I have spent a great deal of our time in this business valuating properties and analyzing acquisitions for clients. He’s always said, time and time again, that he examines each property he considers for his client as if he was purchasing it with his own money, for himself. So every night, we research the properties that are going to hit the auction block the next morning. We narrow down the list to areas that we know inside-out and have deep business roots in. For example, most of our recent transactions have been in a particular area of Glendale or Burbank, simply because it’s close and we know the community. We’ll gather every piece of due diligence information we possibly can about the properties on our list in these areas. Then, we’ll put our valuation expertise to use to figure out what these properties are worth on today’s market at fair market value (or even a quick-sale price).
Once we have a value on each property, we’ll take a look at the minimum bid amount assigned for that property by the trustee. Next, we use our formula (which I will not release on the internet – feel free to e-mail me about it) to underwrite each deal and assign a Maximum Bid Amount or “ceiling”. This analysis includes a wide array of highly conservative figures for expenses such as Title Commitment Binders, renovations, escrow fees, lenders fees, etc Now, when we go to the auction and start bidding on a property, we’re thoroughly prepared and know exactly when to stop bidding, because anything past our ceiling means we won’t be making as much profit.
So, some of the mortgage buffs reading this are going to ask “Where are you getting funding? Are you buying this all cash?”
We’re buying this with none of our own money. In fact, as I’ve mentioned before, we work with and for our investors. So, you could say our investor provides the capital and we leave our commission in the deal. Also – and here’s the main component many of you will have trouble with – we work with a specific lender and only this lender for one reason: our lender will finance all of our purchases at trustee sale, as long as we’ve gotten their approval on the list of properties we give them every evening. So, our client will only have to put 25% down and our lender physically shows up to meet us or our representative at the auction with enough money to finance whatever deal we may have our eye on.
Ladies and gentlemen, pay attention. The last sentence of the last paragraph is the sole reason this post is now on the internet. Of the hundreds of highly active and involved real estate and mortgage professionals I’ve met and shared experiences with, nobody has ever done this in this exact way. Why it took us so long to catch on to this is a different mystery as well.
Now, let me clarify that this process isn’t easy. It’s tedious as hell and takes a lot of patience and intuition. You technically can’t inspect the home until after you’ve purchased it. You’ve got to be sure that you’re making a well-educated decision. Also, you’ve got to trust your instincts. That’s why we stick to areas we know well and price ranges we know we can manage selling. We’re not after multi-million dollar shopping malls (although who knows, if enough people are willing to invest we could syndicate one!).
This is all I’m going to write for now. Feel free to add your own comments or get in touch with me for a chat. I’ll be posting a registration link to receive a brief overview of the transaction in greater detail. Check back soon!