Kuno's Foreclosure Experience

NOTE: All this information is from years ago after the mortgage meltdown in 2008. I want you to see how much the market has changed to now. There are little to no foreclosures. This has put pressure on investors because they are placing offers at list price or higher. Sellers market. At some point buyers for the investor flips will put on the brakes because the market has been getting a little out of control, prices getting to high. Add inflation, job growth, wage stagnation or loss, Government Shutdowns.

Here is a couple things that Dave has done personally with foreclosures.
He has helped buyers purchase foreclosures since 1995.
Dave is a full-time Realtor so whether the foreclosure you are looking for is a single family home, condo, town home, apartment building, large apartment complexes or commercial properties - consider your deal done!

Detached Single Family Homes
In 1995 Dave Kuno received his Real Estate Sales License and in that same year while helping buyers and sellers he formed his residential construction and property management companies. The construction company purchased dozens of foreclosures; detached single family homes and apartment buildings. The homes where completely gutted out to the studs. Each home was up-dated to code with new electrical, plumbing-copper supply lines and plastic for waste. Complete roof tear off and replace any or all decking as needed.
New fascia, soffits and seamless gutters. New 1/2" OSB (if needed) to exterior walls, 4" Dutch-lap vinyl siding, R-13 & cellulose insulation and double hung-double pane windows. New mechanicals - 90% efficient furnace and hot water heater plus new central air system - line set, A-coil and condensing unit.
New kitchen and baths, flooring, fixtures and drywall. The homes were all new again! Dave personally sold each home!
The construction company earned 20% to 50% net return on each home and each home had a 30 to 90 day turn-around. The reason Dave purchased new 90% efficient mechanicals was to create a mechanical room that would include the 100 amp electrical panel, water meter, furnace, hot water heater, washer and dryer all in one area. With the old 80% and less efficient technology the furnace and hot water heater were in the middle of the basement or somewhere taking up valuable floor space because gas fumes where vented into a chimney. By using 90% efficient mechanicals you could place your furnace and hot water heater anywhere in the basement, just run your vent pipers (PVC-plastic) out the side of the building, no chimneys. The extra $500 to $1500 up-grading to 90% efficient mechanicals was well worth the extra cost.
The basement had function now with so many possibilities with different floor plans and layouts. The homes sold faster and made an extra $5000 to $10,000 net profit plus the homes used less energy which had a less carbon foot print.
It was a win-win for everyone including the environment.
The construction company always used average to one step above average products, no cheap stuff. Always purchased building materials that were being used for above minimum code requirements. This was another reason the homes sold faster! When you go cheap it only hurts you in the long run.
Each week that the home is not sold you loose money plus potential litigation and returning service calls during the two-year home warranty.
The construction company's philosophy was;
"build a home that you would put yourself or loved ones into"
This was why the construction company always made a good net profit.
97% of the homes had a contract on them before completion. We would than take care of the contingencies (type of carpet, cabinets, paint, fixtures and so on) and with in-30 days we had the deal finalized.
We gave consumers different options on carpet, appliances, cabinets, vanity's and paint colors. So you see you can still make money while providing a solid and safe product to the consumer.
In 2005 the market was getting way out of control with the mortgage qualifying guidelines so Dave shut down construction operations at the end of December knowing the bubble was going to burst. It was February/March of 2007 when the first signs of the market heading downward when New Century and Ameriquest filed for bankruptcy. All they did was sub-prime mortgages!
One thing that Dave was proud of he never sold a home unless the buyers were getting a 15 year or 30 year fixed mortgage.
Dave still insists to his clients today to either get a 15 year or 30 year fixed mortgage.
It's the safest way to secure debt on your home.

