August 8, 2020

Rich Von – Distressed Property FAQ

Rich Von

Rich Von

Rich Von has a talent for turning around homes that are in disrepair, sometimes revitalizing entire areas. Below, Rich Von shares some of his knowledge, gained from years of experience.

Q: What is a distressed property?

Rich Von: The term distressed property refers to a home that is on the market at a reduced price due to foreclosure or short sale.

Q: Are these properties typically in bad condition?

Rich Von: Some of the properties are in really bad condition and others are near perfect—there’s a wide spectrum. Distressed properties have unjustly been given a bad rep due to the fact that, in some cases, homeowners vandalize properties before moving out.

Q: So it’s a misconception that all homeowners vandalize properties?

Rich Von: Yes. The vast majority of homeowners simply move their items out and let the lender take over from there.

Q: What can I expect if I purchase a distressed property?

Rich Von: A distressed property probably won’t have the niceties found in a home that has been put up for sale for a profit.

Q: Such as…?

Rich Von: The carpets may need to be cleaned or replaced. The walls normally aren’t freshly painted and there may be some light fixtures or cabinet knobs missing.  And you should expect to have to do a lot of due diligence so you know exactly what you’re purchasing—this means title searches and very thorough testing to insure appliances are working, plumbing is satisfactory, roof and foundations are ok, etc.  A lot of times you’re purchasing the property as is, so it’s important to bring in professionals to get a true and accurate assessment of what you’re buying.

Q: Can someone get a bargain on a distressed property?

Rich Von: Normally homebuyers can get a much nicer home for the money if they’ll consider a distressed property. However, distressed properties can fall into a bidding war, so it’s important for a buyer to be well-educated in the value of a home and the cost of any repairs to avoid overpaying.  Just because it’s a distressed property doesn’t mean it’s a deal.  I’ve seen a lot of people pay way above retail and think they were getting a deal just because they bought at auction.

Q: If I want to buy a distressed property, will I need an agent?

Rich Von: You won’t need an agent, but I highly recommend it, especially for inexperienced buyers. Distressed properties can sometimes come with extra paperwork and legalities that can be a nightmare for someone who is new to real estate.

Q: Can I make money flipping distressed properties?

Rich Von: Buying and fixing up distressed properties for resale is something that takes experience. Someone can easily lose money if they don’t know what they’re doing.  There are all kinds of traps—liens and title issues; construction issues; I could go on for hours.

Q: What do I need to know?

Rich Von: First, it’s important to become thoroughly educated about an area and be familiar with trends. If a neighborhood is on the downslide, for instance, a house may not fetch what it would in a neighborhood that is trendy and popular at the time.

Q: Will I have trouble selling a distressed property once I’ve rebuilt it?

Rich Von: It’s possible to have trouble reselling, yes. A seller can easily run into trouble trying to sell a distressed property, primarily with buyers getting loan money from banks. A bank will often question whether a home is worth what the seller is asking, especially if the area has gone downhill in recent years.

Q: How do I find distressed properties?

Rich Von: Often banks will hold auctions for a property where buyers can get a great deal. A real estate agent can also help a less experienced buyer find great deals on properties.

Rich Von is a co-founder of Von Vesting, Inc., a company that specializes in distressed properties. The company has found great success in recent years, thanks to Rich Von’s knowledge of local housing markets.

Rich von Alvensleben – Von Vesting Q & A

Rich Von Alvensleben

Rich Von Alvensleben

Rich Von Alvensleben is the Operations Manager for Von Vesting Inc., a professional real estate redevelopment company operating in Northern California. Under Rich Von Alvensleben’s leadership, Von Vesting has established a great track record for investors and their own company as well. Here, Rich Von Alvensleben answers a few questions about Von Vesting.

Q: How many properties has Von Vesting sold in the past decade?

Rich Von Alvensleben: In the last twelve years, we’ve bought and sold approximately 1700 properties, leveraging our experience to take the chance and guesswork out of the process for investors. We’ve returned investors over 12% cash-on-cash every year, and over 20% cash on cash in 10 of the 12 years.

