Lessons From Auction Mistakes with Tommy Loretz | Episode 37

Summary

Real Talk Real Estate with David Greene
Episode 37: Lessons From Auction Mistakes with Tommy Loretz
Release Date: February 13, 2025

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Introduction

In Episode 37 of Real Talk Real Estate, host David Greene welcomes Tommy Loretz, a licensed broker from California, to discuss his experiences and lessons learned from purchasing properties at foreclosure and tax sale auctions. This episode delves into the complexities and potential pitfalls of auction-based real estate investments, providing listeners with invaluable insights to navigate similar challenges.

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Tommy's Initial Auction Mistake

Tommy begins by recounting his most surprising and disappointing purchase: a single-family home in Cleveland, Ohio. Through remote research, he believed he was acquiring two parcels, including a garage and a yard, for a minimal bid of $6,500. However, he later discovered that the property consisted of three parcels. While he secured two—the garage and yard—the main house on the third parcel was purchased by another bidder.

Tommy Lorettes [02:57]: "The actual home, the actual Structure was on the third parcel that I did not purchase and someone else had purchased that. So I more or less ended up with nothing at that point, or nothing worthwhile at that point."

This misstep left Tommy holding the garage with no practical use, as the main residence was elsewhere, effectively nullifying his investment.

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Detailed Breakdown of the Five Bad Deals

Expanding on his challenges, Tommy discusses five additional properties he acquired, each presenting unique issues:

1. Foreclosure Redemption:
   One property was subject to foreclosure redemption, allowing the previous owner to reclaim ownership by settling outstanding debts. Tommy had to wait two months to retrieve his $25,000 bid after the redemption was exercised.

2. Flooded Basement:
   Shortly after purchasing another property, Tommy received a call about a burst pipe causing extensive flooding. He managed to mitigate some damage but faced a potential $7,000 loss.

3. Squatters and Eviction Complications:
   A third property had squatters, leading to a botched eviction process by Tommy's team. The delayed eviction resulted in a $16,000 loss.

4. Torn-Down Property:
   Perhaps the most alarming was a property Tommy bought for $12,000, only to discover the city had demolished the building months prior. All available information platforms still listed photos of the now non-existent structure.

5. Successful Flip:
   Out of the five, only one property met his expectations, albeit requiring significant rehabilitation.

Tommy Lorettes [05:37]: "So I more or less ended up with nothing at that point, or nothing worthwhile at that point."

Tommy Lorettes [26:25]: "No one's really talking to each other and explaining what happened."

These experiences highlight the unpredictable nature of auction purchases and the critical importance of thorough due diligence.

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David's Auction Story

David Greene shares a personal anecdote from his first county auction in Oklahoma. He describes a chaotic scene where bidding wars and aggressive behavior were the norms. During the event, David inadvertently became the center of attention when a fellow bidder recognized him, preventing what could have been an embarrassing confrontation.

David Green [15:33]: "I didn't know what I'm like. I thought I was going to have to fight this Guy now..."

This story underscores the high-stakes environment of auctions and the unexpected interactions that can occur.

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The Auction Process and Its Challenges

The conversation shifts to the intricacies of the auction process. Tommy explains that the information provided is often laden with legal jargon and incomplete data, making it difficult to assess the true value and condition of properties without on-the-ground inspections.

Tommy Lorettes [26:48]: "They're pretty much all the information you're getting from that is in legal jargon. So a lot of it is not very straightforward, can be confusing."

David draws parallels to navigating complex systems, likening the experience to "the matrix," where understanding comes with experience and familiarity.

David Green [11:52]: "To me, it was like when I first saw this, that I was Neo in the matrix and I'm looking at all the code..."

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Adjustments in Approach Following Mistakes

In response to his earlier challenges, Tommy has refined his auction strategy. He now collaborates with local inspection companies to conduct drive-by assessments of properties before bidding. While legal restrictions prohibit entry onto auctioned properties, these inspections provide a clearer picture of potential rehabilitation costs and structural integrity.

Tommy Lorettes [33:25]: "The biggest change that I'm doing is I have worked with a local inspection company..."

