Randy and Mike Grigg
President and Chief Auctioneer of Elite Auctions
This week Bruce is joined by Randy and Mike Grigg. Randy is the President of Elite Auctions. Mike is Randy’s son, who gradually got involved in the auction business. Mike has won awards for “Best Auctioneer”. He is very involved in real estate and charity auctions.
Randy got involved in purchasing real estate while he was in the agriculture business. He started slowly, buying 1 to 3 houses per year. He continued doing this consistently for 25 years. During those 25 years, he learned how to deal with tenants and structure deals.
Because Randy had a career, he considered his rental properties to be a side job. He rarely had trouble with his tenants and they stayed for a long term, so purchasing houses was not a distraction for him. After a while, the number of properties he owned grew fairly large, so he had to figure out a program to manage those properties.
When Randy first began buying real estate, the most popular trainers were Mark Harrilson, Albert Lawry, Robert Allen, John Schaub, and Pete Coronado. Randy was living in Bakersfield during this time, and he felt that gave him an advantage. He paid $27,000 for a house in Bakersfield and his rent was $350. Today, that same house would sell for $45,000 and rents for $800 per month. Randy’s first investment houses had negative cashflow, but as values increased over the years, they eventually accumulated positive cashflow.
95% of Randy’s home purchases were bought from the owner. He attracted sellers through ads in the paper. He bought a lot of houses by taking over the sellers’ loans.
Randy chose not to buy and sell because he already had a career, so he did not need the immediate money. Also, a lot of work and time goes into rehabbing properties for resale. There are also occasional, unfortunate surprises that come up from low appraisals, which can take 5% away from your selling price.
Randy’s beginning instructors told him to buy and never sell. However, Randy did sell a few of them.
Bakersfield has had almost no appreciation. In 26 years, there has been no appreciation, but you can get a 50% lower interest rate, and there have been wage increases. The payment for a 2011 home purchase in Lancaster is 31% less than the payment equivalent in 1985.
Some builders are currently investing their money in trust deeds, because they do not have enough work. Also, the builders are not offering market rates on many of the homes they are selling.
Randy’s life did not change much when the housing market went from boom to bust, because he chose to hold his properties. However, he does wish he had sold some of his properties, because he feels his age makes holding onto property less valuable.
Mike worked on some of Randy’s houses when he was younger. He feels it was a good experience, because he was exposed to areas he did not want to live in, which motivated him to provide himself with a better life.
Mike wants to buy and hold properties and he thinks right now is the best time to do it. Bruce believes he can still wait a couple years if he feels the need to. Bruce believes it is good for people to gradually work their way into property buying, because there can be big consequences if you do not. Sometimes people come to Bruce asking for a $1 million investment loan, and when Bruce looks at their profit estimates, he finds they are completely wrong.
Randy does not often buy and then rehab for resale. Most of his properties involve very little rehabbing. Most of the people that Randy puts into his houses have good income and poor credit, and most of them have a strong desire for homeownership. Randy puts these sorts of people into his homes, because they rent with the hope of eventually buying the home, and Randy is willing to sell the home to them should they wish to.
Randy has had a few tenants for over 20 years, but the average tenant length is 6 years. It is John Schaub’s philosophy that you will not make money on a rental for the first two years. Vacancy is the biggest expense in land-lording, because you then have to re-prepare the home for a new tenant.
Randy will finance any repairs his renters wish to do on his houses, but the cost of the repairs is probably market value.
Many of Randy’s current purchases are made for other investors. Those properties come out of the MLS. The rest of his properties come from ball room auctions in Bakersfield. Occasionally, Randy has the chance to bid against the lender in an online auction. Many online auctions have almost zero competition.
Randy’s website is www.sellwithauction.com
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