How he bought a $2.5million house for $645K at auction?!

We went to a real estate auction where a guy bought a Property that was $2 million in value, but he bought it for like $600,000. Turns out this isn't unique. It's called buying real estate at auction. And this episode's all about how to do it, how we can do it, and what does it mean to buy on the courthouse steps. Now, I don't know about all of you, but when it comes to real estate right now, I don't think anybody's getting a deal. Right. Real estate prices are at all time highs. Who else could use a little bit of help? I feel like we're going to like one of those supreme drops where everybody's running around throwing money at sneake. Am I the only one wondering, weren't we just in the middle of a pandemic? How is everybody and their brother buying houses like they're going out of style? I have looked at buying another property in Park City, Austin, Santa Barbara, Wilmington, Sedona. Nine out of 10 times, we can't get to the places fast enough to buy them. Is that a humble flex? I don't know. But what I meant to say is real estate's super expensive and we're going to fix that. Today we're here at an auction learning how to buy houses that have been foreclosed on for pennies on the dollar. There's like a couple hundred of our best new buds back there looking to do thing with a list, something like this. And we got a guy who's bought thousands of houses who's telling us how to do it. His name's Aaron. His last name is unpronounceable. Look at this thing. But we happen to be friends, so I know it's a much.

Yep, you're ready.

Tell me about your favorite house that you've ever bought.

So I love the experience of auction. We're going to get to see that today. It's like the hurry up and wait where we're waiting and all of a sudden everything is going on. But I've had my favorite house is probably maybe like the 15th or 16th that I ever bought. I bought it at auction and I get there and I go drill the lock and I open the door and it's absolutely perfect. And while I'm there, somebody comes and knocks on the door and says, we were supposed to be buying this in a short sale. Can we buy it from you? So I bought it for 250,000. They at that moment said we were going to buy it for 340. They wrote a contract with me and 10 days later I sold it to them. As soon as that deed got there. They're not always that awesome. I've had plenty that we lose money on or you open that door and it's gutted or burnt out or fire crazy houses. But that was definitely my favorite.

Oh my gosh. Well, I hope we can buy one a day that we can buy for 250k and sell it 10 days later for 340,000.

Yeah, that's why we shoot, we show up.

Now we know the reasons why real estate is really expensive, right? Inflation, interest rates at all time lows, people moving from tenants to finally being able to purchase because they don't have to work in an office in the middle of New York City anymore. But what we don't realize, I think is how to buy them at reasonable prices. A prediction. I actually think what we're talking about today is going to be one of the most important segments we're covering at contrarian thinking. The reason why is I think going forward and you're already starting to see it, real estate foreclosures, which is the opportunity that gives us to buy at this price, are going to go up at the same time that most of us here are pumping money into assets like real estate alternatives. Bitcoin Main street was shut down and now we know that recessionary fears are looming. We're going to have fewer people like us that are available to continue to pay the mortgage. Mortgage continuously post government payouts being completely wiped and with gas prices at all time highs now, it's an absolute tragedy. But this graph shows you what my gut tells me. It's called shadow inventory, which means that foreclosures are in waiting before they go listed to auction. It's called moratorium. And those numbers are creeping and creeping up. Interestingly enough, those numbers are not big yet. Usually in Texas there are 5000 houses sold at auction each month. 2000 sell. Right now Texas has more like 1500, 1700 and only 50. 100, maybe even 150 will sell. So already over the year, more than 20,000 vacant or abandoned homes are just sitting. So what follows is a way to play this market. What he said stuck with me. He said, fall in love with the problem anytime it's hard, there's less competition anytime. Less competition, you'll get a better deal anytime there are problems. As long as you have solutions to it, you can make a ton of money and have a lot of fun. And Aaron is actually the man to talk to about this. Because he is the opposite of a lazy guy. He owns hundreds of properties, acquired and grew the biggest foreclosure list out there. It's called Roddy's. This is it runs a few media businesses, all focused on real estate. And when I was trying to tell him about, you know, these properties that I wanted to buy, he said, don't buy real estate at retail. Cody. The best way to get a deal is to go where no one is. Most people are doing what? We got Zillow porn happening. You know, everybody's online, getting obsessed, looking at Redfin. But most people never go to foreclosure auctions. I surely hadn't before we did this. Now, what exactly are these? I think we've all heard of foreclosures. You see them on MLS sometimes showing that a bank foreclosed on the property, they took the property in. The thing is, REOs, which are foreclosed properties listed on MLS are pretty competitive, actually. Why? MLS is easy. It has a connectivity to Zillow. It has a connectivity to Redfin. You see it online, get title insurance, go and make an offer. So while you're doing that, 100 other people are doing that. What you might not know is that prior to them listing on mls, there's an auction that's private. It's called buying upstream or how to buy on the courthouse steps. And it's a little hairier, but we contrarians know to go where the masses ain't. So what does it feel like to go to an auction? Well, I can tell you it goes down a little bit like this.

