This past week legendary UCLA college basketball coach John Wooden passed away at age 99. I’m a huge sports fan although admittedly I didn’t know much about him. I just finished reading an article in the New York Times, ‘Wooden’s Legend Extends Beyond Titles’. Several of the players he coached, including Andy Hill, praised Coach Wooden for the lessons he taught on and off the court. At practice Coach Wooden would often say “be quick, but don’t hurry.” Mr. Hill was so inspired by this later in life that he wrote a book with Coach Wooden called Be Quick, But Don’t Hurry.
What does this have to do with real estate? Well, if you want to buy houses at the courthouse steps, or buy houses from someone who buys them at the courthouse steps, you must be quick. But, if you hurry you’ll get crushed.
I’m frequently approached by Realtors and would-be investors that tell me they want to buy houses at the auction, either for their clients or for themselves. After all, it’s sexy isn’t it? Who wouldn’t want to buy a house for 30% below market value, fix it up, sell it for a mega profit, brag about it to their friends and then fly off to Hawaii to celebrate? That’s the fantasy. The reality is that most investors who have the resources (cash) to buy a house at the auction never do. Why? Because they can’t make a quick decision…the thought of purchasing a home without seeing it or performing an inspection paralyzes them.
Last week I called a Realtor who has a client interested in purchasing wholesale properties from our company. We had a home come up that fit their description located in Buckeye, Arizona. I gave them the details and told them they had 24 hours to make a decision. The next day they backed out because they were worried that because there was no power at the home they couldn’t inspect the A/C unit. Huh? There was plenty of spread in this deal (our price was 76K and it comps for 110K) to compensate for a faulty A/C unit, plus a whole lot of other potential problems that could come up. Let’s not forget why these houses sell for so much less at the auction – you don’t know what you’re going to get.
Since last summer my company has purchased and sold 25 properties at the courthouse steps. On average we net $8,500 in profit, as long as we buy at 74% of market value (or less), spend $9,000 on repairs (or less) and sell in 65 days (or less.) With this data I can be quick without hurrying. So if you plan to buy at the courthouse steps know the numbers and have a plan that empowers you to make quick, educated decisions.
It reminds me of the Clint Eastwood movie, ‘The Outlaw Josey Wales’. When approached by four armed cavalrymen in the street he asked them, “are you gonna’ pull those pistols or whistle Dixie?” Josey wasn’t afraid to pull the trigger quickly because he had a plan mapped out in advance.