Josh Blank's Foreclosure Investing Blog

My Take on The Bailout

Russ H

"Amen brother…Josh for President! We are definitely like-minded people."

Stephen W.

"Great article. Nice mix of rant, philosophy, free markets, and….marketing!
Your writing skills impress me quite a bit, actually. Writing skills are the output from thinking skills. I think you should get a radio show or regular newspaper column."

Alex D.

"Good Points! Remember the movie zeitgeist? Increasing the power of the fed (tighter regulation in disguise) coming from a less government republican pres? Something stinks really bad…"

Martin L.

"Your overall knowledge of economics really impresses me. Is that a product of college classes or moving and shaking on the street all these years? I think you’re right on with just about everything you said!

Have a good one. Golfing out at Lake Carroll all weekend with the old college buds."

Hi Joshua & Heather,

Thanks for your e-mail to continuously remind all of us investors to stay on
course and March ahead of this horrible economic crisis. And that poem….it
was AWESOME!!

Gene and I are trying to wrap things up in Romeoville. The Village of
Romeoville took over 1 month to issue our plumbing, electrical, etc. permits.
But to let you know how things are going out there, Gene got an actual hand
applause from several neighbors after he installed a bay window to replace the
existing slider glass door in the front of the house. Wow! It’s really
a "FEEL GOOD" thing to actually be improving the neighborhood.

Is First Choice still doing loans to investors? In addition, Romeoville is
not a Mass Consumption Series…what is the process of adding it to the
Series? Thanks for all your help. We would never have been BELIEVERS wasn’t
it for your program.

Gene & Geri K

"Its great day Josh! I sent Beth over the Lease packet this morning. I’m assuming she received it however the fax I use is extremely unreliable so let me know if she didn’t. I will be in touch ASAP about the next one-looking to get that going real quick. Must say…pretty impressed with the process and how smooth this entire thing was."

Thanks,

Josh P

"I haven’t heard back from Tim on the pre-qualify, he did tell me that they were doing only the 80% deal now. Which from my perspective means no money out of pocket, and can still pull out equity from Citizens if I want to. Bryan said he was working on some Carpentersville stuff. Hopefully something breaks soon, I’m itching for another property!"

Jim M.

"Hi Joshua,

Sincerely,

Gary M.

"What I came to find was that Robert Anthony Real Estate had built a team of associates that cover every aspect of the process for me so that I wouldn’t have to learn by my own mistakes. This includes:

• Identifying the distressed (typically foreclosed) properties in the price range to make good rentals
• Purchasing them with their own cash and wholesaling them to their clients for 55 to 70 cents on the dollar of the after repair value
• Partnering clients with attorneys with years of experience focusing on this area of real estate to assist with establishing LLC’s to hold the properties in, and closing on them
• Bringing in contractors that deliver on everything promised within weeks after purchase for less than half of what the typical contractor would charge for repairs
• Identifying and having relationships with progressive banks that understand the rehab and rent process, and will offer the funding needed to complete the project
• A leasing agent who specializes in quickly getting the property rented for you and filling out all of the necessary paperwork to do so

Every aspect of the business was covered to put my mind at ease about finally moving forward with my plan. Within a week, I had purchased my first property for $104,500 including Series LLC costs with 10% down. The rehab of the property was approximately $9,000 and was complete in 3 weeks. When I went to cash out refinance the property, and received back everything that was put into the project, it appraised out at $153,000. Within two months I had built $39,000 in equity without ever picking up a hammer. My leasing agent had a renter in the home within a month of completion of the rehab, and I was ready to move on to the next one.

Since then, I have completed the same process on two additional properties, and will be evaluating another one shortly. Here are some details from those projects:

• Purchased a distressed property for $152,000 with 10% down. Put approximately $11,000 into rehabbing the property which took less than 4 weeks. Cash out refinanced the property to receive back what was invested in the project. The home appraised for $220,000. That’s right, $57,000 in equity in less than 3 months!

• Purchased a distressed property for $135,000 with 10% down. Put approximately $10,000 into rehabbing the property which again took less than 4 weeks. Went through the same cash out refinance process within 40 days to recoup my original investment in the project. The home appraised for $190,000. Another $45,000 in equity!

The rents I receive on these properties cover or exceed the PITI (principal, interest, taxes and insurance), and the homes should appreciate by an average of 5% a year.

To recap, in just over a year, I was able to build over $140,000 in equity without ever lifting a finger to rehab these properties. The key to this working is having access to the right properties, and a team of professionals to assist you with each step in the process along the way. Robert Anthony Real Estate has covered that for their investors. I was so impressed with what I experienced, that I moved my real estate license over to them, and am acting as an agent to assist others with duplicating what I have been able to accomplish.

Please keep in mind that while this is a wonderful way to build wealth, there is also work involved. You will need to follow up on things to complete the process on each home, you will get calls from tenants, there will be maintenance issues, and you may even experience a dead beat renter from time to time (they assist with that situation as well). But the upside far outweighs any issues that have arisen since I began this process.