This proactive approach aims to mitigate unforeseen issues and enhance the accuracy of his investment assessments.

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Advice for Newcomers

When asked for advice, Tommy emphasizes the importance of starting small and learning from early mistakes. He cautions against investing large sums initially and advocates for spreading investments to manage risk effectively.

Tommy Lorettes [36:06]: "Start off small. There's a lot that can go wrong... don't bet all your money on this taking you out of your job off one deal."

David echoes this sentiment, highlighting the value of embracing and learning from errors to build confidence and expertise without succumbing to analysis paralysis.

David Green [36:41]: "If people can embrace that, they will have the confidence to move forward..."

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Conclusion

Episode 37 of Real Talk Real Estate offers a candid exploration of the challenges inherent in foreclosure and tax sale auctions. Through Tommy Loretz's experiences, listeners gain a realistic understanding of the potential pitfalls and the strategies necessary to navigate them successfully. David Greene's engaging narrative and actionable advice make this episode a must-listen for aspiring real estate investors seeking to delve into the auction market.

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Notable Quotes

• Tommy Lorettes [02:57]: "The actual home, the actual Structure was on the third parcel that I did not purchase and someone else had purchased that."

• David Green [15:33]: "I didn't know what I'm like. I thought I was going to have to fight this Guy now..."

• Tommy Lorettes [26:48]: "They're pretty much all the information you're getting from that is in legal jargon. So a lot of it is not very straightforward, can be confusing."

• Tommy Lorettes [36:06]: "Start off small. There's a lot that can go wrong... don't bet all your money on this taking you out of your job off one deal."

• David Green [36:41]: "If people can embrace that, they will have the confidence to move forward..."

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Connect with Tommy Loretz

For those interested in reaching out to Tommy Loretz for further insights or collaboration:

• Email: justtlorettzmail.com

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Tune in to Real Talk Real Estate with David Greene for more unfiltered stories, insider details, and expert insights to elevate your real estate endeavors.

Transcript

[David Green]

Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no BS and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you too. So if you want to build wealth through real estate or you just love learning about it, you found your home. What's up, everybody? Welcome to the David Green show, Real Talk Real Estate, the show where we pull back the curtain and share the good, the bad and the ugly of what goes on in the world of real estate, investing, business, and frankly, just life. I've got a real estate portfolio, I've got real estate businesses. I'm a licensed broker, I have a mortgage company and I own properties all across the country. So I see it from every angle. And I can assure you that a lot of the content that you hear on other shows is not giving you the whole story. Today we are continuing in our series on nightmare deals where I am joined by Tommy Lorettes who's going to share about some deals that he bought out of state and had issues pop up that he was not expecting, that he was not prepared for, and he had not been warned about. So we can help you avoid the same mistakes. If you're not already subscribed to the channel, please make sure that you subscribe on YouTube as well as Spotify or Apple podcasts wherever you listen to shows and leave us a five star review if you like this free content. Tommy, welcome to the show.

[Tommy Lorettes]

Thanks, David. Happy to be here.

[David Green]

Yes. I just saw you the other day. So we were at David Green Team meetup in Walnut Creek and we got to talk a little bit. What'd you think about the meetup?

[Tommy Lorettes]

It was great. I mean, it's. It's awesome to have events like that so close to home. Makes it a lot easier to get out there.

[David Green]

Yep. Tommy is a licensed broker in California and he's going to be working in the future with a brokerage that I'm in the process of launching, coast to Coast Real Estate. So if you are a real estate agent who is listening to this or a broker anywhere in the country and you would like a different place to hang your license where you'll get better training, better direction, better knowledge and better support, better send me a DM on your favorite social media and let me know and we'll follow up. All right, Tommy, let's start off here. Tell Me about this property or the properties, how you first came across them and what you were feeling when you saw them.