Apartment Buildings
Once the construction company purchased a 4-Unit foreclosure sometimes there was tenants still living in them but most of the time buildings were vacant because there was no electricity for common areas and no one to handle service calls. If there was tenants living in the building we wanted to keep two apartments rented while the other two vacant apartments where cosmetically updated. The reasoning for this was if two apartments were occupied this would cover our expenses for the month; mortgage, garbage pick-up, water, gas & electric. If one apartment was occupied or the building was vacant we had no choice but to take a loss (lose term) for that month but it also depends what you paid for the building also, its playing with numbers!
Our main goal was if we ever purchased a foreclosure or other distressed investment property we always updated as many units in that month as we can so we can have them rented out by the next month. We never wanted a negative cash flow. If the worst was to break even for that month we did good.
We would give two families 30 days to move out but if their apartment was in good condition we would offer that family "first right of refusal" when an updated apartment became available. Every tenant that we offered an updated apartment to would accept it with a new 12 month lease including a $150 rent increase. They knew it was still a good deal.
If a building was vacant the construction company had three weeks to get the four apartments completed. Once each 4-Unit building was cosmetically updated then they were sold to the property management company to be kept as investments.
All the foreclosed and distressed buildings were purchased below market value with rents $150 below the rental average for that market. The rents went from $400 to $550 a month on each apartment after cosmetic improvements were completed which increased cash flow by $600 a month (each building), which paid for the improvements. Each apartment unit needed $4000 in up-grades. If the company took out a $16,000 loan on each building even at 10% interest for 3 years the payments would be $516.27 a month, we would have still been a head of the game plus each building went up in value by $60,000.
Dave never went above 36 months for cosmetic up-date costs to be absorbed but he did adjust the months lower depending on how much he paid for the building, improvement costs, monthly expenses and how much can you increase the rents to stay at average rental rates for that market.
For example; If we could have absorbed the costs in 12 months that would mean the rents would have to go to $1406.65 a month ($16,000 at 10% interest) which no one would pay that type of money for rent in a $600 market.
Why 12, 24, 36 months to pay off improvements? The materials and appliances we used had a life expectancy of 5 to 15 years depending on the tenants especially the hot water heater, furnace, central air and the appliances. That is why Dave purchased buildings that the tenants had to pay all utilities!
In the first year of owning the buildings and when the 12 month leases were up for renewal we increased rents by $50 to $600 a month which was exactly at the average rent for that market. On the 13 month we increased our positive cash flow another $200.
What made it an even sweeter deal for the tenants is each unit had central air, washer and dryer!
He always purchased buildings that had two bedrooms in each apartment to cut down on occupancy abuse which you would get with three bedroom apartments. One thing that is very, very important about owning real estate is knowing how to assess risk and properly manage it! This is the least researched and least understood part of owning properties, whether you're a property owner or a property management company. We always had to be one step ahead of everyone else. One law suit is all it takes for your premiums to double or your policy being canceled.
Risk Assessment and Risk Management Can Never Be Over Looked!
We focused on this so much we never had a law suit filed against us.
Dave's goal was to have each apartment occupied no less than 24 months instead of your normal 12 months. This is how we made money! 70% of the tenants stayed for more than 3 years so Dave knew he did his homework. The longer the tenants stayed the more money the property management company made because of less expenditures; advertizing, cleaning, painting and damages. The property management company always provided a clean and safe product plus all service calls were returned with-in 4 hours. Include central air and washer/dryer in each apartment at the average market rental rate, tenants will stay longer plus take care of their apartment because they know price per square foot this is the best deal in town.
The property management company was averaging 28% net return annually which out performed Wall Street since 1995. Dave Kuno's purchasing and management style created more time for him to hustle and make more money on other projects (Construction Company) plus helping buyers & sellers as a Realtor. This is why 2 bedroom apartments for him personally were better foreclosure investments. 3 bedroom apartments per square foot did not really create a better positive cash flow; it created more monthly expense and headaches in the long term than in the short for the extra $50 to $100 a month in rent. If you add up the difference between all the pros and cons Dave was making 10% to 15% more money with 2 bedroom apartment buildings and another 10% more with his other projects because of how everything was structured (time management).
We are not saying do not purchase 3 bedroom apartment buildings, you need to find your nitch to see if that is the investment for you.
It depends how much you are paying for a particular property;
the money coming in vs. the money going out!
Building Age; Dave purchased buildings that used the same foot print/layouts as today with copper supply lines, plastic for waste, 100 amp panels and the same building framing and techniques as used today.

As you have read Dave did very well for himself purchasing foreclosures.
Now he can help you because he has the experience, knowledge and the aggressive attitude to get deals done.
Include his 7 day a week work ethic and you will not find a better Realtor to represent you.

This is why at Kuno Real Estate we have a very high success rate in finding that foreclosure!

• Consulting Services for Small & Large Projects
• Representation for Lenders/Banks with REO's - Listing, Board Ups, Lock Service, Property Management

That is why you should use KUNO Real Estate!
You get the whole spectrum of knowledge and experience!

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