Hidden Benefits of Foreclosure Hunting
While I’m enjoying my vacation, I have a wonderful guest post for you today. If you would like to guest post here, please read the guidelines, and contact me.
Have you been living under a rock the past few years? No? Well then you must have heard that there was a bit of a real estate crash in the US. The area where we live in Florida was hit particularly hard. But we (the PoPs) were lucky. We weren’t leveraged, had jobs, and were young enough to afford some risk – so we went foreclosure hunting.
While we eventually bought a $50K duplex, the road we took to get there was not straight by any means. There were many metaphoric missed turns and surprise roundabouts that we got stuck in along the way. But, boy was it interesting.
Interesting? What Do We Mean Interesting?
In fact, of the more “interesting” stories we encountered along our journey went along with one of the first foreclosures that we started to get serious about. It was a single family home in an area that was predominantly rented by recently immigrated families. Built in the mid-1990’s, out of concrete block, with a two-car garage, the house itself was bigger and nicer than our own home. Even though we much prefer our own neighborhood and view, with an asking price of about $45K this property definitely had our interest piqued.
We estimated the rent to be around $800/month, and while we didn’t think the place was going to have a ton of cash flow, it seemed to be in pretty great shape from our cursory inspections, so we weren’t anticipating the expenses to get it rented to be much more than the time and cleaning supplies for a good deep clean.
So we put in a provisional offer and started our due diligence by combing through the neighborhood’s public records.
A Haircut And Story Time
It was during our public records extravaganza that Mr. PoP saw a name he recognized as one of the owners of a neighboring house. Turns out it was the barber Mr. PoP had been going to (we’ll call him B). From the property records, it became pretty clear that over the last twenty years or so, B had developed his own quite diversified real estate portfolio (much bigger than ours!) and Mr. PoP had no idea. Luckily Mr. PoP was in need of a trim so he went in to see B and get the low down on this ‘hood.
As B started cutting Mr. PoP’s hair, he shared some of his thoughts on that particular house, which he remembered vividly. B had purchased the house around 20 years ago for about $45K, and as recently as 2006 it had been appraised at $250K+. But here we were back at $45K in 2010. Nonetheless, B still thought he had a great investment during that time overall. In fact, he recalled one tenant in particular very fondly.
“You know,” he said. “I had a great tenant in there for a while – a drug dealer. He always paid cash, and was always on time – even early! And he place was immaculate. It really was a shame when the police arrested him.”
As B tells the rest of the story, he got a call from one of his cop buddies that the police and the DEA were going to go through the house and that if B wanted anything out of there as collateral for lost rent he should go in and get it ASAP. So B went in to the apartment – the drug dealer was in jail at this point – and took a couple of TVs and computers to cover the rent that he was owed on the remainder of the drug dealer’s contract. “Should have looked harder, though… The cops found $10K in the attic the next day.”
For a variety of reasons, potential drug dealing tenants included, we didn’t end up getting that property. But B’s experience did stick with me. We’ve had our eyes open in all the foreclosures we’ve been to since then – always on the lookout for hidden treasures – but have yet to come across anything nearing the $10K in B’s rental attic. So far, the best money we’ve found is a 1943 steel penny under an old dishwasher. Approximate value: $0.02.
Have you ever found anything of value in a foreclosure or other abandoned building? Would you have bought the property in that neighborhood?
Today’s guest post is written by Mrs. PoP who along with Mr. PoP, blogs about money, happiness, and kittens at www.plantingourpennies.com.
Kim’s Comments:I asked Mrs. PoP if she would do a post about her rental property experiences, and she didn’t disappoint. We actually found a shed full of garden equipment and tools on our rental property that were worth a few hundred dollars. It was like an early Christmas present!
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Wonderful article. It was a very good read and very recommendable. I really like how you tackle the importance of having a goal and a deadline. I would highly suggest this article for those investors who fails to get what they want when investing. Thank you for a very intellectual insight.
When we were looking for our first condo, we almost decided to go in on a unit that was facing foreclosure. It was a huge property, three bedrooms, with incredibly ugly wood panel walls. In the end, we decided not to, mainly because of the location and our lack of knowledge about rental prospects in the area.