Abandoned Properties - Money-Making Secrets

Abandoned Properties - Money-Making Secrets

Abandoned Properties - Money-Making Secrets
May 29th 2007
by Reggie Brooks

When I began my career as a real estate investor in 1985, I stumbled across a little known area of real estate that had the potential to make us a ton of money. This was an area of the market that went unnoticed by most people. This was the area of abandoned properties.

How To Profit From Abandoned Properties

You might pass these properties on a daily basis, but just never paid much attention to them. You could be passing up hundreds of thousands of dollars in profits! These are properties that the owner has walked away from for whatever reason. It could be a divorce situation, an illness, a death in the family, a job relocation, or any number of other reasons. Do we care why? Absolutely not! Don’t waste your energy trying to figure out why sellers do what sellers do.

A $58,000 Profit Right Across The Street

I remember a young lady in one of my 2 day classes. In the first day of class, we taught a whole day of unconventional ways to find profitable deals. One of those methods was how to find and profit from abandoned properties. The next day, the young lady came to class and told us an interesting story about an abandoned house right across the street from her house. She said that when she got home from the first day of class, she put her key in her front door to go inside. Suddenly, for no apparent reason, she stopped and immediately turned around. Across the street was an abandoned house. She had unconsciously seen the abandoned house every time she walked out of her front door, but until now she just never paid any attention to it. The windows were broken out, the grass was high, there was trash in the yard, and on and on.

After the class was over, the young lady stayed in touch with me. I had asked her to keep me informed as to the progress of her deal. It took her around three months, but in those 3 months she successfully purchased the property, fixed up the property, marketed the property, and made a profit of $58,000! By the way, she had no money, no credit, and no job, but she was still able to make this kind of profit.

Why Abandoned Properties?

When you work with abandons, you have an excellent opportunity to use the best financing in the world - seller financing. There are several reasons why we prefer seller financing over conventional financing.

Rarely will a seller ask to see your credit report. If you have credit problems, it usually will not become an issue. Many times the seller is completely open to many creative strategies that will help to eliminate their abandoned property problem. After all, what does the seller have to loose? His abandoned property is just sitting there not making any money.

The seller may have a mortgage to pay on it every month, because he wants to keep his credit clean. More than likely, he’d like to rent it or sell it but he feels that he’d have to spend a lot of money to fix the property up before he could market the property. In the meantime, another month goes by and another mortgage has to be paid. The taxes and insurance will also have to be paid. Money will still have to be spent on maintenance and upkeep. The repairs might become extensive, since the property is vacant and subject to vandalism. The neighbors are probably complaining about the eye sore. The Department of Building and Safety might have become involved. This can all add up to the seller having to spend a sizable chunk of cash every month, which can also represent a sizable headache for the seller. You guessed it. The seller is probably very motivated!

How Do We Find Abandoned Properties?

Here’s one of the easiest ways to find abandoned properties. The first thing to understand is that the more affluent the area is, the fewer the abandons you’ll find. The less affluent the area, usually the more abandons you’ll find. I encourage you to find an area somewhere in between the two extremes. If you keep your eyes open, you’ll find properties that might have the windows broken out, they might be boarded up, you might see the grass and shrubs overgrown, you might see trash, handbills, newspapers and other signs that this property might be a good candidate for a profitable abandoned property.

Keep a pen and a pad of paper with you at all times. I teach my students to take different routes to and from their normal destinations and write down the addresses of any properties that might be abandon property prospects. This might require that you leave home a little earlier than usual, but it is certainly worth it if it brings you just one abandoned property deal.

Using A Little Known Government Program With An Abandoned Property

Several years ago, I was taking my aunt to an appointment with a dialysis center when I came across an abandoned four unit building. This property showed all the classic signs of abandonment: boarded up windows, tall grass, trash, etc… I wrote the address down and called my title company as soon as I got a chance. I gave them the address, and they gave me the owner of the property and the mailing address. I wrote an offer and bought the property for $82,000. We fixed the property up using a little known government program called the Rental Rehab Program to maximize our profits. This program provided a 3 to 5% loan when the prevailing interest rates were 12% The program also allowed any qualifying tenants to drastically reduce the amount of their out of pocket monthly rent by going on the Section 8 Government Subsidy Program after the rehab was complete. The average wait for the Section 8 Program at the time was 6 to 8 years. This was truly a win-win deal for everyone involved. We kept the property for a number of years, putting a positive cash flow in our pockets every month. We eventually sold the property and made a lot of money.

