Hey Jon Long, of Liberty Acquisitions stop sending me automated offers.

I have gotten an offer every 24 hrs on all of my houses in a certain city.  Clearly they are automated and come in at the same time.  The offer is about 40% of the list price.

I am writing you today in response to <My Property Address>.

Liberty Acquisitions. is an investment company that purchases properties for cashflow purposes. After analyzing the property from a cashflow perspective, here are the numbers that we came up with. These numbers are estimates based on statistics of the local market, your listing area and the offer price below. We welcome a conversation to discuss this or any other property that may be purchased for an investment value.

Possible Annual Rent:	$4,257 (that is 354.75 a month lol)
Less Ann. Mortgage Payment:	$3,105
Less Taxes:	$776
Less Insurance:	$388
Less Management:	$388
Less Maintenance:	$388
Total Annual Profit/Loss:	($776)
Total Monthly Profit/Loss:	($65) (why would you want to lose money?)

Below you will find an ALL CASH Letter of Intent with no financing contingencies. We are prepared to offer you a guaranteed closing date. Initial Offers are purely based on purchasing formulas. Your property has been selected as one that may fit our parameters. Once this LOI has been reviewed by the Seller, please fax the executed contract along with any additional information to (323) 255-9915

You may also email any further questions to jonlong@libertyacquisitionsinc.com or reach them by telephone

at (562) 304-0801

Regards,

Jon Long – Buyer Associate

Liberty Acquisitions, Inc.

What a waste of time, the only people that respond to offers at 40% of list price are the properties that no one wants.    The property in question would rent for $1,100/mo (his software estimates $350).  So if I help him fix his formula I wonder if he would pay 3x as much for the property?

I hope this guy is not sending these offers in REOs too.  He would instantly loose all credibility with the entire office.

Good luck Jon Long.

I try not to tell people what I do for a living.  Not because I don’t want to help people, but they always ask the same questions.

My (name of a relative) is a real estate agent and I’m trying to buy a property to flip.

I say, “That’s great, where are you looking for property?”

Usually, they give some kind of excuse or reason why they haven’t started looking or they mention how they are waiting for a deal to come to them.

I always encourage them to go to some f the local RE investment clubs, or at least go to some local real estate forums, but usually that seems like too much for them.

The conversation typically ends there, I am happy to answer any additional questions if they have any.  But the TV Shows have glamorized our business to make it look easy.  Most people think you typically buy any house, fix it up a bit and cash a $100,000 check.

Sadly, it’s a reality check.  Go look at 100 properties, write 50 offers, get one deal, come up with all the cash to close, do a massive rehab, fight lenders on all their crazy restrictions, pay escrow, title and the real estate agents and hopefully 4-6 months later you should get a fair return for your time and investment.

That doesn’t make it sound as glamorous does it?  Don’t get me wrong, I love this business, but “easy” is not a word I would use to describe it.

We’re moving along here slowly but surely.  House #45 is completed and just got listed.

We enclosed the carport to a full garage and it is now officially 5 bedrooms and 2 bathrooms.

Unfortunately, I don’t have great pictures of this one.

Outside – Before

Garage – Before

Garage – After

Fireplace – Before

Fireplace – After

Kitchen – Before

Kitchen – After

Before I become a full-time investor, I was like everyone else and associated auctions with “good deals.”  The longer I am in this business I am not as sure.

Real Life Example #1

Two weeks ago, we went to a 3 house auction in California.  Two lower-end houses and one higher-end house.  About 30 people showed up, the two lower end house went for about 95% of the ARV (when you add repairs).   The third higher-end house, I was high-bidder on and went for about 73% of ARV (when you add repairs).  It was a messy house, that was hard to value, and most of the bidders came for the lower end house… so we maybe had 3 or 4 competitors, we would have bought all 3 of them if we could.

10 days later the auction company let us know the bank rejected our offer.  They didn’t really give an explanation, but they lowered the price it was listed in the MLS for, still a lot higher than what we bid.

Real Life Example #2

One year ago, we went to a highly publicized REDC auction (http://www.auction.com).  We came ready to bid on about 40 houses, mostly cash-only stuff that needed 20k+ in repairs.  We had cashiers checked lined up to buy up to 10 houses.  The average bid was 50-100% of what our max bid was.  So we where not even close and left feeling that we should buy in the MLS and sell at an REDC auction.  I wonder what % of the deals close?

Real Life Example #3

In some training, they brought in a local small auction company.  They work as investors and help other people sell their homes retail in auction like format.  They have the system down to a science and basically say, they get a strong conventional offer and typically sell deals for 105-115% of market value.  We have discussed trying them on a couple deals, but the fees are just so high compared to our sales costs.

