Investor Cashes in on 'Cheap, Shabby' Homes

An auction on the front porch, a crowd of nervous buyers, a few minutes to see the item -- and the bidding begins. This is how most homes in foreclosure are sold.

But it's rarely how foreclosure king Odell Barnes snaps up the hundreds of properties he buys every year. Barnes operates by fielding dozens of calls a day -- from his own front porch.

"I do most of my buying from right here," said Barnes, while sitting on the porch. "I do whatever I want to do. If I want to go fishing, I go fishing. As long as I have a cell phone and a computer, I'm happy."

Banks all across the country call Barnes when they want to unload hard-to-sell properties in bulk. They know he'll buy anything -- but at a rock bottom price.

That's because the houses he purchases are in the most distressed parts of the country. Barnes has bought and sold thousands of them over the years, some nice, some not so nice. Most are small and often plain, and all share the same forlorn look of loss.

"[I] bought them for 20 cents on the dollar, or maybe 10," said Barnes. "Do you really care when you're buying that cheap, and it's a piece of real estate? I don't care."

He claims he's a "good ol' boy" who can't read anything but a "For Sale" sign. He bought his first house at the age of 14.

"There was an ad in the paper," said Barnes -- "$200 down and take over payments. I asked my daddy, who was a waiter in a restaurant -- I mean, we were really poor. And I said, 'You think we could buy that house?'"

'If It's a Good Deal, I'll Buy It'

And buy he did. With a modest initial investment of $200, Barnes has become a millionaire. Today he lives with his family on a 54-acre ranch outside Columbia, S.C.

"I have an illness about buying things that's a good deal," said Barnes. "It doesn't matter how many I have -- if it's a good deal, I'll buy it."

This is strictly business to Barnes. In most cases, he never sees the houses he's buying -- or the buyers, for that matter.

"I'm a dictator. I approve it," said Barnes. "In the first week I own a house, I would like you to have a 550 credit score. In the second week I have a house, if you have a job, I'll sell it to you. In the third week I own a house, if you're breathing I'll sell it to you. Because I want it moved. I want somebody in that house."

And Barnes rarely has to leave that porch. His employees do the legwork. "I have three people that work for me that do nothing but travel the U.S. [and] put up signs," said Barnes.

"It's a little 'For Sale' sign … and the reason I use this sign … I don't want to look like a big company. I don't want to look like a real estate company. I want this sign to relate to that guy who is walking home and he can say, 'Wow, 500 down, 300 a month. That's cheaper than my rent.'"

Sometimes he doesn't even bother with home buyers. Instead, he'll sell in bulk to one of the dozens of investors he works with.

'Too Good to Be True'

Jarrod Haning, a classical musician, got together with Barnes to supplement his symphony salary. "Odell has a group of investors, about 40 of us, that buy his houses. He finds the deal; we do the legwork. We find somebody to put into it. We make sure they're making their payments on time. We take care of them," Haning said.

Two months ago, Haning sold a three-bedroom bungalow to Pat and Gary Chitwood, and following Barnes' method, sold it "as is."

"We'd been hoping and praying that we could buy something," said Chitwood. "We're not young anymore. So you don't get a lot of chances. Saw the sign 'For Sale' … 300 dollars down, 275 per month … I backed up, said to my husband, 'That's too good to be true.'"

Haning bought the house from Barnes for about $5,000 and sold it to the Chitwoods, with no improvements, for $27,000. At 12 percent interest for 15 years, they'll pay almost $50,000.

Despite the higher-than-normal interest rates, Chitwood was happy with her decision. "I just wanted a house, and once my son said, 'Mom, this house is well built,' I bought it," she said.

'People Want to Own a Home'

Chris Estes, executive director of the North Carolina Housing Coalition, thinks these types of transactions can be problematic. "Sure, families are always happy when they first get in the house that they own at any level, whether you buy it at $9,000 or at $300,000. The challenge is, how do those families feel about that purchase two years from now, three years from now? Are they still able to afford their mortgage?"

As many as 30 percent of Barnes' buyers wind up losing their homes, can't keep up with the payments or can't handle the repairs.

Estes said some people are better off renting. "Is it better for them to be in a better-utility rental unit that doesn't cause health issues, doesn't have issues with mold or asbestos or lead paint, rather than owning a home that may have some of those health issues?"

"The model of helping low-income people buy homes is a great idea. It's really how you do it and what the impact is," he continued.

"People want to own a home," said Barnes. "And these people -- they're poor, they ain't dumb. They know how to put in a hot-water heater. If their house needs to be painted, they'll go to Lowe's to buy a gallon of paint and they'll paint it. They don't have book sense, but they know how to fix up their house. And it's amazing -- you go to them and they fix them up and they're so proud and they own a home."

And it's those two fundamental American tenets -- home ownership and capitalism -- that have made Odell Barnes a wealthy man.

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