Finding affordable properties via private seller auctions

Tony Richards recently purchased four properties in his hometown of Montgomery, Alabama. He bought it from an outside landlord who didn’t have the local market knowledge or presence needed for property management.

All four of the properties are in underserved neighborhoods as defined by the Federal Housing Finance Agency (FHFA). Additionally, three of them are on the same street. The median family income in the Census tract around those three properties is $28,591. That’s 60% below the median family income of $70,782 across the greater Montgomery metropolitan area.

“That would not be for the out-of-town investor,” said Richards, who purchased the properties via Auction.com’s new SmartSale program. “But for someone like me who knows the city of Montgomery and the tri-county area like the back of my hand … I can make it work.”

New marketplace for motivated sellers

That is good news for sellers like Ricardo Sims, the out-of-state landlord who sold the Montgomery properties to Richards via SmartSale.

“We had to take back some properties where we don’t have a large real estate operation, so we didn’t want to keep them,” said Sims, general partner at Constitution Lending, a Connecticut-based real estate lender providing fix-and-flip and long-term loans to real estate investors. The company sometimes takes ownership of properties when investors default on their loans “We had 15 single-family (homes) in Montgomery, Alabama … I don’t imagine how the hell I would have sold (them) on my own. Thank God for Auction.com.”

Sims was able to sell the properties quickly thanks to the deep and wide pool of buyers using Auction.com, with its more than 7.4 million registered users. Like Richards, most Auction.com buyers are local community developers who have a deep knowledge of the markets and submarkets where they are buying.

More inventory for boots-on-the-ground buyers

Richards started investing in real estate in 2004 and discovered distressed property auctions in late 2019. His first Auction.com purchase was in December of that year.

“We discovered online auctions and Auction.com, and that was the best thing since sliced butter for me,” said Richards, who has purchased 15 properties on Auction.com since 2019. “Honestly I kept that a secret because I didn’t want too much competition.”

Prior to the four properties he purchased via SmartSale in 2024, all of Richards’ Auction.com purchases were through online bank-owned (REO) auctions. SmartSale has provided a new acquisition channel for local community developers like Richards.

“Very tired landlords,” Richards said, describing some of the motivated sellers utilizing private seller auctions. According to Richards, these landlords are motivated to sell because they may not have the local resources and infrastructure to properly manage their rentals — unlike local community developers like him.

“We are right here with boots on the ground,” he said. ”Any maintenance issues we are on it, not 24 hours later, but today.”

Supporting local jobs with “Full Renos“

Along with the prompt and premium property management he provides to tenants, Richards also takes pride in the extensive and high-quality renovations he does on newly acquired properties, most of which are in poor condition when he buys them.

“These are full renos, meaning tear the bathroom out, tear the kitchen out, new bathroom, new kitchen,” he said of his approach to renovation. “Make everything new so you don’t have to come back as much.”

Richards said his small business, Renaissance Properties, employs about 20 people full-time and supports more jobs through the network of contractors he regularly hires for property renovations.

“If you are counting the contractors … it’s going to be 50-plus,” he said. “We have a team of people that primarily work on our properties. The majority of their business comes from Renaissance Properties.”

Quality, affordable housing

Richards grew up in Montgomery and knows the city and its neighborhoods well. That knowledge, combined with the locally based resources that his company brings to the table, gives him a home court advantage. He’s able and willing to buy properties that other investors might shy away from, and he’s able to provide quality housing to people who otherwise might not be able to afford it.

“My niche is renting that same quality property to someone who may not be able to afford that property otherwise,” he said. “Their only (other) options would be a slumlord or not being able to rent period.”

The home court advantage also gives Richards the confidence to buy in neighborhoods that other real estate investors might avoid.

“All the books I read way back in the day said buy a house in a neighborhood you wouldn’t mind living in,” he said, noting that he decided to veer from that advice a few years into his investing journey. “Just because I wouldn’t want to live in a neighborhood doesn’t mean someone else wouldn’t want to live in that neighborhood.”

Related