The Best Financing In The World

With the property needing as much work as it did, it would have been almost impossible to get a conventional bank loan to finance it and, at the time I was in no position to pay all cash. So, what is the solution? As I mentioned before, seller financing is the best financing in the world. The seller of the property financed the entire deal for us.

Here’s the point: Abandoned properties are one of the best kept money-making secrets in our industry. They are very good candidates for many of the government loans and grants that can super charge your profits. Tap into this area of real estate and watch your profits soar.

__________________

"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"

"SUCCESS WALKS HAND IN HAND WITH FAILURE"


eye opener

WOW you made me think of 2 properties i know of that are boarded up in my area. Not too many people would see them since they are on dead end blocks and only local residents go down the blocks.


Offer

Make the owner an offer based on strictly the value of the land only. The house probably needs extensive work and the city is probably the ones that boarded the house up because it is a danger to kids etc...

__________________

"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"

"SUCCESS WALKS HAND IN HAND WITH FAILURE"


Sistreat, That was a great

Sistreat,

That was a great post. I have about 3 different properties that I know of around town right off the bat. Thank you.

Cory


sistreat??

sis i got a question in a town over there are 3 houses in a row boarded up that are like that right now do u think the town owns it or is there a owner and house go for alot of money in that area they are close to the street that also might be the prob was thinking if i bought it and found a devolper to buy the houses and they can knock it down and i can make a good money off it what do u think im gonna get the address tommorw and find out info


thank you sistreat

Sistreat,
You are so helpful to us and such a wonderful source of knowledge/experience and always willing to share that with all of us. I know I am not alone in appreciation for your contributions to, it seems, almost every thread on the site!!! I am aware of abandoned buildings in both my town and nearby towns I see them all the time, I was just never really sure if they were even worth the time/effort.


Mattjay

mattjay wrote:
sis i got a question in a town over there are 3 houses in a row boarded up that are like that right now do u think the town owns it or is there a owner and house go for alot of money in that area they are close to the street that also might be the prob was thinking if i bought it and found a devolper to buy the houses and they can knock it down and i can make a good money off it what do u think im gonna get the address tommorw and find out info

Find your local tax assessors web site and they will usually have a place on the web site that you can llok up properties and see who owns them. If not call the tax assessor and tell them the address and they will give you an address of the owner of the property. They don't have a phone number for the owners...only an address.
Just make them an offer based on the value of the land. Some developers will not mind an extensive rehab project if they can get it cheap enough.

__________________

"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"

"SUCCESS WALKS HAND IN HAND WITH FAILURE"


Angela

Thank you Angela for you kind comments. I don't mind at all helping if I know the answer. If I don't know the answer to a question someone else on the board surely knows. There are a lot of good helpful people on the board.

__________________

"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"

"SUCCESS WALKS HAND IN HAND WITH FAILURE"


Abandoned Properties

Sistreat, I really do appreciate all of your insight. I am actually talking with the owner of an abandoned property right now. Hopefully, we can strike a deal that makes sense for both of us. Keep encouraging us! Thanks


Always something new

Sistreat, everyday we could look for a new posting from you, that perks our interest and provide additional knowledge to real estate investing. Thanks for the into.

Sandra

__________________

"You can never get to the top, if you are not willing to climb. Do not look at the difficulty of the climb, only anticipate the view from the top."
"Can't even walk without you holding my hand." (Song)
"Is anything too hard for the Lord ..." Genesis 19:14
"In all things, wait on the Lord."
"Think not of your own deliverance, but trust in God who will give in abundance."
"When you are down to nothing, God is up to something." Unknown
"Our lives begin to end, the day we become silent about those things that really matters." Dr. Martin Luther King Jr.


gems

we have many ppl on here that give good solid advice,but Sissy,you are our GEM!!!!
May God Bless everything you put you hand too.Of course may the Blessings be on all here.


Philadelphia abandoned properties

Great advice!! Since I began my RI journey I have been spending my time in the Philadelphia abandoned property market. (What a market it is) Philadelphia is filled with abandoned row homes and multi units. I currently have 22 of them under contract and ready to assign. Many of them I got for under 10k their ARV is between 110k - 150k.Of course some need extensive rehab (about 50k)

The abandoned property market is huge anywhere not just in the city. As I called the owners I found them very motivated to sell.