[Tommy Lorettes]

So there's, there's a few thoughts I had when I first discovered this. So some of the properties I want to talk about today I acquired through foreclosure auctions and tax sale auctions, which in and of themselves have, have a little more speed bumps than a traditional purchase. But the first one I wanted to talk about today, I don't know if, if you want me to dive straight into what it was and what happened, but it was definitely the most surprising and alarming purchase I've ever made once I realized what I had actually done.

[David Green]

Yeah, well, tell me about the deal itself, where you found it and like what you were thinking when you first looked at it.

[Tommy Lorettes]

All right, so this specific property, the first one was a single family home in Cleveland, Ohio. I had found it through the county website. It had been repossessed by the county and they were going to be putting it up for sale. So I did some research through a few different online websites, kind of, I do not live in Cleveland. I did not go to Cleveland. So it was all virtual remote research that I performed. I did see that the, the property itself was more than one parcel. So I made sure, like, okay, there's, there's more than one parcel. Need to make sure I'm correctly seeing which parcels are involved in the sale and saw that two parcels were included in the sale. So I thought, okay, this is great, this is perfect. I get both of them. The way the auction process works is there's, there's basically a, a minimum balance that needs to be covered, which maybe is the, the money due the bank or the money to the city or county based on unpaid taxes, unpaid mortgages. So a lot of times it'll start relatively low and then gradually increase as more and more people bid on whatever the property may be. And this one had about, about six and a half thousand minimum bids. So I thought, okay, that sounds great. I'll put in six and a half thousand for a single family house. That sounds like a home run deal, one of the best deals I've ever seen. So I get to go ahead, put that minimum bid in, end up winning. And then about two weeks later, I hear back from the county that I just purchased a garage in Cleveland, that it was actually more than two parcels. This one home consisted of multiple parcels, three parcels in fact, and I had purchased two of them, which only were the garage of the single family home. So the actual home, the actual Structure was on the third parcel that I did not purchase and someone else had purchased that. So I more or less ended up with nothing at that point, or nothing worthwhile at that point.

[David Green]

So walk me through how this happened. So you think that you're going to be buying two parcels and they're supposed to have a house on one of these parcels.

[Tommy Lorettes]

So it was the single house, covered three parcels. And two of the parcels were related to some kind of just grass side yard and the garage. And those were the two that I purchased. The third was the largest one that actually included the house itself.

[David Green]

Okay, so the person owned three parcels, they built a house on one of them, and the other two parcels were included in the sale. So you're buying all three basically in what's probably like a property tax auction.

[Tommy Lorettes]

Yeah, that. Well, that's, that's at least what I thought.

[David Green]

Okay, so you think that you're buying them because this person owes property taxes they haven't paid. The county or the state takes it back, they put it at an auction, you do your research and you're like, dude, I could buy this house for $6,500 plus these other lots that are all near it. What did you think it was going to rent for?

[Tommy Lorettes]

So I was actually planning to flip it and it would have been, the ARV would have been somewhere in like the 130 to 150 range. And it probably needed 30 to 50k of rehab. But that, that was kind of my, my initial plan with it.

[David Green]

And what do you think you're going to sell it for if you flipped it?

[Tommy Lorettes]

Probably somewhere around 140.

[David Green]

Okay, so you're thinking, hey, I'm going to be all in for like 55,000 bucks, worst case scenario, and I'm going to sell this thing for 140. So you're looking at ninety thousand dollar profit range here. And then you get blindsided by some odd news that most people don't hear. So what happened?

[Tommy Lorettes]

Oh yeah, so yeah, that and then even to add more to it, so the person that someone else purchased the actual house itself. So I spoke with them about a way to make things work together. They were somewhat, somewhat unwilling to just purchase the garage from me, which I saw as being the simplest path forward. They ended up backing out of their purchase, which put it back into the county's hands. And I tried to see if I could kind of take their position. That was not possible. It's, it's dealing with a local government. So they are fairly rigid as far as their procedures and so that property is still unavailable. It's supposed to go back up for auction again later this year. We'll see if that happens. I haven't seen it up yet, but I've basically been holding this garage for eight and a half months at this point with. With absolutely nothing to show for it.

[David Green]

Okay, so you think you're buying the parcel that has the house and the parcel with the garage is included in.

