Ronnie’s Success Story: Insight Into Foreclosures and Double Closing
In this success story interview, Ronnie Tecson shares some great advice from his many years of experience. He’s been investing in residential real estate since the 1990s and teaching friends and family how to do the same. If you want to learn more about the strategy and tools he currently uses to win in real estate, read on.
- Working with Owners in Foreclosure
- The Double Closing Process
- Utilizing Credit Cards for Investments
The below image shows the details of the deal he found on MyHouseDeals:
What sparked your interest in real estate investing? And how did you take your first step?
I first started real estate in the 1990’s. I attended the Tom Vu seminar. He’s actually a Vietnamese refugee. And he gave a seminar at the time. So I attended his three-day seminar. It was in 1990 or 1989, somewhere around there. And then after that, I did a lot of real estate, fix and flips. And then some assignments and some wholesale double closing.
While I was doing that, I met a Filipino guy. He was buying some property from me, and he introduced me to this business, international commodity trading where you buy and sell, import and export, raw materials to different buyers in different countries.
International commodity trading is great because I had repeat buyers purchasing raw materials, unlike real estate where it’s usually one-time buyers. That’s why I did it. And then lately, last year, I noticed that the real estate market was getting hot again. So I’ve been doing both.
A friend of my sister’s was selling their home so I bought it, rehabbed it and sold it. Then I learned about MyHouseDeals.com. So I became a premium member and I’ve been looking almost daily at the good properties.
Tell us more about splitting your time between international trading and real estate investing.
Well, actually I’ve continued pursuing real estate transactions off and on over the years. I’m older now, so being an international trader, you always travel outside of the United States. And now I have a hard time because sometimes the travel takes about 20 plus hours before you get to your destination. So it’s tiring now for me. And most of my business associates are also older now. And the market right now for international trade is kind of slow. Plus I don’t want to travel any more.
Would you consider yourself a part-time investor or a full-time real estate investor?
I am retired. I’m doing this part-time because I’m also doing other deals, side deals.
So I’m also doing real estate deals now with my son. I’m teaching him about investing. He has attended some seminars also. I’m a Filipino, I’m originally from the Philippines, and several of my Filipino friends started real estate investing recently. They’ve paid thousands of dollars for seminars and I helped them put it in action, since I have experience with assignments, double closings, double escrow, etc.
Tell us more about the double closing process.
With my first double closing, my sellers never knew I was reselling it. In LA real estate closings are done through escrow. So the buyer and seller never see each other. In Illinois where I originally did business, the buyer and seller, they met at the closing.
Most closings are done at the title company, where the buyer and seller are represented by their own lawyers. But I like closing real estate in Los Angeles because in California it’s an escrow company that closes. The buyer and seller never see each other.
For my first double closing in California, I had an uncle who wanted to buy a house and had already put down earnest money. So we looked at the house and I didn’t feel like they had a good deal.
So I told them, “I can help you buy a house with no down payment.” Just like that. “You will have instant equity in the property.” So when they said that they liked it, I had the title company do a title search. I wanted to know how much they bought it for. Once we knew that, I was able to buy the property, and put it under contract at a very low price.
I did a double closing with them. I wrote a contract with the seller, then I rewrote another contract between me and my uncle. With real estate, I’m like a quarterback, managing everything.
I have a lender who pre-approves my buyers, realtors who research and show properties and a title company who gives me an initial title report.
These days I do the title search on my own. I used to go to the county recorder’s office to do the title search myself. But now it’s easier because you can do it online. You can just type it in and it will load up.
Before I had to go there in person. Actually, you had to go to courthouses first, to get the case numbers, etc. Then you had to go to the file room to research each person in foreclosure, how it started and the filing of the bank’s lawyers complaint, etc.
When I had the contract between the seller and my uncle, then I went to an escrow company in Glendale called Verdugo Escrow. I asked them to handle my closing and then when they saw that it was a double closing they said, “I am very happy to accept your transaction and close your escrow but we’ve never done a double closing. If you’ll coach us what to do, then we will be very happy to help you close.” So I taught them how the double closing works and we closed without a problem.
Your real estate expertise has enabled you to help your family, hasn’t it?
