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Into this new year of 2006 we are now seeing the bad decisions made by pretend real estate investors from 2005. There are too many untrained or poorly trained real estate investors in the marketplace today. January 4th 2006 we inspected 3 homes in pre foreclosure or foreclosure that were purchased by investors from the bank in 2005. These were all good money deals for knowledgeable real estate investors but not these guys.

Deal #1,
Investor buys a house for $112,000.
The bank foreclosed on the property for $91,000 two months prior. We passed on the deal our highest offer was $84,000 a big difference from $112,000.

Here’s why: ARV is $135,000

Our profit is $20,000 notice we take our profit out first

Repairs were $19,000

Carrying & Sales Cost $9,900

Miscellaneous $2,100

Highest Offer $84,000

Pretend investor pays $27,900 too much, and now is trying to unload his mistake at pre foreclosure for $149,000 on a poorly finished and under funded house.

Deal #2,
Investor buys a house for $172,000.
A pre foreclosure deal we didn’t even see this one coming. It was a good deal the ARV is $295,000 plenty of room to make a good profit.

The problem is this investor had too many deals in process at the same time. 3 other projects underway when he picked up this deal used the same bank on all 4 deals and personally signed each note and took title in his and his wife’s names. I don’t know how the other deals fell apart but this one could have been flipped for a small profit ($10,000 to $15,000) to another investor and maybe save the others.

Mistakes on top of mistakes never take title in your own name use a separate land trust, an LLC or a Corporation for each property. Never personally sign a note on an investment property to a bank. Use hard money lenders, use private lenders, use your Roth IRA, use your wife’s Roth and kids educational IRA these will fund your retirement or the kids education.

Deal #3,
Investor buys a house for $28,000.
His first investment with an ARV of $65,000 and repairs of $11,000 the plan was to rehab, refinance, hold, and rent the property. Rental rate in this area for a 2 bedroom, 1000 sq ft houses is about $575.00 a month. Which is a small monthly income to cover your cash flow or cash on hand for your family and your business but there is more to this problem.
Here with $11,000 in repairs the investor tries the cheap way to complete the job. He hires a part time general contractor who takes over 3 months to mostly complete the project. The contractor left some supplier bills unpaid and work incomplete before he quits because he wasn’t paid on time. After hiring another contractor to finish the job and paying all the bills the final cost of repairs is $19,500 and 4

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