Foreclosures are sold every single week in Colorado by Public Trustees. There is a Public Trustee appointed for every county in the state. The list of properties for sale are posted one day before the auction. There is a mad dash to perform all of your due diligence within 24 hours. Buyer Beware! Properties are purchased for cash…no refunds…you can not afford to make any mistakes. Here is a recent property we purchased.
There a two main obstacles you must get over if you want to buy a foreclosure at the auction. The biggest obstacle for most is money. Up front cash is the only thing that counts. And there are a number of people, like myself, who make a living buying at the auction. You must bring enough to be competitive. The dream of showing up at the auction and no one else wants the property your after…it’s a pipe dream. Be prepared to compete against others. The second obstacle for most is time. In less than 24 hours, you need to analyze a list of properties. Analyze means, figure out neighborhoods, rough values, and completely understand the title. You need to understand loan priorities, liens and judgements, taxes, and assessments. Everything counts. Afterwards, you need to go see the properties with potential. In this particular example, we were unable to get inside the property because it was occupied by renters who did not answer the door. In most single family residences, this would be a major stopping point for me. Over the years, I’ve seen how many distressed families live. It’s not pretty…and in many extreme cases, it is down right sickening. What do you do when you can’t see inside a property? I ask the neighbors. You would be surprised at how much information a neighbor knows about your lifestyle. Everything checked out with the neighbors…they even invited me inside to look at their unit…a mirror image. So we took a calculated risk on bidding on this property. After you’ve done your analysis, it’s time to go to the Public Trustee to bid….and hopefully win the property.
So…based on the above analysis, you can see we have a property that has a lot of potential. Don’t ever buy a property thinking your plan A will always work. Many times, you need multiple ways of exiting out of a deal. The key is always what you purchase the property for. If there is enough equity, you’re always going to be get out clean. Want to see what the property looked like?
This one worked out really well. Great renters who are taking care of the property. We could opt to evict them, but why? They will buy down the property another $13,200 in a year (9.2% ROI in rent alone). When it comes time to sell next year, we should make a total return over 25%. Not bad for just one deal huh?