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Austin Real Estate Investment Training and Coaching
Finding Deals In Austin
July 23, 2007 Day One
9:00 Arrived at BZ’s home. We discussed and reviewed what homework she had accomplished. No NOD/foreclosure letters were mailed out.
10:00-12:30 Spent the time mailing out preforeclosure and foreclosure letters. Uncovered potential deal on her contractor’s (James Isco) home when we noticed his name in the list.
12:30-1:30 Discussed plan for afternoon, went to post office and mailed letters. Met and visited with realtor, Vickie Walker. Vickie seemed extremely willing to learn the investor mindset and had already brought BZ four rehabs that she was currently working on. She was not afraid to ask questions and was willing to work the system.
2:30-3:00 Discussed and structured potential deal on James Isco.
3:00-4:00 Drove out and met inspector on new home that BZ was looking to purchase. Discussed financing options on loan for new home for BZ.
4:00-6:00 We worked on marketing for notes, owner financed deals, scratch and dent paper, and sending out marketing pieces to builders and realtors. Planned out Tuesday.
July 24, 2007 Day Two
8:30 Arrived at BZ’s. We discussed the Four Goal Close as we were meeting with a short sale possibility.
9:00 James Insco arrived and we began discussing his foreclosure. James signed the authorization form and we called Option One to get the numbers to fax the authorization form into.
10:00 Faxed in a complete short sale package to Carrie Moore/Lee’s office on Timothy Lane Foreclosure with a bid of $350K (ARV is $600).
11:00 Vickie Walker stopped by and picked us up and we traveled to south Austin to look at a 18 unit apartment complex that might be a good fit for a condo conversion. Not a good fit. We made a list of questions for Vickie to contact seller with more information. Units were extremely small and in bad shape.
12:00 Lunch at Kirby Lane
1:30 Arrived back at the office where we received notice that we needed a new HUD-1 for the short sale package. Called title company and had them fix the Hud and then we sent it over to Carrie. We also fielded a few phone calls from some of her signs.
2:00 Headed out to view property owned by James Insco in Leander (north of Austin). The property is on 2.5 acres and has a 1800 sq ft home (3/2), another 1400 sq ft structure that was being used as a game room/bar for the locals/neighbors, and 2 mobile homes. Area is quite remote and would be difficult to market individually. We did find out that the people living there might be interested in purchasing. We discussed possibilities with James, and gave him a couple of prequal forms to give to the tenants.
3:30 Arrived back at BZ’s house and started working on other marketing techniques. We discussed and reviewed tax foreclosures, strike off lists, and expired tax sales. We found eight other potential tax foreclosures that were dated for sale on the 7th of August. We also found a mobile home on several acres that we could pick up for $3K, that would work perfect for James Insco to move both of his trailers to, should we pick up the property and James at auction.
5:00 Contacted a private lender who is looking to lend out around $180K, but wants to have a deal in place before they pull any equity out of their home. Discussed dropping equity/cash in a mutual fund at 12% and that way it would be liquid to fund deals. She had to think on it, but BZ was excited from listening to the conversation.
6:00 Structured two other offers on foreclosures that have been on MLS for over 180 days. Faxed authorization letters to Vickie Walker for her to submit. Discussed hard money solutions and potential payments, return, and exit strategies on both properties.
July 25, 2007 Day Three
8:30 Arrived at BZ’s. Discussed email and answers to questions on south Austin condo deal. As it turned out, seller just recently bought property and is having some headaches with all of the problems on the property. We discussed options and chose to keep eye on property once sellers became more motivated.
9:30 Roll played some more with the Four Goal Close. Discussed comps on a duplex in San Marcos that we were going to look at. As it turns out, this duplex is just down the street from one where I lived in while I was going to college in San Marcos. Reviewed some other comps on other condo conversions that we would be looking at later today.
10:00 Picked up Vickie Walker and headed to San Marcos. Role played on potential questions that we would ask apartment complex manager and hard money lender, Robb Lathem, with Noble Funding, with whom we were meeting for lunch in San Marcos.