[Tommy Lorettes]

The sale, the part. So what they did was they. They broke up the parcels.

[David Green]

Okay.

[Tommy Lorettes]

For the sale. So they sold two parcels together, which are the two I bought that has the garage, and then the one they broke out individually was the actual worth, worthwhile one that had the house on it.

[David Green]

Okay. Now, how did you not be. How are you not made aware of the fact that the parcel that has the house wasn't included in your sale?

[Tommy Lorettes]

So part of this was just me being inexperienced in this process. I had done a few prior to, but still. Still very new to it, still had a lot to learn clearly and just missed it. I looked up what the. That it was multiple parcels, saw that multiple parcels weren't included and thought. Thought that was all the due diligence I needed to do at this point. Again, I was fully remote for all the analysis. So I did not physically inspect anything.

[David Green]

And I don't think anybody would blame you for that. I'm just trying to understand what the process was like. So did the county originally have them? All three parcels were shown on like one segment of information.

[Tommy Lorettes]

Correct. They're all the same address.

[David Green]

Okay, gotcha.

[Tommy Lorettes]

And so. And they were. I kind. I came to find out after the fact that they were supposed to all be sold together, but someone had. Someone had made a mistake in. In some department of government that ended up breaking it out into multiple.

[David Green]

Okay, so here's what it sounds like to me. Happen. I think I'm putting this together. You look up the address for sale at the county auction, and you see the address is three parcels. You assume, like anybody would, that they're selling these parcels together. And they admitted that the intention in the beginning was to do that. You write down the address that you're wanting to bid on, and then when it comes time to bid, they give the address. But it's the two parcels next to the house. You don't realize they've split this address into two separate sections that different bidders can bid on because it was presented originally as a address. They did make it clear there's one address, one of two with a garage, and then two of two With a house. And you are used to looking at these auctions where the address is always associated with all the parcels that come together in them because the same person owns it. So if somebody was selling this themselves, they would be selling all the parcels together, but the state took ownership back and then they decide to split it up, which is probably some W2 worker for the state with not a mini brain cells working or just doesn't care apathetic that says, hey, let's throw these up separately. For whatever reason, maybe they saw like a Google Earth image and saw the garage and thought, oh there's two houses, let's sell this as two different things.

[Tommy Lorettes]

Yeah, and that, that's pretty much exactly what happened. And what, what really got me was it would have been somewhat straightforward if, okay, I see the same address twice going for auction on the same day. The main house and the garage were actually auctioned off on separate days. So that, that just added another layer of confusion on my end, not being able to kind of cross reference that the same address is being sold twice in one day. I didn't even look at two separate days expecting to see the same address.

[David Green]

Right, of course, yeah. I don't think anybody would blame you. Especially when you see how these online auctions work. It's like a crazy amount of information on a huge spreadsheet and they're using terminology that you're not used to understanding. A lot of abbreviations. To me, it was like when I first saw this, that I was Neo in the matrix and I'm looking at all the code and you're like, if you just stared at that code for long enough, it start to make sense to you, but not when you're new. So I can understand it. So you find out you bought the garage to a property and somebody else bought the house. Did you try to reach out to the person that bought the house and see if he would buy the garage from you?

[Tommy Lorettes]

I, I did. I figured that would be kind of the most, the most reasonable avenue. I mean the, the garage was worth significantly less than the house. So I figured I would just add to his purchase and kind of at least make my money back. But he ended up deciding to back out of the sale. So basically he forfeited his deposit and gave the property back to the county, which is then putting has to go through its own internal, internal processes, which apparently take eight months to a year and then the property will be up for sale again.

[David Green]

Okay, so I'm putting this together now. This person likely realized I got the house but not the garage. I don't want to buy it at all. So he just said, I gave a deposit to buy this property because they're bidding. They got the winning bid, they made a deposit. They then did their due diligence and said, oh, never mind. I don't want it if it doesn't have the garage. So now this property is going back to auction, and you're going to have to wait for that to happen and then go try to bid on it.

