Sometimes, I think the secret to my long career as a real estate investor here in Albany is that I love history. I love the story of this town, of its glory days in the heyday of the Canal, and the grand houses that were built. I genuinely love being able to buy homes, restore them, and bring back some of the beauty and make the town more liveable. That’s what drives me.
It’s also what drives the Albany County Land Bank (ACLB), the non-profit quasi-public corporation that handles foreclosure auctions, abandoned house sales, and other real estate transactions. They want to make sure that Albany houses can be lived in so they sell cut-rate if you have a rehab plan. That is why the foreclosure auction here in Albany is where a lot of people looking for investment properties go.
I think the ACLB is a great idea that has contributed a lot to the city but, as an investor, I don’t think it is the best place to go when looking for properties. There are a lot of red tape reasons why you might end up frustrated at best, and in a hole at worst.
Let me give you some investment advice for Albany County.
What You Need to Know About Albany’s Foreclosure Auction
I’m going to be blunt: there are a lot of run-down and abandoned houses here in Albany. Despite being the state capital, this town hasn’t been a vibrant economic center in some time. The foreclosure rate is lower than the national average, but that’s not the whole story. Both the delinquent mortgage rate and the percentage of people with underwater mortgages are considerably higher than the average.
That begins to tell the story. What happens when homeowners are underwater? Well, sometimes they just abandon the property. In recent years, Albany still had over 1000 abandoned properties—nearly 3.5% of all residential structures. And, that doesn’t even take into account the vacant lots you see everywhere.
This problem led to the creation of the Albany County Land Bank. Since 2014, the ACLB has used money from the city, county, and state government to buy distressed, foreclosed, or abandoned properties in this part of NY and sell them to the public for very low costs. Some residential buildings start for as low as $4000.
This is not a money-making plan for the Bank. It’s a way to make sure that these properties are made livable and become vital parts of the community again. It’s a great plan and there are good deals, of course. But for the professional real estate investor in Albany, there are some potential pitfalls.
The Pitfalls of The Foreclosure Auction in Albany New York
The ACLB has its auction once a month. While there is a lot to bid on, most of it is for vacant lots. This year, expect the lots to outweigh houses available by about 400%. While it might be sweet to score a lot for $600, that’s not really great for investors who are focused on buying, selling, and rehabbing distressed houses. You have to build it from the ground up.
And, it’s not a traditional auction, per se. You send in applications for the properties. That’s because this is not strictly a “highest bidder” type of process. Other qualifications are taken into account, in accordance with the ACLB mission.
Some of these are:
- Properties are generally distributed on a first-come, first-serve basis, so send in your application early
- Special consideration is given to people who live on the same block or in the same area
- You have to have a strict plan for renovation—the more detailed, the better
- Credit check, work history, and tax status figure in and must be in top shape
Who judges these? Well, in order: the Albany foreclosure auction staff, the Community Advisory Committee, and the Disposition Committee, which is frankly a great name, but you had better hope they are disposed toward you. If not, you’ve wasted time.
And, that’s one of the biggest issues here. See, because it is first-come first-serve, you are encouraged to apply to multiple houses. After all, if you get passed up on one, or someone else snagged it, you might be lucky with another. But, you also might not be.
But the bigger problem than not getting a property? Well, it could be getting a property. Why? What I’ll call the 3 Rs:
Risk, Rules, and Reward.
OK, so you’ve got the house. That’s great, in theory, but the problem is that many of these have been abandoned. Some have been squatted in or just left to the wind and weeds. Nearly all have been neglected.
Unless you have done a thorough inspection and really know your way around old houses, you might be in for a lot more repair work than you bargained for—and that’s just to get it up to code. And, that’s a problem, due to the second “R.”
According to this particular Albany foreclosure auction’s bylaws, the new owner—you—has 30 days to get the new building up to code. If that’s just doing some cleaning, maybe replacing the windows, that’s fine. But if you have to do a lot more work, which is very possible, even likely, that’s tight. That means a lot of upfront cash for contractors or a very fast hard money lender.
The other big rule is that, with few exceptions, you can’t sell it for 5 years. This makes sense; they want to discourage people from doing shoddy work to make a quick buck. If you are looking for rental properties, that might fit your timeline. But, it also might be some pretty tight handcuffs if ever you want to alter your plans and flip the house.
Why is a “reward” a bad thing? Well, it is when the rewards are dubious. After all, very few of these houses are abandoned for being in too nice of an area. Your investment property might be nearly unrentable. Or, you might not get the rates you want. It could be very hard to get back that investment you made. Given the sure and certain costs of getting it to code, and then to a liveable state, this could be a terrible investment.
So what is another option? There is a way to help homeowners and the city outside of the ACLB.
A Better Way To Find Investment Properties in Albany
I love being able to give a distressed homeowner cash, renovate the property, and sell it to other people looking for a nice home here in Albany. That’s why I like being an independently owned and operated HomeVestors® franchisee.
See, as a franchisee, I get qualified leads from distressed homeowners—before the property goes into foreclosure and the Land Bank. I can inspect the house, understand the scope of the work, and make them a fair offer. It puts money in the distressed homeowner’s pocket. And, the deal can be done on my terms, allowing me to rent it for as long as I want and sell it when I feel it is right.
There isn’t any “foreclosure” red tape. There’s just a chance to get more qualified leads, make your own deals, and do what you think is best for you, the seller, and the city. It’s how my career is built, and how I’m doing my part to rebuild Albany—without messing around with a foreclosure auction.
If you want a better way to find investment properties here in Albany, request information about becoming a franchisee today.
Each franchise office is independently owned and operated.