I'm a 25 to get 30 now 5. Another $40 on the making of 40 now 5. There's two different auctions going on here. There's the sheriff auction. It's really nice and organized. Like, they start at 10, they'll do the announcement. People have paddles, and they're hoping to actually sell the property. So they're going to make sure you have time to see the notice the difference. What we see over there with the foreclosure, the mortgage foreclosure auctions is those aren't guys with badges doing the sale. They're trust people call trustees. Sometimes they're attorneys. Sometimes there's people that were hired and they come in and they've got their piece of paper and they don't get paid more if it sells or not. It's actually harder for them if sell. If nobody buys it, they get to walk back to their car and do the paperwork later. If somebody buys it, they have to fill out the receipt. They have to sign over the cashier's checks. And so some of them actually try to almost sneak in. You have to be ready, have your eye open. And then when you see somebody that might be a trustee, you've got to run over and be ready to listen.

So I don't know anything about auctions. I would be super scared to come here with a cashier's check and, like, give it to somebody, and then I take all this paperwork. That would totally freak me out. But you have this thing called Roddies list where you can actually sort of see what's coming up. There's some data on there so you can make smart decisions.

What exact.

What exactly is this?

Yeah, so if you. If you went and got a picture of that notice up there, that notice doesn't say much.

Right.

So the notice on the wall that's posted in there, it says that Cody Sanchez, you know, didn't pay her loan somewhere, but there's no address on it. It says a legal description. And so what this list does is we have researchers that go all over the state. They go pull those lists off the wall at the courthouse, and they take that and make it actionable data. So if you were looking at the list, you could see somebody had a $250,000 loan, but you wouldn't know if it was a piece of land or a mobile home. What this list does is we take that and you can actually say, oh, this one's a house. This one's commercial. This one has good title, this one has bad title. It's like some people want to buy a house in a certain neighborhood or a certain zip code, or they only want to buy houses built in the last 10 years. What Roddy's list really does is make it to where people can filter and search like that.

We're gonna get started in two minutes.

Five minutes later.

231. $231,000 to number one. Two being 232. 232.

233.

233 to number one. Number two is bidding 300. Do I have any other bids?

303.

Number 11 is bidding $303,000.

True or false. This means that all of these people have $300,000 cashier checks on them at least, right?

Yeah, they all have cash with them. Millions of dollars in cashier's checks.

Right now, number one, I think we should rob everything.

New plan. Approximately 10 hours later, number 11 is 509,000 do. So right now, his investor's on the phone with him. So he's trying to ask, like, do I keep going or do I not? A lot of the bidders here are bidding for other people. So he's on his phone taking the bids and then he's bidding.

Basically.

Number 11 bids. Number two is bid $625,000 on 1043. Going once, going twice. Sold. Number two for $655,000.

And he'll say he cost him 200 gr. So he doesn't show up today. He saves $200,000.

The other guy was out, Right.

Right. So the. So one last person decides to go to a different auction instead. Or he calls in sick today. Like, that's big money. Gets made based. And maybe there was somebody else that would have paid. I'm going to go take a picture of this really quick.

That action seemed to take forever. They were going up by like $100 and then they were going up by $1,000. What's the strategy to make sure that you're bidding correctly?

Strategy like before, if you're going to learn how to buy at auction is you need to know what your max is bid is before because, like, what you saw out there, when you get out there, it could get a little bit exciting. Right. Only $1,000 more. Only 1,000. Like, you don't want to lose by a thousand ever, but people keep going up a thousand. And like, if I was willing to pay 610, maybe I'm willing to pay 611, or maybe I wanted, but that can go on for hundreds of thousands of dollars. So as a strategy, you want to make sure you know your bid ahead of time so you don't accidentally pay $100,000 more than you could have. Now, something interesting was three bidders there. Opening bid was like $237,000. If the other two bidders don't show up, somebody buys that for 237 a day. It ended up selling for six hundred and fifty something. Right. We'll figure out what the number was. But maybe if only two of the three show up, it sells for 450 because one of the guys drops out at like 450 or 500,000. And so you just never know.