[Tommy Lorettes]

Exactly. And the winning bidder, he was a local investor in Cleveland, so he did just have that local on the ground knowledge that kind of made it a little easier for him to physically go into the county and fight this. Whereas me trying to make calls and send emails and so forth had nowhere near the impact.

[David Green]

Yeah. So do you think you're going to attend the auction in person and maybe tell the other bidders that are there, hey, you can try to buy it, but you're not getting the garage?

[Tommy Lorettes]

I. I'm gonna try and buy it, and then depending on whether or not I don't want to overpay for it, but if not, I will just try and resell it to them. And if that doesn't end up working out, this may just go in the write it off as a bad deal and let the county have it back and put it up for another sucker to buy at auction.

[David Green]

Do you want to hear a funny story about a similar situation that I saw at my very first ever county auction?

[Tommy Lorettes]

Definitely.

[David Green]

I am going to the first one ever. You and I had talked about the process a little bit. This was a couple of months ago, and I'm in Oklahoma, and I'm sitting there with my buddy out there who runs a property management company called Renter's Place. And he's kind of walking me through what the process is, because he used to buy houses out there a lot. And it's a ton of people. I think they do it like once a year. I mean, legit, four or five hundred people, police officers, booths set up everywhere for, like, once you win the auction, you have to go pay your deposit. They have these big screens. It's almost like a convention center type of a room. And it's just started. It's been going like 15 minutes. And there's a bidding war going on between two people that keep holding up their little paddles. And one of the dudes starts walking across the room yelling at the other one. But then he's raising his paddle every time the auctioneer says, do I have right And I'm trying to see through the head of the heads of people in front of me to figure out who is he yelling at? And I'm just seeing a woman's hair. And I'm like, is he yelling at that girl? And I'm starting to get a little amped up here. Like, he's walking all the way across the room to yell at a woman, to intimidate her not to buy, because that's what it looks like. And I'm looking around at the cops who aren't doing anything. They're, like, not even paying attention. And now he's kind of walking aggressively, and his face is red, and he's pointing his finger, and I can't tell what he's yelling, but it's. I said to the guy next, like, is it normal that they. Can they talk to each other? Can you intimidate another bidder? This seems like the Wild West. What the hell is going on? And the guy, his name's Tracy, goes, no, I don't know why this is happening. I've never seen it. So I start to stand up, and I'm like, I don't know how. I'm in a room full of men and cops, and no one's doing anything, but, like, there's no way I'm letting that guy get in a girl's face. And I'm kind of, like, mentally trying to find the path for how I'm gonna get from where my table is and share, you know, jumping over the tables to where the other thing is. And before I. When I stand up, I see, oh, it's not a woman. She's sitting next to the guy that he's actually yelling at. It's a grown man, bigger than this guy. I'm like, okay, I don't have to worry about it. That guy can take care of himself. And in the middle of the yelling, the guy turns over because he sees me stand up in a room full of people sitting down. He makes eye contact with me. He goes, oh, hey, David. And then turns right back to yelling at the guy. Like, he didn't skip a beat. It was like a movie. Like, it made no sense. He had recognized me from bigger pockets, saw me stand up. Oh, that's David Green. That's pretty cool. Acknowledges it like he's in a good mood. And then goes back to yelling at the other person. I was legit thrown off, which doesn't happen that often. I did not know what I'm like. I thought I was going to have to fight this Guy now, he's like a fan and he's yelling at a dude, not a woman. So I sit back down with my head spinning, still trying to figure out what is happening, what. And I've only been at this place for like 10 minutes now. Like, this happens all the time, it turns out, because I wouldn't talk to the guy afterwards and like, shook his hand and they all took pictures with me. I didn't tell him when I was going over there to like take him down and get on top of them. I left that part out. But he said, I own a lot that has a property on it. We were bidding for the parcel behind this lot. You can only get to it by driving through my property. It has this teeny little ADU that somebody is living in and renting behind like 12 unit apartment complex or something on the main lot. I was trying to tell the guy, it's landlocked. You can't get to this unit. You'll never be able to access this thing. Stop bidding. You're driving up the price of something you'll never be able to manage. And the dude wasn't listening to me. I'm trying to buy that because I know the tenant who lives in it. He's getting evicted. He helps keep an eye on my apartment complex for me. I want to keep him in there and let him live rent free so he could be my eyes and ears for this apartment complex in a rough area. And this dude's making me pay way more for this thing than it's worth because he thinks that he's getting like this killer deal. He doesn't realize there's no driveway to it. There's no access to it. Like you're never going to be able to actually control the property. So now it makes sense why he's yelling at the guy. Makes sense why he's walking over there. It was still completely bizarre that he stopped in the middle of it and said, oh, hey, David. And then jump back in. And now everybody there sees this, right? So more people start recognizing me. It's like I slowly start seeing people, like walk up and come over to shake my hand. And they come to because it's all in real estate. Investors that are at a county auction, they just didn't notice me. Now I can't even like exist in this place because there's a line of people that are forming that all want to come say hi and take a picture and tell me that they read my book. So we had to leave like 15 minutes after this happened because There was too much attention that was drawn to me, and that was my first experience with the situation at the auction that you buy houses at regularly.

