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00:00We went to a real estate auction where a guy bought a property that was $2 million in value,

00:06but he bought it for like $600,000. Turns out this isn't unique. It's called buying real estate at

00:10auction. And this episode is all about how to do it, how we can do it. And what does it mean to buy

00:14on the courthouse steps? Now, I don't know about all of you, but when it comes to real estate right

00:20now, I don't think anybody's getting a deal, right? Real estate prices are at all time highs.

00:25Who else could use a little bit of help? I feel like we're going to like one of those supreme

00:29drops where everybody's running around and throwing money at sneakers. Am I the only one

00:33wondering, weren't we just in the middle of a pandemic? How is everybody and their brother

00:37buying houses? Like they're going out of style. I've looked at buying another property in Park

00:41City, Austin, Santa Barbara, Wilmington, Sedona. Nine out of 10 times, we can't get to the places

00:47fast enough to buy them. Is that a humble flex? I don't know. But what I meant to say is real

00:52estate's super expensive and we're going to fix that today. We're here at an auction learning how

00:56to buy houses that have been foreclosed on for pennies on the dollar. There's like a couple

01:00hundred of our best new buds back there looking to do the same thing with a list, something like

01:05this. And we got a guy who's bought thousands of houses who's telling us how to do it. His name's

01:10Aaron. His last name is unpronounceable. Look at this thing. But we happen to be friends. So I know

01:14it's a mocha staggy. Yep, you're ready. Tell me about your favorite house that you've ever bought.

01:18So I love the experience of auction. We're going to get to see that today. It's like the hurry up

01:21and wait where we're waiting and all of a sudden everything is going on.

01:27But I've had my favorite house is probably maybe like the 15th or 16th that I ever bought. I bought

01:32it at auction and I get there and I go drill out the lock and I open the door and it's absolutely

01:37perfect. And while I'm there, somebody comes and knocks on the door and says, we were supposed to be

01:41buying this in a short sale. Can we buy it from you? So I bought it for 250,000. They at that moment

01:47said we were going to buy it for 340. They wrote a contract with me and 10 days later, I sold it to

01:51them as soon as that deed got there. They're not always that awesome. I've had plenty that we lose

01:55money on or you open that door and it's gutted or burnt out or fire crazy houses. But that was

02:00definitely my favorite. Oh my gosh. Well, I hope we can buy one a day that we can buy for 250k and sell

02:05it 10 days later for 340,000. Yep. That's why we show up.

02:11Now we know the reasons why real estate is really expensive, right? Inflation, interest rates at all

02:17time lows, people moving from tenants to finally being able to purchase because they don't have

02:21to work in an office in the middle of New York city anymore. But what we don't realize I think

02:26is how to buy them at reasonable prices. A prediction. I actually think what we're talking

02:31about today is going to be one of the most important segments we're covering at Contrarian

02:36Thinking. The reason why is I think going forward and you're already starting to see it, real

02:40estate foreclosures, which is the opportunity that gives us to buy at this price, are going

02:44to go up. At the same time that most of us here are pumping money into assets like real

02:49estate, alternatives, Bitcoin, Main Street was shut down. And now we know that recessionary

02:55fears are looming. We're going to have fewer people like us that are available to continue

03:01to pay the mortgage continuously post government payouts being completely wiped and with gas prices

03:07at all time highs. Now it's an absolute tragedy, but this graph shows you what my gut tells me.