__________________

Do not fear, for I am with you; do not be dismayed, for I am your God.I will strengthen you and help you; I will uphold you with my righteous right hand. Isaiah 41:10

http://realwholesaling.com FREE wholesaling tips and resources!

To your success,
Carol Stinson


Comments

Thank all of you for the kind comments. I am so glad you can benefit from these articles. I always enjoy reading a good article with helpful advice and guidance.

__________________

"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"

"SUCCESS WALKS HAND IN HAND WITH FAILURE"


Abandoned Houses

freeindeed wrote:
Great advice!! Since I began my RI journey I have been spending my time in the Philadelphia abandoned property market. (What a market it is) Philadelphia is filled with abandoned row homes and multi units. I currently have 22 of them under contract and ready to assign. Many of them I got for under 10k their ARV is between 110k - 150k.Of course some need extensive rehab (about 50k)

The abandoned property market is huge anywhere not just in the city. As I called the owners I found them very motivated to sell.

My goodness Carol! 22 abandoned houses under contract?!!! That is amazing but in this market I do see how it is possible. I pass on many of these old abandoned places almost daily. The neighborhoods are not the safest places to be in. Many times I find neighborhoods with as many as 10 to 15 boarded up houses in a row.

But if you can get em sold that is what counts. I have one buyer who will buy all of the old junkers I find if the price is right. I guess he is a section 8 landlord. The right price is about what the land alone is worth. Don't overload yourself with unsellable junk but you are doing great!!! Keep up the good work!

__________________

"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"

"SUCCESS WALKS HAND IN HAND WITH FAILURE"


wholesale junk

Actually 16 of them is a package deal that an investor is trying to move. He purchased them at an auction and asked me if I would wholesale them. What I like about this deal the most is that by advertising it I have built my buyers list substantially. I do have some interest in the package the problem that I am running into is that the buyers are having a hard time getting funding for the rehabs.

I grew up in Philly (in one of those bad neighborhoods) so I am familiar with the area. Many of the properties that I am locking in are in the area of Temple University where student rentals are very desirable. Once these rehabs are done they are getting $500.00 a month per room. Many of these properties are 4 bedrooms. So $2,000 a month is a nice cash flow which is a good selling point for this package.

There is not much money to be made wholesaling these shells considering that they only sell for about 10k each. But I like the fact that they build my buyers list.

__________________

Do not fear, for I am with you; do not be dismayed, for I am your God.I will strengthen you and help you; I will uphold you with my righteous right hand. Isaiah 41:10

http://realwholesaling.com FREE wholesaling tips and resources!

To your success,
Carol Stinson


philadelphian REI

Hello, my name is nikki, and my partners and I just started our RE company in philadelphia. Always looking for REI that can possibly be an assest for future ventures. Feel free to contact me if this seems like something you may be interested in. thanx


freeindeed and sistreat

freeindeed wrote:
Great advice!! Since I began my RI journey I have been spending my time in the Philadelphia abandoned property market. (What a market it is) Philadelphia is filled with abandoned row homes and multi units. I currently have 22 of them under contract and ready to assign. Many of them I got for under 10k their ARV is between 110k - 150k.Of course some need extensive rehab (about 50k)

The abandoned property market is huge anywhere not just in the city. As I called the owners I found them very motivated to sell.

Base on sistreat mention before, you only offer the land price to the house owner.
How about the rehab cost? How do you estimate it?
I don't have the source nor time to run the rehab work, unless is necessary.
Can I assign to someone else for quick turn around cash? What % do you suggest to add on top for the assignment fee?

Thanks,
Kathy


Excellent

Good post sistreat. What strategy in Dean's book did your student use to buy the abandoned property?


Philadelphia Investors

Hi Nikki, nice to meet you. I have a vacant property under contract in the West Philly area near the Frankford EL. Very cheap, would like to assign the contract if I can. Are you interested?


Bump!

Bump--it--up!

Very good post to keep in front of everyone's eyes.

A way belated thank you Sissy,

Denver

__________________

"Do, or do not. There is no 'try'"
------Yoda

Think, say and do what is right; refuse to think, say or do what is wrong.


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