[Tommy Lorettes]

I mean, that. That is pretty crazy. Can't. I guess, can't judge a book by his cover. A guy sounds like a pretty good dude.

[David Green]

And yes, that's exactly right. And the plans I had for him were anything but good. So I'm very glad that he did recognize me and put it into that. Because if I had, like. Because if it wasn't the woman. Right. So I would have looked like the biggest jackass ever to go do that. Thank God for intervention there. So I understand that that's. This is one nightmare deal. Tell me about the five properties that you bought.

[Tommy Lorettes]

Oh, yeah. So, yeah, this. This was not my. My last bad experience at. At the auctions. Probably it won't be. I'm gonna keep doing it, and I expect to have more of them. Just ideally less and less as time goes on. But about six months ago, I had a big day at the auctions. Had. I was the winning bidder on five different properties. Was the biggest day I'd ever had up to that point. Prior to I'd only be only bid on like six or seven and had won three, one of them being the garage. So this was a pretty big day for me there with that. And checked it all out. Had gotten a little bit better. They were all actually the parcels and addresses that I thought they were, and I ended up winning five. Came to find out after hiring an inspection company to go take a look at all five of them, that they were not exactly what I had thought of the five. That the first one, which was somewhat straightforward, more of a inconvenience really, was redeemed. Essentially the. The previous owner can get their property back if they pay any outstanding debts. So they happened to do that. The only issue was I had sent in my winning bid amount prior to discovering that, and the entire process of getting my money back took about two months, and that was over $25,000. So it was not a. Not an inconsequential amount of money. I did get it back eventually, which is great, but it just was basically sitting in limbo for about two months. One of the other properties that I won, of the 5, got a call from the Cleveland water department about a day later that it was flooding in the basement. A pipe had burst and water was just uncontrollably pouring into the basement. So I had to scramble to make some calls, get someone over there, get the water shut off. Get all that done. I still own that property. I'm actually best case scenario hoping to get rid of it at about a $7,000 loss. So that that one kind of continues to go on. Another one found out soon after, sent an inspector over to it that there were squatters living in it. So I went through the process of getting an eviction started, or I thought I did. I had paid a fee, sent over some information, notice was even posted for the eviction, but the entire process by my team was not carried out. So the eviction didn't start until about three months after I had initially thought it started. That property cost me about 16,000 to buy. So I'm not, not too surprised that there were some issues with it, but much more than I expected. I expected a poor condition property, not a botched eviction and squatters another one. This one was, was probably the most alarming of the whole group. I bought it for about $12,000. Turns out the city had actually torn down the building. So this one I, I just ended up buying a vacant lot. I, I had checked still, still doing everything remotely at this point. I had checked Google Maps, Zillow, Realtor, all these different online information systems and they all still had photos of the existing property that looked worse for wear, but was, was there. Turns out the city had torn it down a couple months earlier and no one had had thought to update their information. So still have that one as well. Just a vacant lot that I am not quite sure what to do with at this point. And then last but not least, I did end up with one of the five that was actually what I was hoping for and expecting it would be. Which is a property that still needs a lot of work but is not occupied, not flooded, hasn't been torn down some something to work with. So I basically went 1 for 5 on that, that big auction day.