03:13It's called shadow inventory, which means that foreclosures are in waiting before they go listed

03:18to auction. It's called moratorium. And those numbers are creeping and creeping up. Interestingly

03:24enough, those numbers are not big yet. Usually in Texas, there are 5,000 houses sold at auction

03:30each month, 2,000 sell. Right now, Texas has more like 1,500, 1,700, and only 50, 100, maybe

03:38even 150 will sell. So already over the year, more than 20,000 vacant or abandoned homes are

03:45just sitting. So what follows is a way to play this market. What he said stuck with me. He said,

03:51fall in love with the problem. Anytime it's hard, there's less competition. Anytime less competition,

03:56you'll get a better deal. Anytime there are problems, as long as you have solutions to it,

04:01you can make a ton of money and have a lot of fun. And Aaron is actually the man to talk to about this

04:06because he is the opposite of a lazy guy. He owns hundreds of properties, acquired and grew the

04:12biggest foreclosure list out there. It's called Roddy's. This is it. Runs a few media businesses,

04:17all focused on real estate. And when I was trying to tell him about, you know, these properties that I

04:21wanted to buy, he said, don't buy real estate at retail, Cody. The best way to get a deal is to go

04:26where no one is. Most people are doing what? We got Zillow porn happening. You know, everybody's

04:31online getting obsessed, looking at Redfin, but most people never go to foreclosure auctions.

04:36I surely hadn't before we did this. Now, what exactly are these? I think we've all heard of

04:43foreclosures. You see them on MLS sometimes showing that a bank foreclosed on the property. They took

04:48the property in. The thing is, REOs, which are foreclosed properties listed on MLS, are pretty

04:54competitive, actually. Why? MLS is easy. It has a connectivity to Zillow. It has a connectivity

04:59to Redfin. You see it online, get title insurance, go and make an offer. So while you're doing that,

05:05a hundred other people are doing that. What you might not know is that prior to them listing on MLS,

05:10there's an auction that's private. It's called buying upstream or how to buy on the courthouse steps.

05:16And it's a little hairier, but we contrarians know to go where the masses ain't. So what does it feel

05:21like to go to an auction? Well, I can tell you, it goes down a little bit like this.

05:30There's two different auctions going on here. There's the sheriff auction. It's really nice

05:33and organized. Like they start at 10. They'll do the announcement. People have paddles and they're

05:38hoping to actually sell the property. So they're going to make sure you have time to see the notice.

05:42The difference that we see over there with the foreclosure, the mortgage foreclosure auctions

05:45is those aren't guys with badges doing the sale. They're people called trustees. Sometimes they're

05:50attorneys. Sometimes there's people that were hired and they come in and they've got their piece of

05:54paper and they don't get paid more if it sells or not. It's actually harder for them. If it does

05:58sell, if nobody buys it, they get to walk back to their car and do the paperwork later. If somebody

06:01buys it, they have to fill out the receipt, they have to sign over the cashier's checks. And so some

06:05of them actually try to almost sneak in. You have to be ready, have your eye open. And then when you see

06:10somebody that might be a trustee, you've got to run over and be ready to listen.

06:13So I don't know anything about auctions. I would be super scared to come here with a cashier's check

06:18and like give it to somebody. And then I take all this paperwork. It would totally free me out.

06:22But you have this thing called Roddy's List where you can actually sort of see what's coming up.

06:26There's some data on there so you can make some decisions. What exactly is this?

06:31Yeah. So if you went and got a picture of that notice up there, that notice doesn't say much,

06:35right? So the notice on the wall that's posted in there, it says that Cody Sanchez, you know,

06:39didn't pay her loan somewhere, but there's no address on it. It says a legal description.

06:44And so what this list does is we have researchers that go all over the state. They go pull those

06:48lists off the wall of the courthouse and they take that and make it actionable data. So if you

06:52were looking at the list, you could see somebody had a $250,000 loan, but you wouldn't know if it

06:55was a piece of land or a mobile home. What this list does is we take that and you can actually say,

06:59oh, this one's a house. This one's commercial. This one has good title. This one has bad title.

07:03It's like some people want to buy a house in a certain neighborhood or a certain zip code,

07:06or they only want to buy houses built in the last 10 years. What Roddy's List really does,

07:09is make it where people can filter and search like that. We're going to get started in two

07:14minutes. Five minutes later. 231, $231,000 to number one. 232, 233, 233 to number one. Number

07:27two is bidding $300,000. Do I have any other bids? 303. Number 11 is bidding $303,000.

