Opportunity in Adversity
Ask any real estate investor and they’ll tell you: the recession was a crazy time for the market. It was an uphill battle for everybody in the real estate game, and one of my latest podcast guests, Aaron Amuchastegui, knows that better than anybody.
Aaron is one of the principals at Homerock LLC and the President of AMA Construct Inc., a real estate consulting company focused on distressed assets. He learned the game by grinding during the recession, making offers on REOs, foreclosures, and a variety of other types of properties. As his offers got consistently rejected, Aaron didn’t give up. His luck turned at a sketchy auction where the auctioneer propped his laptop up on a trash can lid. He and his team bought a property, sold it, and made some money off it. They were off to the races.
Aaron’s story speaks to how timeframes affect the real estate market. As recessions and market corrections come and go, the ability to buy and sell houses can fluctuate pretty wildly. The key to Aaron’s success has been using his resources, like the Internet, to be consistently and persistently looking for the deals he wants. Aaron looks across a variety of counties and states, bidding on properties where foreclosure happened very quickly and searching for auctions that a lot of people might not know about. By staying on top of things, Aaron has been able to acquire properties in a number of states.
From his numerous experiences buying and selling at auctions, Aaron has devised a step-by-step process to maximize chances of success and narrow his focus. Your first step is to locate your lists. FLS Online and Realtytrac are good places to start. Search for foreclosure auctions in your county or state and you’ll be on the right track. Next, narrow down your mindset. Once you’ve established what kinds of properties you’re looking for, you can cut down your search results from 40 or so to 10 or 15.
After finding houses that fit your mindset, it’s time to drive by them. From doing this, you can further narrow the list down to the ones you really want to target. Occupied properties come with all sorts of hassles and sad stories; avoid these and stick with vacant homes if you can. Now that your houses are selected, conduct your CMAs, build your pro formas, and determine how much each house is going to cost and how much you’re looking to make. Finally, when all that’s done, it’s time to attend the auctions for the properties you want and start fishing for them.
When you go to bid, have an idea of the most you’re willing to pay for that property. Be sure to start your bidding significantly lower than that, but don’t lowball the auctioneer too hard. Increase your offers in as small of increments as you can manage ($100 to $1,000 is good) until you can coax the auctioneer into a comfortable price. Do whatever you can to avoid going over your maximum price, and try to get as significantly under that as possible. You may go to ten auctions and pay your full price for eight of them, but if you’re under on the other two, you’re ahead of the game. Aaron is a student of the auction process, and these strategies have worked very well for him. Godspeed as you make them work for you too!