Kuno's Foreclosure Experience

Foreclosure Renovation

Here is a couple things that Dave has done personally with foreclosures.
He has helped buyers purchase foreclosures for 15 years now.
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 started his residential construction and property management companies. Keep in mind he still was a Realtor representing buyers & sellers also.
The construction company purchased dozens of foreclosures; detached single family homes and apartment buildings. All homes where completely gutted out to the studs.
Each home was up-dated to code with new electrical, plumbing (copper supply lines) and plastic (PVC) for waste.
We did a complete roof tear off and replaced any or all decking as needed with new 4X8 sheets of OSB.
We put new fascia, soffits and seamless gutters. Removed old black board and put new 1/2" 4X8 sheets of OSB to exterior walls then wrapped the home with TyVek. New 4"Dutch-lap vinyl siding, double hung-double pane windows, batted-faced R-13 insulation for exterior walls and blown-in cellulose insulation for the attic. New 90% efficient furnace and hot water heater plus central air system; line set, A-coil and condensing unit.
New kitchen and baths, flooring, fixtures and drywall.
The construction company earned 20% to 50% net return on each home and each home had a 30 to 60 day turn-around on renovations.
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 older homes that used 80% or less efficient technology, the furnace and hot water heater were in the middle of the basement or somewhere else taking up valuable floor space because the 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 in net profit. With the combination of wrapping exterior walls and tapping new windows, insulation and 90% efficient furnace and hot water heater, the homes used less energy which had a less carbon foot print.
It was a win-win for everyone and 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 because you went cheap and did not do things to code. If you gave home warranties your crew would be going out to service calls more often.
It does not pay in the long run!
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.
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, sub-prime mortgages!
One thing that Dave was proud of he never sold a home unless the buyer/s were getting a 15 year or 30 year fixed mortgage.
Dave always did and always will direct his clients 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 (Dave purchased buildings were the tenants paid all utilities).
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, 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 we paid for the building, 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 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 would use less than 36 months for cosmetic up-date costs to be absorbed but It was not cast in stone, it depended on how much we paid for the building, improvement costs, monthly expenses and how much can we increase the rents to stay at average rental rates to one notch above (for an up-dated product with central air, washer/dryer in the apartment) 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 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.
Two bedroom apartments had fewer damages, less noise, less crime which created fewer vacancies, which created more money. No mater what buildings Dave had in inventory he always constantly was assessing risk and how to manage it. This is the most least researched and understood part of owning properties from property owners and property management companies.
It boils down on talent, either you have it or not!
His 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, 20% for 2 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 and how much labor to manage it!the money coming in vs. the money going out!
Building Age; Dave purchased older buildings that used the same foot print/layouts as today including copper supply lines, plastic for waste, 100 amp panels and the same building framing and techniques as used today.
Price per square foot it was a much better purchase than new construction.

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! Consider Your Deal Done!

  • Consulting Services for Small & Large Projects
  • Representation for Lenders/Banks with REO's
    Total AM & FSM Services;
    Listing - Sales
    Property Management - Preservation

If you need to sell your home to purchase another it can be a challenge but not impossible. Please do not listen to what you hear, every market is different. Dave has 15 years of market research experience. He will take the time to go over all your options in your market and the market you want to be in. This is what sets KUNO Real Estate apart from the rest, Market Research and presenting it to you were it makes sense. Keep in mind when it was a "sellers market" the seller received top dollar. When the seller purchased another home the seller paid top dollar. Now that it's a “buyers market” it's the opposite. When you sell you may break even or lose money but you make up for it when you buy, its all relative!
If you were to sell and not purchase anything then you will lose money (equity).

For example; We helped one of our pro-athletes purchase a home 4 years ago for $1,350,000 at the time the market was peaking out. Now our client is married with a growing family and in need for a larger home. We sold their home for $950,000, a $400,000 loss.
As soon as we gathered all the information we needed on what type of home they were looking for we started searching the Multiple Listing Service (MLS) and found 3 different subdivisions with the school system they wanted to be in. Each subdivision homes were selling differently than the other based on age, square feet, beds, baths and so on. We compared all options and told them this particular subdivision will give them more dollar value with the criteria they were looking for. We helped them purchase a home for $2,250,000 which sold for $2,950,000 four years ago. Now you can see the $400,000 loss on their home gave a total gain of $300,000 on their new one ($2,950,000 minus $2,250,000 = $700,000 minus the $400,000 loss = $300,000). It's researching different markets to get the best value for the dollar.
Another example; We sold our clients home for $1,400,000 that we had helped them purchase six years ago for $2,000,000. Our clients upgraded to a $2,400,000 home which 4 years ago sold for $3,400,000. Our clients lost $600,000 on their home they sold but made $400,000 on their new purchase. The key is when will prices bottom and which markets will bottom first!
This is why Dave Kuno will break down everything you need to know. He is the best when it comes to researching markets and working with numbers!

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Here in the Midwest we do not have huge market swings like they do in California, Arizona, Vegas and Florida. Please do not listen to the media.
Our area has about 4% to 6% average appreciation a year under normal market conditions which we have not had since the late 1990’s to 2001. Home values are based on economics but values were inflated due to above normal market activity that was created by non-traditional lending practices.
We are in a deflationary period due to Globalization and will continue to be for a while unless unemployment numbers start coming down fast. Interest rates staying below 4% may help the market but it goes back to job growth. In my opinion all of 2010 will be like 2009, stagnate or deflationary.
I do not see the FED raising rates either for the rest of 2010.

Even if the Government helps create jobs we could still keep deflating. Why? Because what are these jobs going to pay? We need to create sustainable jobs were the average person is earning 50K to 100K, this will stabilize the market.
Incomes have to exceed the price for goods/services and inflation.
It will continue to be a buyers market until vacant inventory levels get back to normal.
Some areas have experienced an 8% to 15% decline and others 15% to 25% decline. The 15% to 25% declines are homes above $500,000 price range. Why? Because of sub-normal qualifying guidelines which fueled the new construction market in this price range, hence deflation. Existing homes were also affected above $500,000.
There was too much credit available.
The homes from $200,000 to $400,000 are selling and the homes up to $200,000 are selling faster.
Again we have to keep watching; investor confidence, commodities, interest rates, dollar, economic growth, GDP, employment numbers, wage numbers, inflation, deflation because of globalization and how it’s affecting our area. All this will dictate how many distressed properties that will become on the market (Short Sales & Foreclosures). The more homes that are for sale in a subdivision and no buyers, then that will lead to more deflation in home values. If one home in a subdivision is for sale we do not care what the market conditions are home values will be stable, Supply and Demand! There is always one family looking to live in that subdivision. It's when you have a lot of homes for sale in a subdivision that lead to falling prices because sellers keep lowering their price to sell. As a buyer even if prices come down another 3% to 5% you are still ahead of the game. Especially if you buy a foreclosure! You can not lose because of the equity you have made. But again it’s all about economics in an area!
Hopefully we gave you some points to think about please call us if you have any questions.
We are here to help you succeed. We have only scratched the surface on information.

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