07:36True or false, this means that all of these people have $300,000 cashier checks on them

07:42at least, right? Yep. Yeah, they all have cash with them. So millions of dollars in cashier checks

07:47right now.

07:47I think we should rob everything. New plan.

07:53Approximately 10 hours later. Number 11 bids $509,000. So right now his investor's on the phone

08:03with him. So he's trying to ask me, do I keep going or do I not? A lot of the bidders here

08:07are bidding for other people. So he's on his phone taking the bids and then he's bidding basically.

08:11Number 11 bids. Number two is bid $625,000. 1043. Going once. Going twice.

08:21Sold number two for $605,000. And he'll say he cost him, he cost him $200,000, right?

08:33Wow. So he doesn't show up today. He saves $200,000.

08:36Yeah, because the other guy's out. Right. Right. So one less person decides to go to a different

08:41auction instead. Yeah. Or he calls in sick today. Like that's, big money gets made based,

08:46and maybe there was somebody else that would have paid more. Let's go talk about that.

08:48I'm going to go take a picture of this really quick. That auction seemed to take forever.

08:51They were going up by like $100,000 and then they were going up by $1,000. What's the strategy

08:55to make sure that you're bidding correctly? Strategy like before, if you're going to learn

08:59how to buy at auction, is you need to know what your max bid is before. Because like what you saw

09:03out there, when you get out there, it could get a little bit exciting, right? Only $1,000 more,

09:08only $1,000. Like you don't want to lose by $1,000 ever. But people keep going up $1,000. And like,

09:13if I was willing to pay $6,10, maybe I'm willing to pay $6,11 or maybe I'm willing to, but that can

09:16go on for hundreds of thousands of dollars. So as a strategy, you want to make sure you know

09:20your bid ahead of time. So you don't accidentally pay $100,000 more than you could have. That's

09:24something interesting. There's three bidders there. Opening bid was like $237,000. If the other two

09:29bidders don't show up, somebody buys that for $237 a day, it ended up selling for $650 something,

09:34right? We'll figure out what the number was. But maybe if only two of the three show up,

09:37it sells for $450,000 because one of the guys drops out at like $450,000 or $500,000. And so

09:43you just never know. Yeah. I mean, well, today, right? There were three guys, like you said,

09:46two of them were going at it for a while with the other guy being silent until they got to like,

09:50I don't know, $450,000 or something like that. Then the second guy dropped out entirely. So if that

09:55third guy hadn't shown up, then the original guy would have gotten the property for $450,000 instead of,

10:00you know, $600,000 almost or whatever. The difference in that in minutes, right? So that's $200,000

10:06difference in minutes. Or at one point, the guy tells him on the phone, like, you're done. So he

10:10hangs up and he says, he's done at $610,000. And then he says, one more. So he mentally says one

10:15more. So he goes like $611,000. Then the other guy says $615,000 or $620,000. So at any moment,

10:20you could cost someone $1,000, $5,000, $10,000, $20,000 really quick. So the other guy could have been

10:25done at $600,000, right? But every time he bid, the other guy was paying $5,000. There's some strategy

10:30at that at auction too. When guys come to do this a lot, if they think someone's going to keep going,

10:34they will try to bid them up. So they spend all their checks. So why did one guy stop at $450,000?

10:39Maybe he only had $450,000 in cashier's checks today. Maybe he was only ready for that. You have

10:44to have the cash. So if you, maybe if you buy a house earlier, now maybe you don't have enough

10:48for this one. So I'm a first time buyer. I want to buy a home at auction. You've sold me. What are

10:55the three things I need to know upfront? So first you got to drive by the house, go make sure it's still

10:59there. Make sure it's not burnt down. And you can tell a lot by looking at it. Like the, like if it's

11:03empty, you can peek in windows and stuff. But even if it's occupied, you can see how nice it is based

11:07on the kind of cars they drive. Is the lawn mode or not? Like does the roof look good? Does the

11:11siding look good? So even standing in the road, looking right at the house. So you got to drive

11:14by every house before you bid on it. That's also going to help you figure out the neighborhood that

11:18you're in. And then second, you need to look at it online. So like look at a Google Maps view.