Yes. The next house I bought was with my second cousin. They were renting a house for like $1,600 in Woodland Hills, California. So I found them a house to purchase. I first pre-qualified them with my loan officers. Then I gave my realtor their preferences for location and house specifics and she found them four houses to choose from.
After she showed the properties, I told my cousin, “Don’t tell the realtor that you want to buy this. But just tell me which properties you want. Preference number one, number two, number three. So if we couldn’t get the property they wanted, then I could go look at the next.”
They ended up wanting the first property they looked at, which was an REO owned by the bank. Before I made an offer, I asked my guy in the title company to look at the title to get the story of the house. I found out that they foreclosed at a certain amount, plus repair costs and realtor costs. They were selling it at $200 something thousand. That was a really good deal. I’m looking at about forty thousand below market. It’s good enough for me because I’m double closing it.
Do you have any rules or formulas for your investments?
So I’ve been looking at a lot of gurus, a lot of teachers. You need to buy it at 70% below market, less repair costs, or sometimes 65%. It comes out to about 50% which is good enough for me. That’s very hard, as an experienced investor, that’s very hard to find. There are thousands of real estate investors. There’s not many properties like that. So investors will be running to grab those properties.
I’ve been in this business for a long time. I have bought and sold more than 30 plus properties. So I learned the business. But right now the problem is finding the property. That’s the number one problem.
Finding properties and finding funding seem to be the biggest challenges for most investors but you seem to solve the funding issue by pre-qualifying buyers, correct?
That’s what I do. I always pre-qualify.
And I always want to improve how I invest. Up to now I’ve been doing rehab but, as much as possible, I don’t want to do rehab. I want to buy properties that are already in move-in condition and then just do the double closing. With double closings, you don’t need to have a very big discount.
Is that why you’ve chosen foreclosures over motivated-seller properties?
REO properties are good. What I’m looking for with REOs is that it’s already repaired. So it’s move in condition.
Pre-foreclosure is also okay. I have bought a lot of pre-foreclosure properties. That’s why I go to court houses, to do my due diligence on the pre-foreclosure. I have bought plenty of properties in pre-foreclosure, just like what Tom Vu teaches.
What’s your strategy for working with owners in foreclosure?
We knock on the door and most of the time when the owner opens their door, they will let you in. You introduce yourself saying that you learned that their property is in foreclosure and you want to help. They always say, “Our foreclosure problem is already in the hands of our lawyer.” That is what they always say, most of them. Then they close their door.
Then one day, I was always thinking, “What should I tell these people so they let me in their house?” So one day, I got an idea. I returned to that house again and knocked on the door. And the same thing. She tells me that “I already told you that this is already in the hands of our lawyer.” And then I told them, “I understand Ma’am but did you know that your lawyer can never help you stop the foreclosure?” That’s what I told them. “They may delay the foreclosure but they can never stop the foreclosure. Because the only way they can stop the foreclosure is if they bring your loan current and if they use their own money and pay for all your arrears. But they will not do that. Actually they even charge you a retainer’s fee before they even accept you as a client, so how can you expect them to pay for all your arrears?”
I tell them, “I am here and I’m willing to bring your loan current and pay for your arrears.” And so they let me in. Then I have a worksheet, where I tell them the market value of their property less what they owe. What they owe, including the arrears, less selling cost, realtor cost, etc. Then subtract the repair cost, based on a certain percent. Generally only 10 to 20% of the market value at the time.
Tell us more about how you calculate expenses and potential profit.
You have to look at the holding costs. It will take me six months to sell it, two months to repair, three months to find a buyer and one month to close. So it’s about six months of holding cost, which is for the PITI (principle, interest, taxes, insurance), the utilities, etc. Then add in closing costs for the insurance, lawyer, survey, etc.
Then I deduct that from the fair market value. We’ve always used FMV, now they’re using ARV. So once I deduct everything: their loan balance, their arrears, the selling costs, holding costs, repair costs, and even the opportunity costs (the money that I invested in the property). I can then see what equity is left. I show them my worksheet and tell them, “If I invest the time, my money and risk, how much of the equity will you be willing to share with me?” That’s how I do it.
If they see that there’s only a very small equity left, most of them will tell me, “Oh, I’m not after any equity anymore. You can take that. All I wanted was to stop the foreclosure.” Most of them will ask you to stay there for at least a month or two, to find where they can move. And then they are willing to even pay the rent. The rent will be the mortgage payment they pay, month to month. And they even pay me in advance. They pay me two checks.