If you are not getting the return you would hope for from your 401K, the stock market, or any savings plan that you have in place, and you are interested in learning more about leveraging real estate as an investment/retirement tool, please call me…"

Marty L.

"We can’t thank you enough for the services you and your staff have provided us. Instead of seeing that old 401k money flying out of our pockets we have 3 rented properties that we have pulled significant money out of, still have plenty of equity, are fully rented and we have positive cash flow. Unbelievable.
On top of that, you staff calls us to let us know of up coming opportunities, lets us know the status of rentals, etc.
Bruce called today about some potentials in a town I’ve never heard of, but he certainly made it sound inviting. He also told us about another Elgin opportunity. We’re looking forward to checking them out and hopefully moving forward on them this weekend.
We are assuming that your offer to lower the fee on our next property by $1,000 still stands. If you are "wholesaling" any of these, that would be good to know as well. Buying one more property would have us meeting our goal for the year, but given current market conditions, we shouldn’t let that stand in our way of doing as many deals as we can."

Thanks again,

Jim and Dawn

1. How difficult is it to obtain a home equity loan (HEL) or home equity line of credit (HELOC) today, in the midst of the country’s current financial crisis?

Great Question. While it has become far more difficult to get home equity loans and lines of credit, the process is still relatively simple. There are many banks and credit unions that lend their own funds out (not Fannie/Freddie type loans). These banks and credit unions need to lend to keep their doors open. Without loans, the banks can not make money and will therefore not be able to pay salaries or show shareholders profits. It’s imperative that banks lend in order to stay alive. Provided that the homes have accurate appraisals and strong borrowers, banks love to make loans to these folks. I’ve put my investors in touch with banks that provided 2nd mortgages consistently. Even in this market we are finding loans available based on equity. This year I took out 3 home equity loans that were based on 90% LTV’s on non-owner occupied properties. That’s amazing for this market, but we find them consistently. When one bank changes programs, we often find another that will step in.

2. What extra restrictions have lenders added? What is the extra or more stringent criteria they’ve imposed upon loan applicants?

Lenders have added seasoning issues and a whole slew of new requirements. The most stringent criteria I’ve seen is on the appraisal end of the business. I’ve heard of banks needing comps that are within 3-6 months old within 1 mile of the subject property. This is something we regularly provide our clients, but it is certainly overkill in my mind. Sometimes you may need to go past 1 mile to find 6 or 7 accurate comps, however we consistently find this data for our clients.

3. Is it even worth pursuing a HEL or HELOC today? Why/why not?

Yes, there are great programs out there and rates are dropping.  It’s a great time to borrow and take advantage of this market. Homes are available at 40 - 60 cents on the dollar, there is no better time to buy than when panic has flooded the market.

4. For which type of candidates and under what type of circumstance
(ie, seeking a home remodeling) would you recommend a borrower apply for one
of these loans?

For investors I would suggest getting a 2nd mortgage for construction or providing replenishment to your funds once construction is done. Investors with good credit and income can borrow from banks and get incredible deals in this market.

5. Under what conditions/scenarios should you avoid a HELOC? Under what conditions/scenarios should you avoid a traditional home equity loan?

I would rarely avoid a home equity loan as it doesn’t make much sense not to have one. If you have available capital, you could always get a HELOC (line) and simply keep the funds available for the times that you may need them. It’s a great way to provide for the future without actually paying interest on the funds.

6. How have home equity loans and HELOCs changed over the years-have these products evolved/improved/streamlined/become more complicated, etc.?

The products have unfortunately become more complicated. In the fast and free days, helocs were pretty easy to get approved, while now it’s a bit tougher, but still available. The process was much faster before, but now it often takes an investor a bit more time to establish a relationship with a bank. I establish relationships with banks on a consistent basis. If you don’t, you’ll never get them to trust you. I would also NEVER default. Once you default or miss a payment, you’ll never get money easily again. It will always be an issue.

7. Where is the best place to apply for a home equity loan or HELOC-a traditional bank/lender? A mortgage lender?

Banks and credit unions. Brokers are not my favorite place to get anything done. I like talking with the decision maker and letting them know that I am a solid credit and someone who takes borrowing seriously. Without those comments, it’s just a numbers game. The less likely that you need money, the more likely they’ll lend to you. Remember, decision makers are people too, if they know you and trust you, you’ll go much farther.

8. Any other thoughts, tips, suggestions on this topic?

Buy foreclosures with commercial finance, it’s much simpler.

Austin is my editor.

The majority of our tenants call us from an ad they saw in the paper.

The cost is equivalent to one month’s rent. You receive a list in MLS, info-line, and craigslist.com, scheduling of all showings, and screenings.

Yes, please check your city for licensing.

Specific things we look for include: minimum 1 year at current employer, no evictions or judgments related to rental property, income = rent * 2.5, and verification from previous landlord of on-time payments.

Currently 33, which includes partnerships, joint ventures, and Josh’s current rental portfolio. The number varies quite a bit throughout the year.

No, because everything can be handled through our management company.

From time to time we acquire properties in these areas however cash flow is slightly worse on higher priced homes. You may think rents are much higher in nicer areas, however that is not always the case.