Yeah, I mean, well, today, right, there were three guys, like you said, two of them were going at it for a while with the other guy being silent until they got to like, I don't know, 450 or something like that. Then the second guy dropped out entirely. So if that third guy hadn't shown up, then the original guy would have gotten the property for 450 instead of, you know, 600,000 almost or whatever.

Just the difference in that in minutes. Right. So that's $200,000 difference in minutes. Or at one point the guy tells him on the phone like you're done. So he hangs up and he says he's done at 6, 10. And then he says one more. So he mentally says one more. So he goes like 611. Then the other guy says 615 or 620. So at any moment you could cost someone 1,000, 5,000, 10,000, 20,000 really quick. So the other guy could have been done at 600. Right. But every time he bid, the other guy was paying 5. There's some strategy at that at auction too. When guys come to do this a lot, if they think someone's going to keep going, they will try to bid them up. So they spend all their checks. So why did one guy stop at 450? Maybe he only had $450,000 in cashier's checks today. Maybe he was only ready for that. You have to have the cash. So if you, maybe if you buy a house earlier now, maybe you don't have enough for this one.

So I'm a first time buyer. I want to buy a home at auction. You've sold me. What are the three things I need to know up front?

So first you got to drive by the house, go make sure it's still there. Make sure it's not burnt down. And you can tell a lot by looking at it. Like the, like if it's empty, you can peek in windows and stuff. But even if it's occupied, you can see how nice it is based on the kind of cars they drive. Is the lawn mowed or not? Like, does the roof look good? Is the siding look good? So even standing in the road, looking right at the house. So you got to drive by every house before you bid on. That's also going to help you figure out the neighborhood that you're in. And then second, you need to look at it online. So like look at a Google Maps view. What is the house back up to? Does it actually have a pool in the backyard or not? Is there a train station behind? Is there a cemetery behind it? Are there things that make it a little bit less pleasant or a major highway? Or does it look good so you want to look at it on Google Maps also? Then you want to learn how to figure out what the price is worth. So like comp pricing, we do this whole course with you that Tells people essentially how to figure out how much a house is worth. But the concept is, if you have two houses next to each other, they're both 2,000 square feet. If this one sells for 200,000, that means the other one's going to sell for 200,000. So comping is really trying to figure out, like, well, this house is kind of like that sold for 190, and this house is a little bigger and sold for 210. So I'm guessing it's all that comping is a guess. I'm guessing this is going to sell for 200,000. So you got to look at it. That's gonna help you figure out how much am I gonna spend to fix it up. You gotta look at it on Google Maps, make sure there's not anything wrong or makes it better or nicer. Then you gotta come up with your value. And then once you come up with your value, you have to decide, this is my max bid before you go to auction. You want to make sure, you know, when this one comes up, I'm willing to pay this much for it and not a dollar more.

We should try to find that house and see if the guy bought too much for it. Yeah.

So that notice said as it's West Darlene Drive. Oh, my goodness. So that's not just in Leander, but you're right by Lake Travis. So different things that could. So somebody says, like, five acres in Meander. There's probably so many things that could go into. Is that thing a deal or not? So you could. So it's this property that. It goes all the way down to here. So you could essentially have a boat dock with that property. And Lake Travis boat docks alone right now are selling for, like, $200,000 just for the dock.

True. So we should have bought it.

People are leasing it from somebody else. At the beginning, we're thinking, why is he paying so much money for that? And also, like, why could there be such an upside? Think he got a screaming deal.

Should we have bought it today?

Yeah, we should have bought that thing today. If we would have been better prepped. If we would have had that on the other list, we would have bought that thing.

Yeah, because it wasn't on Roddy's list.

It was not on the. Right. It was over in the sheriff's sale and the. So it was actually an even more unique sale than we usually see. So it was a judgment sale. So most of the time, when the sheriff is selling something, the other people can buy it back over the next Six months in this case, in almost this case alone, when there's judgments of the sheriff sale, just like a regular mortgage foreclosure sale, the guy that bought it owns it today. So he owns that property today. He can go change the lock on the gate. He can take ownership. You know, he can make sure it's nice and secure. If somebody's living there, he can go post a notice on the door and say, I'm now the new landlord here. So that investor, I won't be surprised if, you know, he makes double his money in that $650,000 investment. He makes $650,000 even if he sells it. Just as a lot, if he wants to build it out, put a house on it and sell it, make over a million dollars in less than a year.