Why?

People are emotional more than logical.  All bids take place in a public environment.  No one likes to lose.

Obviously, this done include trust deed sales, which are a totally different animal.  I also do know investors who have found deals at auctions, just not I…yet.

I send out apologies to the blogosphere, it has been a while since I have even thought about the blog.  I try to post every other day, but clearly I am not succeeding that apartment.

Here is an update:

- Since I lost posted we have been working very hard on buying more properties.  Two weeks it felt like we missed everything and in the last 4 days we have put 4 properties into escrow . That brings us to #41, I am a little behind on posting the details about them.  One of them is a higher end burn-out.

- That got us worried about liquidity, so we have successfully wholesaled one deal and are thinking about bringing on a partner for a second deal.  We want to have cash in the bank so we don’t ever stop looking for properties.  I am sad to wholesale anything in this market, but it makes me more sad to run out of capital.

- House #16 has loan docs signed by all parties and should fund and record by Friday.  We’ve had docs for a while but the buyer had some medical problems they needed to attend to so it has delayed things. It will be nice to get this one off the books (especially at this great profit) as our next oldest house is House #32.

- House #32 has 8 offers on it, 6 of them above list price.  One conventional and the rest FHA.  I am not real excited about the conventional buyer so I may try our first loan after the 90-day flip rule has been removed.

- House #34, which apparently I haven’t blogged about either, got listed yesterday.  No calls yet, which seems odd, hopefully it gets busy this weekend.

- I am really confused as to what to think about the market.  Going up? Going down?  All the data says it should go down, but from what I see everyday it is going up and going up fast.

- March is going to be a bad month goal wise.  Probably only one closing, unless these escrow companies can be quicker about things.

That’s all for now.  A quick and dirty update, back to work buying more.

Sean O’Toole is the creator of Foreclosure Radar and just published a very interesting article on his blog.

Here in CA we have one million homeowners who are already delinquent, and we seem to be clearing about 25-30k a month based on foreclosures and short sales (which are the only “solutions” that are actually clearing the distress by eliminating negative equity). Divide one million by 30k, and you come to the same 33 month conclusion they reach.

Another interesting part of the report deals with recently cured loans… those no longer delinquent, primarily due to loan modifications. They suggest that these should be included in calculations of shadow inventory, as they have had a nearly 70 percent rate of recidivism – in other words, most become delinquent again because the loan mod failed to address the core problem of negative equity. Seems like a reasonable conclusion to me.

Basically, California has over a million houses sitting in the shadows.  Not foreclosed upon, but not paying a mortgage, not including loan mods that will most likely fail within the next 3 years.  Likely that means we will see little or not appreciation for the next 3 years and probably depreciation in the upper end of the market.

The government providing intervention in the market and laws to slow foreclosures are actually hampering price recovery.  But hey I’m not complaining, if the government wants to delay things 2 or 3 extra years that is profitable decision for me.

The longer I have been in the business, the longer my, if only list gets.

• If only I came up the $500 the agent told me and bought that property.
• If only I trusted my gut and bought more rentals.
• If only I kept that property instead of selling it.
• etc

Right now, you’d look like a genius pretty much buying anything in the low end of the market in 2009, prices are up 25% here in Southern California.  That being said, I think regrets are a terrible thing in this business.  You’re always going to make decisions you regret, but that is the nature of this business.  No one in this business has a crystal ball and even if you have all the numbers in-front of you the government can hop in and throw a game changer in at any time.

Here is what I try to remind myself:

Rentals

Can you make it cash-flow?  Really truly cash-flow after all expenses?  Do you like the neighborhood?  Would I be okay if I owned this property in 10 years?  Can I find qualified persons willing to rent this property? If you can answer yes to these questions you are not going to make any big mistakes.  Even if you do, you should be able to cash-flow or break-even while you deal with your mistake.

Retail Flips

For retail flips if you buy using the right comps (within 3 months that are truly similar, sq footage, lot size and year built) at a discount 65-70% of  TRUE market less accurate repairs you have a lot of protection.  You should have a 15% profit margin cushion and remember the market dropping 2% a month is substantial.  Some properties will have unforeseen expenses, but if you specialize in buying right a lot will go wrong for you to lose money. You should factor in what the market will be doing for the next 3-5 months and that’s it.  If the property can cash-flow as a rental you are protected, you have even more protection and a good Plan B.

After that, if you made a wrong decision 6 months ago, or missed a property forget about it.    The decision seemed right at the time.  With the ever changing market you will make a lot of wrong decisions… so get used to it!

