Diary of a group of newbie real estate investors...01/16/2023Jan 16, 2023
The last 2 weeks have been fantastic. Our investors are identifying projects and have set up some direct mail campaigns, are in the process of closing on some projects and our app developer signed up with 5 syndicators who purchase industrial properties.
This past Saturday, we invited real estate attorney David Lebwith to join us. We talked about what should be included in an offer to purchase. David said the most important document is the offer because that's where everything is laid out and worked out. It not only includes the purchase price, it includes who is making the offer (wholesalers, that means you and/or your assignees), and any contingencies (subject to an inspection of the property, or approval of your business partner, title 5 (MA) inspection if there is a septic tank, etc...). In essence it is the document that gets agreed upon by both parties that sets up the purchase and sale agreement.
As one of our investors is closing soon on an auction they won, we talked about the process of purchasing properties through auctions. When you are at an in person auction, typically you need to bring a check for $5k (if you are bidding), but, you don't need that on Auction.com. There is buyer's premium that you need to submit ($2,500) within a specific time period if you win the auction. In order to bid, you have to get verified. The process is simple. You just upload a picture of your license. Most of the auctions listed require that you be a cash buyer (my hard money guy can help with that) and typically there is a reserve price that needs to be met. You will also notice that many are also listed on MLS. So, auction.com is used to market the properties.
There were lots of questions around auctions. Most banks will not allow you to assign a property you are purchasing. So, if you are a wholesaler, it will be necessary to do a double closing. You could also set up an LLC with your buyer and handle your assignment fee after closing. Be sure to reach out to David if you have more questions about how to do that.
We asked if David believes we will see more auctions over the next few months. He believes there will be. He said it won't be like it was back in 2008-2009 because the banking industry is in a much different place now. However, when interest rates rise and people with adjustable rate mortgages are hit with increasing mortgage payments, it inevitable that this will happen to some folks.
We asked about preventing or stalling an auction/foreclosure by filing for bankruptcy. David said that it will just stall the auction because unlike credit card debt which is unsecured, a mortgage is secured by the property and when it hits the courts, the judge will allow the mortgage company to continue with foreclosure.
It was a great zoom and everyone got their questions answered and David's cell phone number. Nothing like having a real estate attorney with over 30 years of experience on speed dial.
We've set to meet in person the first time before our Randolph meeting and some are coming to dig more into finding deals at our Melrose meeting on Thursday.
I'm excited to see what our folks do this week!
Bernadette Trafton, Chief Connector
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