[David Green]

So walk us through what information you're given when you are playing planning to buy these properties, like what you're looking at and then how easy it is to get something completely different than what you thought. Because I know how this works and I know you're not an idiot. That's what someone would think listening to this. But this is actually normal when you're buying properties this way. So like walk us through what this whole process looks like.

[Tommy Lorettes]

Well, I do like to think I've, I've learned by making mistakes, so may have been more of an idiot in the past than I am today. But basically what you're given, the information you're given about A property to start prior to the auction itself is a case number which is related to the foreclosure case being carried out by the county. That can have a ton of information. It is also pretty much all the information you're getting from that is in legal jargon. So a lot of it is not very straightforward, can be confusing. The longer I've been doing this, the better I've gotten to understand how everything works there. You're also given some parcel numbers and an address and then a dollar amount for the minimum bid. Occasionally they'll give you what the, the property was most recently assessed at on the property taxes, which gives you a, a very loose sense of the, the value of the property itself.

[David Green]

Okay. And then you buy the property but you don't see it. You're not getting a home inspection on this thing. It's not in the area that you're in. So you can't even really drive by and see what the property looks like unless someone else does. And sometimes these are lots that you can't get to from places you could easily see the property. So how do you make the decisions when you're looking at information that you can't verify if it even exists?

[Tommy Lorettes]

Most for, for better or worse, most of the decision making is done analytically through, through how the, the numbers shake out. I try to get a sense of, of what it might be worth, what it might cost to repair and then the value that it would cost to bid, whatever that minimum bid may be. And then go from there, see how much I'm willing to go up to on that bid amount, basically the maximum allowable bid. So that's kind of how I get there. But it's a bit of a crapshoot. I like to think of it as kind of a flipping show mixed with one of those Storage wars shows.

[David Green]

Yeah.

[Tommy Lorettes]

Where you really have, you really have no idea what you're getting. Some of the, some of the properties are fairly decent shape. Maybe someone, I mean it's not the most pleasant thing in the world, but maybe someone passed away and that's why the, the property is being auctioned and they take great care of it. Up until that point, some of them may have been hoarder houses with 30 people living in a four bedroom and there's not an inch of the place that can, can be left untouched as far as the renovation goes. So you really have no idea what the condition is going to be when buying these properties, right?

[David Green]

That's exactly right. But it's kind of a numbers game. You Buy enough of them, you get that deal. That's like, holy cow, I paid ten grand. This house is worth a hundred thousand dollars and it only needs five grand to work. And then sometimes you buy the house and you find out, oh, they tore down the building before I even got the keys, like you had just mentioned. So a. You only hear on most podcasts about that $100,000 house someone bought for 10 grand. That's what you hear when people talk about tax auctions. It's like, oh, I'll take one of Those, I'll take 20 of those. Right. I'll take all of those. You don't hear about the bad deal. So what ended up happening with this house that was torn down before you took possession of it?

[Tommy Lorettes]

So as far as how it actually was torn down.

[David Green]

Yeah, like, how did it get torn down before you could get it since you bought it?

[Tommy Lorettes]

So what I have been able to discern from the court documents that I've read through was that it was initially a foreclosure process was started that during that process, because it can take. I mean, this will vary by county, by county, state by state, depending on where people are listening in from or where they're investing. It can take a year, multiple years for the actual foreclosure to be carried out, especially when it's being handled by the government. And so during the duration from when the foreclosure was initiated to the time the property was put up for auction, the former occupants had vacated and the city had condemned the property. And once it was condemned, kind of marked as a hazard to the community, they decided to tear it down and clear. Clear out all the rubble. I will say it is, it is somewhat beneficial that they actually removed all the. The property itself, having demoed it. It would be a lot worse to have just a building that needs to be torn down and have to wait for that whole process and remove all the, the rubble. Trying, Trying to find a silver lining here, but yeah, it's basically just government. Different departments within the government. They're kind of doing their own thing.