11:00 Great lunch! We discussed what Noble Lending had to offer. Robb became a true asset to BZ for hard money. Four points at fourteen percent is not bad and they also do condo conversions on a limited basis. We also discussed traditional residential lending and commercial loans with him. We also discussed Self directed IRA, and IRA LLC’s and the benefits of each. Robb also discussed the fact that he might send a few deals to BZ for a referral fee. BZ and Vickie both came away from lunch commenting on how much they enjoyed visiting with Robb and how much they learned.
12:30 Drove by multiple duplexes that were empty and not tip top shape. Vickie would get us comps and more info from the owners on Thursday to discuss offers. Drove by and visited apartment complex that is on the MLS. Properties features were quite nice, but according to the Cap Rate (7%) and the comps (much nicer than this one), the owners were asking way to much, and with it being such a new listing, we decided for Vickie to keep her eye on it and follow back up with it once the sellers were a bit more motivated.
2:00 Visited River Bend Condominiums. This 30 building, 100 unit property is owned by four separate owners ( one owns 21 buildings, another owns five, two own one apiece). We visited with Jada, property manager, who after three months has the property running at 100% occupancy compared to a 80% occumpancy. The buildings themselves were already condoized, but the units are not. Jada gave us a ton of insightful information about the owners and occupants and this would be more of a adult condo unit as opposed to kiddie condos. The units are 2/1.5 and would be a easy upgrade to condo’s for sale on an individual basis. We all agreed that Jada had a huge hand in the success of the property, but we found out that the primary owner who held 21 units was very motivated to move on to a large project in El Paso. We also found out that the property had four different software and accounting techniques (one per owner) which was making it difficult. We also found out that the property was not on the bus line, but that their were many tenants who had lived in the property for three plus years (up to 18 years!).
3:30 Headed back to Austin. While on the way, we discussed financing options to purchase along with ways to sell the condos to the occupants with either owner financing or traditional lending. We ran into a traffic jam and spend a good hour moving slowly. This gave us plenty of time to discuss repair costs, holding costs, cash flow, and time tables. BZ and Vickie were extremely excited and looking forward to meeting with the majority of owners Thursday afternoon.
5:00 Dropped Vickie off at her home and arrived back at BZ’s. BZ wanted to take a break before dinner this evening, so I let her off the hook and I worked on putting together some marketing ideas for her.
7:30-9:30 Dinner at Hudson’s on the Bend.
July 26, 2007 Day Four
9:00 Arrived at BZ’s home and we started to discuss and plan out her marketing calendar for the ongoing months. We spent two hours helping her outline her marketing efforts for her assistant when she gets back from vacation. We also received another short sale package from her contractor, James Insco, and called him to discuss what he sent us and what was still missing. We also received two emails from his tenants who were interested in possibly purchasing the property. Unfortunately, they had no credit except for a ton of collections. We also discussed with him his options for bankruptcy and the fact that his two sons who were living on the property need to help him out ASAP.
11:30 Created a couple of Handyman Special adds for BZ to post on Craigslist to help with her with creating a buyers list for the homes that she was working to shortsale in the Lakeway area. We implemented this into her marketing calendar for continued followup. I also agreed to meet her on August 7th to attend the tax foreclosure with her to help her bid on the 8 properties that she was looking at buying.
12:30 Vickie Walker (realtor) picked us up to head to a meeting with the primary owner of the 21 of 29 apartment/condos in San Marcos. Mr. Anderson with the Anderson Group was an extremely nice guy who had some great information on the property, the underlying financing, and the other three owners who owned the remaining 8 units. As it turns out, he has owned the property for 10 years and the reason for him to sell some of these was that he has a large development in San Antonio and Eagle Pass, Texas. The five units are on one traditional loan, with the remaining 16 in a assumable loan that is backed by bonds. The loan balance on the assumable loan is at 7.95% with a balance of $1,848,288. He didn’t know the balance on the other loan. He also stated that the property appraised for around $210,000 three years ago, and that he was planning on letting them go for around $200,000 a building (which is four apartments). Mr. Anderson also mentioned that one of the individual owners just picked up there property at foreclosure for around $120K, and the other individual owner picked theirs up for around $40K around 10 years ago. He also mentioned that Mrs. Kellogg (owner of the other five) was open to the idea of selling her properties two years ago when they had their last HOA meeting. The property had a $475 HOA dues each month per building which could be erased with just one owner. Mr. Anderson also initially agreed to allow a 60 day option period, along with planning on calling the other owners to inform them that he would be sending BZ their contact information so that we could contact them to discuss the potential purchase. Mr. Anderson also mentioned that he would get a per forma based on all 29 buildings sent over to us within a week or so. Overall, the meeting went quite well and we all walked out of their feeling like we had uncovered a ton of useful information.
