The Science of Flipping - Episode 49 – How to find HUD deals | Real Estate Investing Podcast

Episode Date: October 8, 2014

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Welcome to the Science of Flipping Podcast. I'm your host, Justin Colby. What's up, guys? Welcome to the Science of Flipping Podcast. I am your host, Justin Colby. It's a beautiful day out. We finally have hit fall weather. I'm so thankful. I think it's low 90s today, which for some of you, you're laughing and I'm even laughing, but low 90s for us right now feels like winter. I mean, it is awesome. The windows are open. You're no longer using your air conditioning in your car. It just feels good. I'm in a great mood. If this is your first time to this podcast, welcome. Get over to the website, thescienceofflipping.com and download your free e-book. The e-book is the 15 most costly mistakes you can make in today's market.

The real estate investing market is always changing and this book was developed by myself, my business partners and other colleagues that we know exactly the mistakes that we made and so this free e-book is for you. Just get over to thescienceofflipping.com and download your free ebook. Now, again, if this is your first time, this podcast is all about creating a lifestyle by design, right? Too often, we feel like we started a business and all of a sudden you realize you are doing absolutely everything in your business and you have no free time for your friends, your family, to travel, to live the life that you really want to live and the life that you started this business

for. So this podcast is going to teach you all the systems that we use in our business so that we can be in Costa Rica or we can be in Mexico or I was just in Las Vegas teaching some students. I was in California. I'm always traveling, enjoying the lifestyle that I want to enjoy with friends and family. But at the same time, my business is still going. We are jumping into Colorado. We just got our first two deals done in Colorado. This podcast will help you learn what we do, how we do it, so that you can truly live this lifestyle. If you are interested in working with me personally on a coaching or mentoring or consulting level, please email me directly.

Info at thescienceofflipping.com. That's info at thescienceofflipping.com. That's info at thescienceofflipping.com. I personally want to talk to you. I will personally reach out to you because if you have interest in working with me and my team, I want to make sure it's a good fit, not only for you, but also for us. So again, go to the website, thescienceofflipping.com.

There is a coaching tab that you can click on or just email me at info at the science of flipping. Now what I want to go over today guys and what I want to just drop some knowledge on you is how to use or buy homes, HUD homes. HUDhomestore.com is the website. It's HUDhomestore.com and it's a very easy website, but this isn't necessarily just about how to use the website, but strategies and things that you're going to need to offer on those homes and how to do it effectively, right? So first and foremost, hudhomestore.com requires you to have a real estate agent involved in the transaction.

Now, you can do this all from home. You don't necessarily need to call a realtor and make an offer each and every day. However, you need to have a good realtor, family member, friend, or otherwise, who is on your team that is able to give you what's called an N, as in Nancy, A, I, D as in dog, number. They must have an NAID number. If they do not have that, that realtor will not work for this. They need to be a real estate broker, not just a real estate agent, and they need to have access to their NAID number. Not all realtors have that. So you do want to have a realtor that you trust or they trust you

because they're going to have to give you their NAID number. They're also going to have to give you their real estate license number. So the reason why you want to have them give it to you rather than them do it is so you can just do it yourself and they can make the commission, right? That way they're not bogged down by every single day putting in offers for you, so on and so forth. You actually can do it yourself and that way they can keep going about what they do and they'll actually make a commission. So that's point number one is you really need to have that realtor, friend, family, otherwise, someone who

trusts you that you trust that will give you that information for you to use. Now, again, the website itself is very, very simple. When you go to the hudhomestore.com, it'll ask you what state you are looking to buy, what county, and it goes a little bit more in depth, right? So how many bed baths are you looking for? What type of square footage? What year built? However, I truly just stick to my state and the county that I want to be buying in and then I can separate all the properties myself.

Sometimes there's a lot, so I want to separate it and get a little more granular and more specific to the type of properties I want to separate it and get a little more granular and more specific to the type of properties I want. But most often I want to see all the properties. I do not buy mobile homes and things of that nature. However, most properties I'm willing to put an offer in on. Even though I don't buy two ones myself, I know there are other investors that do. If I can

beat them to the punch and I can show them a deal that they would buy, I'm willing to make the offer and get that deal. I always just stick to the state and the county and I hit search. One of the things about the HUD Home Store that is interesting is for the first 20 days, and I always disclose that that number could have changed by the time you hear this, but the first 20 days, as an investor, you cannot bid or submit an offer on the property. HUD is only looking for owner-occupants only. So you will not have access to offer on homes that are within that first 20 days. Now from that 21st day on, now you have the ability to submit an offer or bid on a property through the HUD Home Store. You will want to click buyer type and you will want to put in investor because that's truly how

you're going to be handling the deal. So I would put in investor and that list is let's say going to go from 30 properties down to 15 properties because the other 15 are still within those 20 days. So make sure your investor type is known or the buyer type. I'm sorry, the buyer type, you need to make sure that it says investor. And then you're able to hit search and then it'll populate the homes that you are able to put an offer in on or bid on. Now it's very simple. Obviously you get your NAID number, your real estate license number, and you can put in the bid. The next page will simply say, bid on home. You click that button, you put in the information needed, and the next page will then open up and they will ask you, how are you paying

for the home? They will ask you, how much are you paying? You're going to put in your purchase price. They're going to say, how are you paying for it? Cash and financing is the type that you want to choose. You want to make sure that they ask you, how much money is HUD going to have to pay towards closing costs? You want to make sure you put zero because now you're making this more profitable for HUD. So they're going to ask you, how much do you want HUD to pay and you put zero. They're going to ask what type of buyer you are. You write in investor.

