Foreclosure- Let The Bidding Begin!

It has been two months since our last post, but we are launched and the following property is this past Friday’s auction that we attended. Although we did not win the bid, we had fun. The property ended up going for $62K.

Before attending the foreclosure auction, we sat down with our client to discuss his bidding cap. He told us to stop at $50K.

The bidding began at 9:30 Am. Starting bid was $31,428- what an odd number to start off with but this was the third and last foreclosure date for the property. So the amount represents essentially 25% of the original amount that was owed to the Bank.

There were a few players bidding. At 50K, there were only two of us bidding and he found himself caught up in the moment. Randall turned to look at him and with one nod of his head, Randall went to $51K. $52K was the next amount to beat, another nod indicated to keep going. $53K, nod, $54K, nod, $55K, nod $55.5K nod……. Finally at $61,500 our client realized he was “emotional biding” and he stopped nodding. The other bidder ended up with the property for $62K and we walked away satisfied that we had lost.

Although emotions were playing into this game, a big No-No, as long as you can afford it, this mistake won’t be so painful. In the end, our client realized what he was doing and was smart enough to walk away. The information below is what our client had for review. He knew that if he went as high as $70K he still would have hit his ROI. But he gave himself a cap prior to entering the bid, and when he found himself caught up in the emotional biding, he backed off.

LOT 54 A

BOSQUES DE SANTA ANA

STA. ANA, SAN JOSÉ, COSTA RICA

Lot 54ª is a 333 sq. meter corner lot with existing construction (45% complete) for a three unit, two floor condominium or apartment complex. It is located in a neighborhood that has other existing single family homes, duplexes, townhouses, and condominium/apartment units.

This is a true investment of time and money because to purchase such property, the whole permitting process will need to be initiated from start to finish. A competent company would need to be hired to follow through from architectural plans to the final permits to complete construction. There are no existing permits or architectural plans for the parcel. Purchasing this lot is, “as is” conditions.

Some of the other existing apartment comp

lexes in the neighborhood are selling for $145K and renting for $1K.

The estimated cost to finish the project is $125K which includes but is not limited to soft cost (architect, permits, engineer, perks…..) and construction.

Base price: $31,468

Land size: 333 M2

Construction size: 110 M2 per unit (3 units)

In third foreclosure.

Date: march 27, 2009

Time: 9:30 AM

Place: Juzgado Civil de Cartago.

Comments: Property is located in an upper middle class neighborhood where new and under constructions structures were observed. A very quiet and tranquil neighborhood with easy access to public roads and transportation. The neighborhood is comprised of a mixture of single family homes, townhouses, duplexes and condominium/apartment units.

This is an area of high ROI- either for a buy, fix and flip, or to be used as cash flow property.

Based on the foreclosure amount of $31,500 to $70,000 the price per sq meter is between $95 to $210.

Maximum recommended price should not exceed $70K.

Estimated ROI should be around $165K:

Purchase price: $70K

Construction cost: $125K

Total Investment: $195K (maximum)

Sale price on each unit: $120K*

Total sale of units: $360K*

*This sales price is below current market values for the area which will encourage a quick flip.

Estimated ROI: $165K (minimum)

Estimated time for ROI: 2 to 3 years.

84.62% ROI in 2 to 3 is not bad!!!!! Not bad at all.