My last comment for the night is, the best time to start acting is RIGHT NOW!  You will always regret what you never did.

We’re out there shopping for property like crazy.  Today alone we sent in 6 offers, plus did verbals and follow up on 10 more properties.  Since we sold our big house we have some cash and are trying to buy 4 or 5 in March.

I do have one escrow that should close on Wednesday 3/3, so that leaves only 3 or 4 more, boy do I have the month cut out for me.  Any Southern California wholesalers feel free to hit me up.

The offers we are writing right now are really clean, huge earnest money deposits (50-100%), no contingencies and a 14-day closing.  So I am hoping we can get some of our offers.  The banks really seem to be raising prices right now and I am just not willing to participate in that.  The “shadow inventory” everyone talks about is there, I just don’t know when it is going to hit and how slowly the government is going to leak it out.

I’ll write a post tomorrow summarizing February.  We’re still on schedule but not inching ahead of our goals, like I was hoping too (maybe I should of set them higher, lol).

What a busy week in the land of California real estate investing.  I closed on three purchase escrows this week alone and put two more under contract.  If you’re counting that should make 5 purchases for January.  So we are getting a great start to our 2010 goals.

Three of the houses are going to be rentals and two are flips.  One of the two flips I only have a piece of as I brought in an equity partner.

I was hoping to have House #17 and House #18 sold this week, but it looks like we are going to need a couple extra days.  We got loan docs signed on both deals, we are just waiting for the funding conditions to be met and the lenders to send their money in.  The profit on both these deals is quite good, we bought the houses cheap and prices have gone up about 10% since our purchase.

A Motivation Tip -
I was at a lunch meeting with a local extremely successful landlord earlier this week.  We where sharing our goals for the year and some ideas.  He is very visual and said he didn’t something different this year.  He wrote himself a check for $1,000,000 and put it on the front page of his goal book.  He said it will bounce but it is a motivation that one day he wants to be able to cash it.  Taking his advice I now have a $1,000,000 taped to my office wall, near my desk.  Every time I am punching away at they keys it can stare me in the face until one day I can cash it!!

That being said, I don’t know how many people read this blog regularly, but you should take a minute to post your 2010 goals on the bottom of this page so we can hold each other accountable.  You can see my 2010 goals here, and if I don’t make them you better hold me accountable!

2010 is upon us!

After we have been in business on year (Sept – 08 to Sept 09), I made a post that summarized our results.  I will post similar numbers for Jan 1-09 to Dec 31-09.

2009 was a great year for us.

• We purchased 20 houses, for just over $2,000,000.
• We sold 12 houses, for just over $2,000,000.
• We started keeping some rentals: we have nine units with six of them rented, two under repairs and one for rent.
• We have four flips in progress right now: two are in sales escrow and should close by 1-15-2010, one is for sale and one is under repairs.
• We have three properties in escrow (I will write about them soon).

Nine of them where retail flips.

Total Sales Price: $1,736,00
Total Purchase Price: $743,00 (avg $82,555)
Rough Remodel Expense: $365,00 (avg $40,555)
Purchase Price & Remodel: $1,108,000
ARV Percentage: 63.8%
Avg Hold Time: 183 days

For the three wholesale properties:

Total Purchase Price: $315,300
Total Sales Price: $345,50
Rough Remodel Expense: $0
Purchase Price & Remodel: $315,300
Purchase Percentage: 91.3%
Avg Hold Time: 3 days

For the 6 Units that are rented:

Total Purchase Price: $457,000
Rough Remodel Expense: $118,500
Purchase Price & Remodel: $575,500
Total Appraised Value: $884,100 (due to the recent market conditions we could sell for more than appraised value)
Purchase Percentage: 65.0%
Total Monthly Rent Collected: $8,100 ($97,200 yearly)

Now the important part, what we are aiming for next year.

2010 Real Estate Goals

• Get to 20 rentals properties (not units)
  This is the main goal of the year.  We are already almost half-way there, so we definitely should be able to get there.  Although, the monthly cash-flow is not real exciting the long-term equity built is substantial on these properties.
• Make 36 Purchases (Rentals, Retail or Wholesale)
  I think this is going to be, by far the most difficult goal.  That is 3 purchases per month and almost double what we did this year.
• Raise $250,000 in Private Money
  Our goals require a lot of capital.  We have built up a substantial amount of our own working capital, but it is still one of our main bottle-necks.

The goals seem simple enough, but that is definitely a years full of work!  Wish us luck.  Don’t forget to write down your 2010 goals and look at them often.  I’ve had a paper hung on my office wall with these goals for the last two months.