Are there cases where you can’t find the owners?
Sometimes they’ve already abandoned the property and moved somewhere else. So now the problem is I don’t know how to reach them. What I used to do was go to the post office and I ask for their forwarding address. You only had to pay 15 bucks at the time. But now they don’t do it anymore. It’s more confidentiality for the homeowner.
With my most recent, I sent them a letter and then they responded to me, “You know, Ronnie, when I was still living at that house, when I was in foreclosure before I abandoned the house, there were several real estate investors just like you trying to buy the house from me. Do you know what I said to them? I told them, ‘Out of my house!’ ”
Most of those owners who are in foreclosure, they’re so stressed out. They have a lot to think about. They’re so stressed out so they just don’t want to talk to anyone and they’ve already abandoned the property.
So how do you convince the owners to work with you?
With this most recent one I told them, “I’m not your enemy. It’s because of the bank that you have this problem. They’re trying to foreclose on you. I’m here to help you. I’m here as a friend. I will try to stop the foreclosure, save your credit and then pay off your loan after I resell the property.” So, the owner asked me, “What do you want me to do?”
I told him, “Well, what I’m going to do is, I’m going to pay everything that you owe. I’ll pay your late payments, the penalty, attorney’s costs, and bring the loan current. I’ll also pay the mortgage every month, along with the PITI. And then I will rehab the property and sell.”
Then he asked me, “So what are we going to do now?” Then I told him, “I will prepare a quitclaim deed. You sign it and return it to me. After that, I’ll send you 500 bucks. Is that okay?” And he said, “Yes, okay.”
With some properties I pay $500, but with most of them it’s free. Last year, I bought a property on May 15th, and then closed escrow on August 30th. I did not pay anything to the seller.
Can you tell us about that property?
It was abandoned by the family. Her sister died and her husband and their nephews lived there. They bought it in cash and then took a loan for cash-out refinancing. There’s a first mortgage on the property.
The property was in a real mess. Oh my God. Even my sister who is a realtor, she doesn’t want to go inside.
Actually, some of the ceiling fell down already, along with the sidings. Because it was almost three years abandoned.
A lot of work.
The labor alone. The contractor charged me $39,000. Plus the materials cost us almost $70,000. We still made good profit.
Can you tell us about the property in Bartlett?
We just closed that last Friday. And we started the clearing last Sunday. I’m using the same contractor as the last one. She’s good.
And we have another house in North Aurora that we just started on two days ago. If there is a buyer we will just sell it. But if not then we might just rehab it. It depends.
We are from Glendale Heights, so as much as possible we didn’t want the beach area or near our area. Bartlett is very close to our place. Anything in Glendale Heights, Kane County, Will County or Cook County is good for us.
How did you go about pulling those comps for all the houses you’re investing in?
Actually I am a premium member of Rehab Valuator. I like their software. If you type the address of the property then you can get the prices of homes within the area.
My sister is a licensed realtor but I don’t ask her for comps because I have better ways. Every time I check comps I use Zillow, Realtors.com and RedFin, all three of them.
So with this deal, how did you finance it? Did you use private funds?
My ex-wife partners with me and she applied for a loan, a personal loan from her credit union. We usually need the cash for the labor. But for the materials, we just apply with Home Depot for a line of credit and also with Menards.
There’s a new company called Plastiq. You can use your credit card and have no payment due for a year. First you open an account with Plastiq and and they’ll accept all your cards in any amount in excess of $5,000. In this case we bought $55,000 worth. My son used their credit cards.
He used credit cards to buy the house?
Yeah. To buy the house. He did not get a cash advance because a cash advance would have been very expensive. They charge like 5 to 8%. With Plastiq there’s no payment for one year and they only charge 2.5%.
So you can charge $60,000 with a 2.5% fee then they will accept your credit card and then pay the title company the $55,000.
Ronnie has a wealth of experience from many years of investing. He has a gift for helping people get out of properties they can no longer afford as well as finding properties for friends and family. He’s currently teaching his son about investing and has helped educate other beginner investors over the years. We really appreciated him sharing his wisdom today on investing topics like double closings, foreclosures and more.