11:22What is the house back up to? Does it actually have a pool in the backyard or not? Is there a train

11:26station behind it? Is there a cemetery behind it? Are there things that make it a little bit less

11:29pleasant or a major highway? Or does it look good? So you want to look at it on Google Maps also. Then you want to learn

11:33how to figure out what the price is worth. So like comp pricing, we do this whole course with you that

11:37tells people essentially how to figure out how much a house is worth. But the concept is if you have

11:42two houses next to each other, they're both 2,000 square feet. If this one sells for 200,000, that

11:46means the other one's going to sell for 200,000. So comping is really trying to figure out like, well,

11:49this house is kind of like that sold for 190 and this house is a little bigger and sold for 210. So I'm

11:53guessing it's all the comping is a guess. I'm guessing this is going to sell for 200,000. So you got to look at

11:58it. That's going to help you figure out how much am I going to spend to fix it up. You got to look at it on

12:01Google Maps to make sure there's not anything wrong or makes it better or nicer. Then you got to come

12:04up with your value. And then once you come up with your value, you have to decide, this is my max

12:08bid. Before you go to auction, you want to make sure you know, when this one comes up, I'm willing

12:12to pay this much for it and not a dollar more. We should try to find that house and see if the guy

12:15bought too much for it. Yeah. So that notice said, that's what's West Darlene Drive. Oh my goodness.

12:22So that's not just in Leander, but you're right by Lake Travis. So different things that could,

12:28so somebody says like five acres in Leander, there's probably so many things that could go

12:32into, is that thing a deal or not? So you could, so it's this property, then it goes all the way

12:37down to here. So you could essentially have a boat dock with that property and some, and Lake Travis

12:42boat docks alone right now are selling for like $200,000 just for the dock. So we should have bought

12:46it. People are leasing it from somebody else. At the beginning, we're thinking, why is he paying so

12:50much money for that? And also like, why could there be such an upside? I think he got a screaming deal.

12:55Should we have bought it today? Yeah, we should, we should have bought that thing today. If we

12:59would have been better prepped, if we would have had that on the other list, we would have bought

13:01that thing. Yeah. Because it wasn't on Roddy's list. It was not on the right. It was over in the

13:05sheriff's sale. And the, so it was actually an even more unique sale than we usually see. So it was a

13:10judgment sale. So most of the time when the sheriff is selling something, the other people can buy it

13:14back over the next six months. In this case, in almost this case alone, when there's judgments of the

13:18sheriff's sale, it's just like a fork, a regular mortgage foreclosure sale. The guy that bought it owns it

13:21today. So he owns that property today. He can go change the lock on the gate. He can take ownership.

13:26You know, he can make sure it's nice and secure. If somebody is living there, he can go post a

13:29notice on the door and say, I'm now the new landlord here. So that investor, I won't be surprised if,

13:35you know, he makes double his money. In that $650,000 investment, he makes $650,000. Even if he

13:40sells it just as a lot, if he wants to build it out, put a house on it and sell it, make over a million

13:43dollars in less than a year. You live a pretty sweet life. You know, we got a golf simulator in

13:51here. You're talking about going to Croatia. You got all these cool activities, but you buy thousands

13:55of houses. Like how long does that take? How many hours a week do you work on this stuff?