2:30 We arrived back at BZ’s office. We received a prequal application on the son of James Insco. We ran the application and it turns out that we might be able to structure a note deal on his daughter in law. BZ was also interested in finding other areas where she and Vickie can look at other commercial properties. I introduced her to Loop Net, and explained how the site worked. She took a few notes and we looked at a few properties and discussed some of the merits of each and what to look for on the website.
We also worked on creating a pattern to duplicate her marketing. I suggested she find a postcard or mailer company (such as postcardmania.com) to send out her marketing, to allow her more time to focus on finding deals. She agreed and I put her in touch with a contact at the company.
3:30 We worked longer on her marketing calendar and came up with a plan for her to contact the homes on the dismissed and discharged bankruptcy list. I gave her some info on what the letter should say, how often she should send it out, and who she should mail it to (trustee and home owner). We also came up with a couple days a month (every other Thursday) where her assistant could drive around the area placing signs and identify ugly houses and kill two birds with one stone.
4:30 Mentor Evaluation and Daily Agenda.
5:00 Finished up with an action plan for the BZ and her team to focus on over the next two weeks.
The real estate market in Austin and surrounding areas is growing rapidly. There is a lot of opportunity for equity and short sales for investors as 1 in 51 homes are in default. Unfortunately, most realtors in the area are not informed, comfortable, or knowledgeable of the short sale process. This is a huge advantage for anyone marketing to the NOD lists available. There are several areas around Austin (Dripping Springs, Leander, CedarPark) that are growing rapidly and other areas that are experiencing a high foreclosure rate (Round Rock, Pflugerville, Buda, and Kyle). This presents a huge opportunity in the area for seasoned real estate investors. Round Rock has the highest foreclosure ratio in the nation (78664 zip code). This is the one area where investors are trying to avoid as resales are slow in the area with foreclosures and bankruptcies driving the market down, similar to what is happening in parts of Vegas and Phoenix. With the median home price being $190,000 (below the national average by 25%), and a lack of inventory (7000 this year versus 12,000 homes last year) this is causing home sales to jump as many homes in areas are often scooped up within a week. In other areas with high foreclosures, homes are lingering on the market on an average of 45 days. In the downtown area, there are 30 pre-approved new condominium buildings ready to be built. These pre-sales are being scooped up rapidly.
Higher priced areas along LakeTravis (Lakeway) are experiencing quite a bit of growth, but also experiencing quite a few foreclosures as well. I have visited with several investors who are making 20-25% on flips on homes valued in the $300K-$600K market. There is money to be made all across Austin and the surrounding communities.
A couple rising areas are the San Marcos and New Braunfels areas. San Marcos is home to TexasStateUniversity (27,000+ students). New Braunfels is home to SchlitterbahnWaterPark. These areas are traditional college towns and are right along Interstate 35 and are in between Austin and San Antonio. There are a lot of multi family units on the market and the rents are usually August to August with rents being very affordable for the students, and depending on the underlying financing, these units can cash flow. Several apartments are for sale currently, but the university has just completed a huge expansion of new apartments as well.
Commercial growth in Austin is also rising dramatically. Sales of office buildings have surged with over $1 billion in properties trading hands last year, up from 2005, and more than 10 times the volume in 2003. There is dramatic growth of commercial buildings with several large companies moving to the area. While growth continues, there is still ample opportunity for commercial, along with development, for investors in the area. This is a great market to be investing in!
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