Summer is fully in swing now and we are actively and aggressively taking advantage of all of the opportunities to invest that are out there in the market right now.
Buying Foreclosed Properties At Auction
Many of you who have listened to us speak recently are aware that we have been working in Las Vegas with a group to purchase bank owned properties at foreclosure auctions.
The market in Las Vegas is active and filled with eager buyers for properties in the $250,000 and under range and there are typically over 100 properties per day (yes per day) on the auction block.
We connected with a group of real estate agents there who represent several large financial institutions and they are doing the analysis and purchasing at auction for us. We ran them through a pretty extensive screening and due diligence process to determine their track record with their own investments in this market and found that they personally had over $1 million invested and had average returns per property of about 20% with an average turn time of about 90 days.
That means 20% on your money turned 4 times per year (every 90 days) for a total return on average of about 80%. Now that got out attention!
What We’ve Done So Far
So, after doing that due diligence and research, we went to Las Vegas and met the guys, visited their offices, looked at properties they had purchased and went to the auction to check it out. It all checked out as a real business, so we made the decision to invest.
On May 13th, 2010, I headed to the bank and got $1,250,000.00 in cashier’s checks and hopped on a plane to Vegas. The next day, I went to the auction and we bought our first property. Since then, we’ve purchased about 12 total properties and have fully invested our $1,250,000.00. Now, on July 7th, we have 1 of those properties in escrow and about 6 more under contract in the process of heading into escrow.
Our returns on these properties is running from about 15% on the low side to almost 50% on the high side. We’re projecting an average return of somewhere between 15% – 20% to be realistic. We do believe that we should be able to liquidate all of these properties by August 15th, so that would put us within our 90 day turn target.
Extrapolating all this out, it looks like we really will be averaging 15% – 20% per transaction and turning our money about 4 times per year, for a total net return on investment of between 60% and 80% annually.
Using Private Money For Real Estate Investing To Leverage Our Position
As soon as we complete our initial “proof cycle” we’ll be going out to raise about a total of $25 Million. We already have commitments for a second round of investments of about $3 million for the Las Vegas adventure. We’re not accepting any new funds right now, because we do want to get through the first turn so we have all real numbers from a live investment to share with our private lenders.
We’ll be offering them the ability to invest through limited liability companies that average around $1.2 million to $2.4 million, with whoever invests at that particular time being able to participate with 2 – 6 other investors to spread risk over 10 – 20 different properties at a time.
While our initial investments have been in Northern California and Nevada, we will also be extending our activities into Phoenix, Arizona soon.
Can You Do This?
Yes, of course you can! That’s why we’re sharing it with you here now. You can find serious players in your area who are successfully working the auction markets. Just go to the local real estate auction for several auctions in a short period, say one month. Note who the active and consistent buyers are and just strike up a conversation with them. Let them know that you have funding and are looking for someone to take care of the actual buying, fixing up and turning of the properties.
Once you have made your connection, check them out by asking for a history of their investment activity and performance. Once you are satisfied that everything is in order, go through a “test” transaction with them for a smaller amount, then after it proves up, gradually invest more.
We’ll keep you posted on how we’re doing with this project as it continues to evolve.
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