13:59Yeah. It's funny. One of the reasons I love Texas so much more than like California, when I used to

14:04do it in California, it's a California auction was every day. And you guys saw today that if you skip an

14:08auction, you might miss the deal of the century. And if you're, and if you're there, somebody else might,

14:12might get it. But Texas, it's one day a month. So the cool thing is even when I started doing

14:16business out here, I was in California, I'd fly out on Saturday and I'd drive houses all day. I would

14:21drive houses again. On Monday, I would do all the prep work. On Tuesday, I would go to auction and

14:25I would buy like three houses. And then I would go put locks on them and I would fly back. Now

14:29contractors would do the rest and sell it. And so I had essentially worked three or four days really

14:33hard. And then I wouldn't have to do anything until the next month. And you flip, you flip three

14:37houses, you make 10, 20, $30,000 or with partnerships where you keep them as rentals, but there's,

14:42you make good money during that four days. And I knew that if I dedicated that four days,

14:45I'd always get it. And now as it scales more, so I'm not flying out here anymore. I'm not driving

14:49the houses myself anymore. I'm not bidding in person, you know, as often as I was. And so as

14:54you get to scale my home rock company, where we have all of our rentals inside that, I respond to

14:58emails once a day. And then once a week, we have a two hour meeting with that team and they run that

15:03business and it flies. And so when it comes to buying foreclosures for myself, it's similar. It's busy

15:07around auction time, but now any house that gets bought today, now we're mostly just waiting for it to sell.

15:11We're waiting for the escrow. I've got three houses that are flip selling right now and I do nothing

15:15for the next couple of weeks. Yeah. That's so rad. Yeah. I mean, so we today went to an auction.

15:20We saw a guy buy a house for $650,000. We looked it up afterwards and the guy bought a house that's

15:27actually worth about $2 million. Yep. So theoretically that guy probably did that same amount of work.

15:32Let's call it four days of work, prepping, driving around, making sure that all the houses were going to

15:36be available, cited in on that one. And then we'll spend, I don't know, 30 days, like making sure that

15:43he gets all the titles and paperwork and everything in his hands and then could theoretically flip it

15:47or could build a house and maybe make more than that. Yeah. And really in that first theoretical flip,

15:52right? He sells it for $2 million after commissions and everything. Let's say a $1 million profit and he

15:57could sell it today. So it could be that four days of work that he did and now no more work making a

16:02million dollars. Like they're not, they're not like that, but that's the dream, right? That's the

16:05process. And it's, and it's possible, you know, when those work out, even if let's say the last four

16:10months, he does the four days, the four days, the four days, the four days, and he skunked, right?

16:13We do the math on that. So he has worked, let's say 120 hours. He makes a million dollars. So he,

16:19so the, I don't know, is that $10,000 an hour? The, that he was getting paid to go do this business.

16:24And the funny thing is the grungy business as you're doing it. So real estate is a great way to be able to

16:29like have businesses and then have times when you get a break because there's a lot of waiting time

16:33too. Like after you buy, you're waiting for it to get an escrow. Once it's an escrow, you're waiting

16:37three or four weeks for it to actually sell during that time. You don't have to do anything for it

16:40except for wait. I love it. What I would recommend is reading a book like this one from Aaron. He gives

16:50you a step-by-step guide on how to buy real estate at auction. Now how to win on this day, a couple of

16:56things. Know your goal. Know your bid in advance, aka don't get excited. Bid happy. Arrive early

17:03and prepared. Listen, this seems obvious. Don't bid on unknown or discarded properties unless you have

17:09a very compelling reason. Bring a voice of reason, aka another human. And it's okay to go home empty

17:16handed. It's also okay to take a calculated risk. Your goal is to price risks into the valuation of the

17:22property so you can come up with an amount you're willing to pay. All right. There's a couple of

17:26resources I want for you. You can see this here. This is a simple bid sheet that I want you to take

17:30a look at. It'll tell you how to figure out how much you should pay. There's one other thing I want

17:35you to remember. Never fall in love with something that doesn't love you back. Don't fall in love with

17:40a house, a deal. There's always another deal. There's always another house. You have to keep fishing.

17:47If you also want the five risks of buying foreclosure at auction, hit below. We got those for you.

17:53The truth is it can get a little hairy at the auction steps, but that hairy is where your return

17:59is. All right. If you liked this, let us know below. If you have more questions, let us know.

18:04We'll do another video for you. And as always, subscribe.

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