[David Green]

Yeah. So, like, no one's really talking to each other and explaining what happened.

[Tommy Lorettes]

Yeah. And no one. All the information I get or I'm given is not. It's. It's very basic, not very helpful. Pretty much everything is dependent on my own research. It's very much a buyer beware industry. So depending on how much I do and how much I'm willing to put into the research really impacts how, how successful these auctions are going to be.

[David Green]

So with these deals that went bad, how has that changed your approach to the auctions? Are you doing things any differently?

[Tommy Lorettes]

Oh, very much so. I'd say that the biggest change that I'm doing is I have have worked with a local inspection company, and we'll have people do at least a drive by auction of every property I'm planning to bid on to make sure that the building itself is actually standing. Another thing I have them do for me is as best as possible, give me a sense of the cost to rehab any items they can see from the exterior. Legally, you're not allowed to enter the property, let alone set foot on the. The property itself. So it's either a curb or from the street kind of estimate. Again, it's. It's not spot on, but it's much better than going in completely blind.

[David Green]

All right, so question for you. How do we kill two birds with one stone? Can we take the squatters that were in the house that you bought that you don't want there, pay them money to go enter into the house that you need the information about, and make a video for you? Because if they get caught breaking the law, they have nothing to lose. And they're breaking law already at the house they're in. They're actually breaking a lesser law by doing this for you than they are by squatting in your property. And this serves you. Have you thought about maybe changing the employment landscape of this area and putting squatters to work?

[Tommy Lorettes]

Honestly, I see it as a net. A net positive for everyone. They get a job, they get some income. I get what I want.

[David Green]

Yeah.

[Tommy Lorettes]

We're able to hire some contractors, put them to work, create a much better property to put back into the community. Seems like everyone is going to win. I am just a little scared about the FBI knocking on my door. The paper trail, bro.

[David Green]

This is the best thing about squatters. Like, they're not squealers. They're squatters. They're not. And you don't tell them your name. They're not even going to ask. They just want to know what color that cash is. Right. You got to work clandestine in these situations.

[Tommy Lorettes]

Well, that. That is something I'll work on next. Next time I come back, I'll have more details on this process.

[David Green]

This is real talk real estate, and we get real with real solutions. All right, thank you for this. Tommy, what's your advice for people that are willing to consider the tax auctions? They've kind of been curious about it. They hear these stories of, you know, what's that meme, the guy whispering, it's free real estate. And that's how it sounds. What would you tell people that want to get into this world?

[Tommy Lorettes]

I would. I think my, my biggest piece of advice for someone new jumping into it is start off small. There's a lot that can go wrong. There certainly is opportunity once you find out what you're doing. But you're likely to make a lot of mistakes early on into the process. So don't, don't bet all your money on this taking you out of your job off one deal. Start small, spread some money around, try a few different things and then most importantly, don't make the same mistake twice.

[David Green]

I love that you can make any mistake. You can't make the same mistake twice. If people can embrace that, they will have the confidence to move forward into doing new things without analysis paralysis and also the wisdom to continue getting better and, and not making the same mistakes that stop you from making progress. I think that's awesome. Tommy, if people want to reach out to you, how can they get ahold of you?

[Tommy Lorettes]

You know, I'm not super active on any of the socials. I would say best is my email which isjusttlurettesmail.com and if you're an agent.

[David Green]

Or a broker that wants to work with coast to coast real estate, you can get more of Tommy, in the future when we have company meetings together where we give training and support and gu guidance and the systems that the David Green team has used, I'm just looking to hire more people that are brokers in different states that could be the broker of record for the company so we can recruit agents in those states and put a very cool thing together. So, Tommy, thanks for being on today. Appreciate it. Looking forward to working with you more in the future. And we'll have you back to give an update on a deal that goes well in the future.

[Tommy Lorettes]

Sounds great. Thanks, David.

[David Green]

Take.