Q: What’s your investment strategy?

Rich Von Alvensleben: We buy smart—which means a low price with high resell potential and manageable construction needs, taking distressed properties off the REO lists of lenders at wholesale rates, rehabing them with new amenities, and then offering them for sale at sub-market rates.

Q: What’s your typical return?

Rich Von Alvensleben: We shoot for a minimum return of 15% per property—but the key is velocity.  When we do what we’re supposed to, we can use the same money to buy and sell three properties in one year.  So that 15% per property translates into 45% for the year.

Q: That has to be a good strategy for investors…

Rich Von Alvensleben: Absolutely! We split profits 50-50 with investors—it’s fair for both sides.

Q: Can you expand on that a little?

Rich Von Alvensleben: We make sure to do our homework on liens, titles, zip codes and comps when we buy, and are careful to stay away from properties that need serious structural work that would cut into the return. The key is our track record and experience—after approximately 1700 flips, there is not much that we haven’t seen.

Q: Doesn’t it get tricky in a down market, though?

Rich Von Alvensleben: Yes, getting an accurate fix on a sales price can be really tough if you don’t know the ropes.   But at the end of the day, a down market requires more skill—you have to be tighter with your budgets and quicker with your construction work and more accurate on your projected sales price.  We like it, because it weeds out competitors—easy to lose money in a down market if you don’t know what you’re doing.

Q: What are your guidelines?

Rich Von Alvensleben: We want a property to sell quickly after improvements are completed. We get a fix on sale price, then work backwards from there, factoring in disposition, improvements, acquisition & carry costs, etc.   The key is knowing what you’re going to sell a property at quickly.  This is more then just comps—it’s construction and days on market too.

Q: How long do properties typically sit on the market?

Rich Von Alvensleben: We shoot for a 90-day turnaround on each property from date of purchase to close of escrow.  The customers buying our product on MLS generally want 30 day escrows, so that means we have to have properties fixed up and listed in 2-3 weeks max so that we have 2-3 wks to list and get them into escrow.  90 days can fly by pretty quickly.

Q: How is Von Vesting structured?

Rich Von Alvensleben: Von Vesting is a California Limited Liability Company that is contracted by the Limited Partnerships that have the investment dollars.  Von Vesting finds the property, hires the general contractor and the real estate broker—manages the entire process—on behalf of the Limited Partnership that holds the investment dollars.

Q: Who are your principals?

Rich Von Alvensleben: Von Vesting is owned and operated by my wife and I with a lot of help by our Chief Operating Officer (J. Kale Flagg) and our Chief Financial Officer (Mike Harman, CPA). The Limited Partnership, which we call the Fund, is owned pro-rata by all of the investors.

Q: What is your target market?

Rich Von Alvensleben: We operate mainly in the San Francisco South Bay area and greater Sacramento.   We have also done flips in Arizona and Nevada—wherever we can find good product that we can turn quickly in markets we know and understand.

Q: Do you have local experience?

Rich Von Alvensleben: Yes, one partner and I grew up in South Bay, so we have a certain amount of home-field advantage.

Q: That has to be a big help!

Rich Von Alvensleben: Immeasurably so. We know how to figure comps with our knowledge of the area, helping to move the properties more quickly on the back end.

Q: That must make it attractive for investors.

Rich Von Alvensleben: It does. Our business relies on velocity, and the fact that we’re so familiar with streets and neighborhoods is a huge advantage for us.

The career path of Rich Von Alvensleben has taken him in diverse directions. Rich Von Alvensleben ’s first passion was marine biology, taking him to a stint as a commercial diver for the United States Antarctic Research Program. Rich Von Alvensleben was also co-owner and founder of Associated Drilling, a California-based construction company; and was co-founder of World Concepts LLC, a nationwide marketing and sales company that generated large profits for many years. Rich Von Alvensleben went on to serve as Construction Manager at Eldorado Holding Company, Inc., a springboard into the arena of real estate investment with Von Vesting. Rich Von Alvensleben lives in the greater Sacramento area; when not at work, Rich Von Alvensleben volunteers with his community and spends quality time with his family.