And then they're going to ask you if you want this offer to be held as a backup if it does not get accepted and you're going to say yes. And I'm just walking through the sheet for you guys. And so one of the tricks that I have learned is they give much larger preferential treatment to individuals. Okay. So what I would do if I were you, though we are always teaching you to buy in an LLC or an S-corp, I would actually put your personal name as the buyer. If you get the offer accepted, you can simply quick claim the buyer name into your LLC name. It is very simple.

Make sure you put your personal name, not your business name, as the buyer. They're going to ask for the buyer information. Obviously, very simple address, so on and so forth, and you're going to simply confirm your bid. One of the tips that is very cool is once they give you a confirmation for your bid, the last three digits or so are usually the amount of people that have offered on that property. So if it says 125, there's usually 125 people that have put in a bid or an offer on that property.

If it says 034, then there's 34, right? So usually it's the last three digits that say how many people are bidding. Now here's where I start to teach you a little bit of a strategy on how to get these deals accepted. A lot of investors will go about submitting an offer on HUD and waiting. You get a counter back from them the next day saying they only dropped it $2,000 relative to what their list price was.

Well, that number is not going to work for you. And so they're just waiting to say okay Well my offers in backup position, so I'm just gonna wait to see if I can get them to lower their price to my offer well What I do and what I teach is once they counter you if that number doesn't work for you Put in another bid that day. Put in another bid that day at the number that does work for you. Now, what I will tell you is most often, you can get the deal from HUD in between 65% to 75% of their list price. If you don't get the deal ever and it sells to someone else, just know that they're going to be overpaying relative to what you were willing to pay.

You can mostly get deals in between 65% of list price to 75%. Now, that being said, if the deal works for you, paying 80% of list price or more, that is just fine. There's nothing wrong with that because you might be looking at the deal in a certain way where you might want to be adding on square footage. Or maybe you're going to pop the top and build up. Or maybe you're going to subdivide the lots or something. So I'm not opposed to you going above 75% of list price. I'm just letting you know, HUD will at some point reduce their list price down to a percentage of their list price. So if you're making an offer each and every day on these deals, you will eventually get the deal. And or if someone's willing to pay more,

then obviously they're going to be willing to pay more and you just got to remain consistent. Now, the great thing about this website is they allow you to export the list of HUD deals onto an Excel spreadsheet. And what that does is now you can keep track love the deals you can keep track of how many times you have offered and you can keep track on how what number they counter you at okay so you know their counter number and you can keep track of these things and if the deal ends up selling to someone else you can keep track that it sold right so that's a very cool feature that is on this website is you can export that

list to an Excel spreadsheet. Now, HUD most often is immediately willing to accept offers in the 80 percentile of their list price. So in between 80 and 89%, if you're going to put an offer in to HUD Home Store, most often you can likely get that approved. You will win that bid. So why I try to urge you stay in that 65 to 75% is because HUD usually will just work off a percentage of their list price. If no one is willing to buy the home in the 80 percentile, then they'll maybe drop it down to 78% of list price. If no one is willing to buy the home in the 80 percentile, then they'll maybe drop it down to 78% of lift price. If no one's willing to do it at 78, they'll drop it down to 75 and so on and so on, right? So if you just remain consistent, either the home's going to sell to someone at a

higher price that you weren't willing to pay anyways, or you're going to win that home. You just need to remain consistent and put in an offer each and every day with that property and that Excel spreadsheet. So on all the properties that would work. And that's really how to use hudhomestore.com. Now there's all these thoughts of ways that you can put in offers and trick the system, one of the nicest things is you're just dealing with the computer. There's no feeling involved. They're just going off straight numbers. As long as you keep working off straight numbers, you will inevitably get a deal that will fit for you that you can either wholesale to another buyer or you can actually buy it, rehab, flip it, and it is an awesome situation. So that is what I got for you guys today. Thank you for listening to another awesome

episode of the Science of Flipping. Each and every week, I try to give you everything I have and all the real estate knowledge that I got. So again, if you're looking to work with me, if you're looking to get your game to the next level, go over to the Science of Flipping, click on the coaching tab and fill out the coaching form or simply send me personally an email at info at thescienceofflipping.com and I will make sure I reach back out to you personally. That is all we got for today, guys. I will see you on the next episode. Peace.