How You Can Make Bank At An Auction Usin...

auction Hey there investors, I have a question for ya…

When you’re learning something, does it help you to have a real-life example set before you? Well, I know I do.

Hey friends, it’s Cody Sperber here and I want to share a real-life case study so that you, as the Real Estate Mogul that you are (or want to become), can immediately put it into practice in your business.

In this 2-part lesson, we’re heading down to the courthouse to hang out at the auction. We’ll first touch on some awesome tips you should know about auctions. Then I’m going to walk through a case study on a property that I actually bought at auction. (And by the way, I made great money on this deal, you’ll see.)

So, you’re going to be a little fly-on-the-wall as I take you step-by-step through this process. Let’s get buzzin… (Get it? Fly on the wall? Anyway…)

Let’s Go to the Auction

I purchased a property on West Willow Avenue from the trustee sale at a foreclosure auction. The price at auction was $159,200. The most recent sale of this property went for $370k. I got a great deal on this sale because the market was in decline at the time.

Now let’s pause here for just a second because you may be wondering just exactly what is a trustee sale?

Great question…

Trustee Sale or Sheriff Sale

Some states are non-judicial states and some are judicial states.

If your state is non-judicial, a foreclosure begins with the recording of a “notice of default” and ends with a “trustee sale.” The trustee sale is held like a public auction. I live in a non-judicial state, so I’m accustomed to trustee auctions.

In a judicial foreclosure state, they hold what is called a sheriff’s sale.

So, you need to know how it works in your state.

And, there are also online auctions; we’re not talking about online auctions. There are also auctions that travel around nationally; but we’re not talking about those either. For this particular case study, I’m talking about the local auctions where you attend in person.

Putting Together Your Power Team

One of the great advantages of attending a local auction is the ability to network. You can meet investors who are buying and selling properties. You can also meet hard money lenders. In this one place, you can actually gather together the majority of your power team in just a couple of hours. (Hooray for you! No, seriously, it’s awesome!)

outbid And I’m not only talking to newbies here, but also more seasoned investors. The point is that you should always be refreshing and building your database, on all sides, at all times.

Let’s say you’re a wholesaler – which probably means you’re not flush with cash or credit – but you’d like to start building up your inventory so you can sell to other people. In that case, you want to talk to those who are bidding and winning. Ask to get on their lists. Have them connect with you so you can wholesale their properties.

If, on the other hand, you want investors to buy properties from you, go along the outside. Talk to all the guys who are looking for properties to buy who may not have cash; you can match them up with the hard money lenders who are hanging out at the auction.

As you can see, you can build your team quickly if you do it the right way.

The Anatomy of a Deal

Now that you understand what’s going on at the auction, I want to take you to the Willow Avenue deal. I purchased this property at the sale for $159,200. At the time of our purchase the fair-market value was $225K to $250K.

The reason I knew it was such a great deal is because a similar property with the same number of square feet (2,700), same number of bedrooms and baths, and with a pool just like this one, had sold for 229K. And the big plus in our advantage was that the Willow Ave. property was even nicer.

Whoever owned the Willow Ave. house had been right in the middle of a remodel. It had a brand-new pool, brand-new hot tub and new tile flooring sitting in boxes ready to be installed. (I know, right!) We estimated the repair costs to be at about $20K. My money partner was willing to put supply the 30% down. I then leveraged his money with hard money.

Now why in the world would I choose to use hard money with 18% interest, which added on an extra $1,000?

Here’s why...

Cash Availability

When you have your hands on a deal as sweet as this one, it’s not the time to worry about the cost of the capital. What’s important is the availability of the capital. (More on that later…)

Different states also have different pay requirements. Where I live, I have to have $10k just to be able to bid; after that, I have to pay the balance in full within 24 hours.

Some states require immediate payment. If you’re the winning bidder, they’ll be asking you for the check right then and there.

I hope you’re getting the picture here – it’s crucial that you are completely familiar with the auction process in your state. Do your research to find out how it works. Be equipped with all the needed information before you go.

Walking Out the Willow Ave. Deal

Here’s how it shakes out...

I plan to use my financial partner’s money for my 30% down and turn to my hard money lender to finance the other 70%.

Did you notice? I have put not one penny into this deal.

Once I have the deal in hand, my next step is to get insurance. I want this property to be insured and secure – both! I paid $67 for the insurance to cover the property for the amount of time I would be holding it.

The bill for getting the property cleaned up and secured was $470. Note: you want to do this the very day you buy it. Don’t wait.

Sooo… I Have the Property – Now What?

Well, I’ve given you enough to think about and to consider at this point (hint, hint: go do some homework about how auctions work in your state).

In Part 2 of this two-part lesson, I’m going to go into detail about exit strategies. You’ll be able to see the options that were available to me and which one I chose and why. I’ll break down the deal for you even more and also show you the importance of the availability of capital.

Don’t miss it.