Investing in Lee County Florida Real Estate
Real Estate is one of the most stable ways to build and protect wealth. Real estate investing is easy, you crunch some numbers and buy houses that financially make sense. The most difficult part of real estate investing is finding deals where the numbers make financial sense, especially since 2020 as home prices skyrocketed. There are many methods to finding good deals. Today, we’re going to focus on buying a house from the Lee County auction. We will discuss how to prepare and what to expect. Let’s dive in.
Bidding on foreclosures at the Lee County auction
But why would want to check each county manually?
Each county auctions foreclosed properties throughout the month; they post the upcoming foreclosures on the Lee County Auction Calendar. It’s best to check with the county you plan to bid at to see how they do things. Lee County and Collier County have different processes. Lee County uses online bidding (I prefer this method), and Collier County is only in person. Let’s focus on Lee County and how to be prepared.
But why would want to check each county manually? You can quickly find ALL of the counties’ auction properties in one easy to use search tool at PropertyOnion.com.
The first thing you will need to do is register with the county to bid. Next, you should attend some online auctions and see how it works, watch what the homes are selling for and if it’s worth your time. With the pandemic, foreclosures have been way down; they even had a moratorium, not allowing the start of any foreclosures for a while. They have now begun again. Because it takes a long time for them to work their way through the systems and make it to auction, we can anticipate a slow continuing uptick in county auction foreclosures.
Registering for the auction, reserve requirements, and final payments
How to register as a bidder with Lee County: Lee County register
Prior to bidding, you’ll need to deposit 5% of your anticipated bid with the Clerk of the court via cashier’s check or money wire.
Once you’ve created an account and deposited the 5% of the anticipated bid, you’re ready to go. Easy. Next comes the work part.
If you are a winning bidder, you “must pay the balance of the final bid plus all fees by 4:00 p.m. on the next business day following the day of sale. Fees include the Doc Stamps ($0.70 per each $100) and a Registry fee (3% of the first $500 and 1.5% of the balance) of the successful bid amount. Payment may be made by cash, cashier’s check, or wire transfer. Failure to pay the balance of the final bid plus all fees by 4:00 p.m. the following business day will result in forfeiture of the deposit and nullification of the sale.”
You will be issued the Certificate of Title “eleven days after the sale date provided there has been no Objection, Appeal, Suggestion of Bankruptcy, or any other action staying the proceedings.”
Preparing for an Auction, Research, and then do more Research!
These homes are auctioned As-Is or “Sight Unseen,” with no warranties or disclosures, we don’t even know if someone is living in the home…so preparation is an absolute must in being successful. Do not buy a home at an auction unprepared, you could get burned badly and lose a lot of money or buy a home that’s not in a first lien position and has no equity, we will discuss this more.
Start your research by calling the city and county. Ask if there are any open permits, assessments, or future assessments. I recommend starting here because it’s free and just takes some time. If you run into deal killers, you move to the next property, and no money is wasted. If there’s any open permits and you later go to sell, it can cause problems. It’s very important to know if there’s any open permits and how difficult it will be to close them. It’s not uncommon for a storm-chasing roofer to replace a roof and never close the permit; they are paid and long gone, chasing the next storm. Maybe, it’s a minor issue to get it closed. Maybe, it’s not; therefore, you’re researching. If you discover open permits or assessments, you want to know what’s going on so you can factor them into your budget if needed BEFORE bidding. After you’ve completed this step, you can move to the next step.
Drive by the homes you’re researching
Do everything you legally can to find out as much information about the property condition as possible, so you can put together a rehab budget.
Drive by the home. If you see a neighbor, you can ask them about the home; this is usually the best source to find out why the home became a foreclosure and its history. You’re not supposed to go on the property. You could get in trouble for trespassing, although some investors do… Do everything you legally can to find out as much information about the property condition as possible, so you can put together a rehab budget.
Skip Trace to find the previous owner
You can try to track down the previous owner. Many investors use a process called skip tracing, where you pay to get the former owner’s contact information; they might talk to you, or they might not. Some people are not happy about going through foreclosure and don’t want to talk to investors amidst their turmoil.
You might need to evict an owner or tenant
When you drive by, try to determine if someone is living in the home: is their car in the driveway; from the street, can you see someone’s personal belongings in the window? If you see a neighbor, they will probably know. Many investors knock on the neighbor’s door, and the neighbors are usually more than happy to explain what’s going on and to see a new owner coming in to take care of the home. When you bid on the home, it may come with the tenant still living there, and you’ll need to evict them or continue renting to them; this is something you will need to figure out. and you can read this tutorial on evictions after you win a foreclosure auction.
What if you can’t determine the interior condition or if the home is vacant?
When I don’t know if there’s someone living in the home I bid on at an auction, I assume there is and have a budget to evict the tenant or owner occupant. When I’m not able to get any information about the interior condition, I assume it’s a full rehab. I’m conservative in my approach because I would hate to buy a home and be way over budget due to having guessed it would be okay. You’ll need to find your risk tolerance; the less risk tolerance you have, the fewer homes you’ll buy, but every home you get will likely be a winner. Plenty of people buy more than I do; they have a higher level of risk tolerance and sometimes get burned, but they figured doing more volume works itself out, and I’m on the opposite side. I research a lot and bid only on homes I really want at my price point; I get a lot less properties, but they are all great buys.
You must know what’s going on with the title; this is an absolute must. You need to know lien positions and the amounts owed. You can buy second and third lien position and still make money, but you need to know what you’re doing. To keep this simple, let’s focus on first lien positions mortgages only. Make sure the bid you’re placing is for a first lien position. What if you skipped title search and bid on a home worth $300k and bid $20k and won, thinking you’ll make a lot of money only to find out you bought a third mortgage and the other two mortgages with priority over you are owed $350k, you’d lose all your bid money and own worthless piece of paper…it happens.
My brother attended an auction where a new investor did this; he thought he beat everyone and was the smartest guy in the room, only to find out what he bought was worthless. Bidding on homes or acquiring real estate costs some money, and you’ll need to invest a little money in title searches. The best pricing I’ve seen is through the PropertyOnion.com title search service.
So now that you’ve researched for open permits, assessments, and the property conditions, you’ve received title and know if there are title issues. You can run your numbers and bid. Do these steps enough times, and you will win some houses.
Imagine winning only four homes a year with solid equitable positions. Within a few years, you could create a lot of wealth. I’m not saying this is easy, but it’s a rock-solid way to accumulate wealth.