You live a pretty sweet life. You know, we got a golf simulator in here. You're talking about going to Croatia. You got all these cool activities, but you buy thousands of houses. Like, how long does that take? How many hours a week? Do you work on this stuff?

Yeah, it's funny. One of the reasons I love Texas so much more than, like, California, when I used to do it in California, it's a California auction. Was every day. And you guys saw today that if you skip an auction, you might miss the deal of the century. And if you're. And if you're there, somebody else might. Might get it. But Texas, that's one day a month. So the cool thing is, even when I started doing business out here, I was in California. I'd fly out on Saturday and I'd drive houses all day. I would drive houses again on Monday, I would do all the prep work. On Tuesday, I would go to auction and I would buy, like, three houses, and then I would go put locks on them, and I would fly back. Now contractors would do the rest and sell it. And so I'd essentially work three or four days really hard, and I wouldn't have to do anything until the next month. And you flip three houses, you make 10, 20, $30,000. Or with partnerships, where you keep them as rentals, but there. But you make good money during that four days. And I knew that if I dedicated that four days, I'd always get it. And now as it scales more, so I'm not flying out here anymore. I'm not driving the houses myself anymore. I'm not bidding in person as often as I was. And so as you get to scale my Homerock company, where we have all of our rentals inside that, I respond to emails Once a day and then once a week we have a two hour meeting with that team and they run that business and it flies. And so when it comes to buying foreclosures for myself, it's similar. It's busy around auction time. But now any house that gets bought today, now we're mostly just waiting for it to sell or waiting for the escrow. I've got three houses that are flip selling right now and I do nothing for the next couple weeks.

That's so rad. Yeah, I mean, so we today went to an auction. We saw a guy buy a house for $650,000. We looked it up afterwards and the guy bought a house that's actually worth about $2 million.

Yep.

So theoretically that guy probably did that same amount of work, let's call it four days of work, prepping, driving around, making sure that all the houses were going to be available, sighted in on that one. And then we'll spend, I don't know, 30 days, like making sure that he gets all the titles and paperwork and everything in his hands and then could theoretically flip it or could build a house and maybe make more than that.

Yeah. And really in that first theoretical flip, right. Sells it for two million dollars after commissions and everything, let's say a one million dollar profit and he could sell it today. So it could be that four days of work that he did and now no more work making a million dollars. Like they're not alike.

That.

But that's the dream, right? That's the process. And, and it's possible when those work out, even if, let's say the last four months, he does the four days. The four days, the four days, the four days. And he's skunked. We do the math on that. So he has worked, let's say 120 hours, he makes a million dollars. So the, I don't know is that $10,000 an hour that he was getting paid to go do this business. And the funny thing is the grungy business as you're doing it. So real estate is a great way to be able to have businesses and then have times when you get a break. Because there's a lot of waiting time too. Like after you buy, you're waiting for it to get an escrow. Once it's in escrow, you're waiting three or four weeks for it to actually sell. During that time you don't have to do anything for it except for wait.

I love it. What I would recommend is reading a book like this one from Aaron. He gives you a step by step guide on how to buy real estate at action. Now, how to win on this day Couple things Know your goal. Know your bid in advance AKA don't get excited. Excited Bid happy. Arrive early and prepared. Listen, this seems obvious. Don't bid on unknown or discarded properties unless you have a very compelling reason. Bring a voice of reason AKA another human and it's okay to go home empty handed. It's also okay to take a calculated risk. Your goal is to price risks into the valuation of the property so you can come up with an amount you're willing to pay. All right, there's a couple resources I want for you. You. You can see this here. This is a simple bid sheet that I want you to take a look at. It'll tell you how to figure out how much you should pay. There's one other thing I want you to remember. Never fall in love with something that doesn't love you back. Don't fall in love with a house. A deal. There's always another deal. There's always another house. You have to keep fishing. If you also want the five risks of Buying Foreclosure at auction, hit below. We got the those for you. The truth is, it can get a little hairy at the auction steps. But that hairy is where your return is. All right, if you liked this, let us know below. If you have more questions, let us know. We'll do another video for you. And as always, subscribe.