PropertyForeclosure.com Blog

If you’re looking for great deals in pre foreclosure investing, distressed property can be a good way to make profits.  But before you commit to anything, make sure the “deal” is really a deal.  Here are three things you need to consider before you invest in distressed property:

What repairs will you need to make on the distressed property?  Distressed property comes in all degrees of distress.  Make sure you’re aware of the problems, as well as what it will cost to fix them.  Two ways to find out about the issues a distressed property has are by asking the owner, and by hiring a licensed home inspector.  It’s always “worth it” to hire a home inspector if you’re seriously considering investing in a property; all the more so if it’s a distressed property.

What is the distressed property worth?  The seller will tell you what he thinks his distressed property is worth.  Again, it’s “worth it” to hire a professional appraiser, who will take into consideration comparable values and sales of similar properties nearby, for a realistic evaluation of what the distressed property is currently worth in the market.

What is the best price you can get the distressed property for?  If a distressed property is in the pre foreclosure stage, the owner may be very motivated to sell it for less than what it’s worth.  A good deal for you is when you can get the distressed property for at least 20% less than its market value. 

Now, apply the three questions above: Know what the cost of repairs will be to make the distressed property saleable, and know what you can sell the distressed property for when it’s in good repair.   A good deal for you is when you can get the distressed property for at least 20% less than its market value. 

In today’s market, real estate flipping has become a popular and effective way for investors – even less experienced investors – to make money at real estate.  A real estate flip is when you buy property and quickly resell it instead of keeping it as a long-term investment.

Here are three ways to make money with a real estate flip.

Buy-it, fix-it, flip-it:  This is the most common type of real estate flip.  In a nutshell, you buy a fixer-upper property, make improvements and repairs, then sell it on the retail market to a buyer who will live in the house.  With this type of real estate flip, you can easily make $15,000 to $50,000 in profit, depending on factors such as location, ultimate cost of repairs, and price you paid for the property. 

When you pursue this type of real estate flip, be sure that you’re conservative and realistic in your estimates for repair costs, time to resell the property, and actual selling costs. 

Wholesale real estate flip:  Very simply, this type of real estate flip consists of buying a property that needs to be rehabbed, then quickly turning around and reselling it for a few thousand dollars more to another investor who is looking for rehab properties.  Even though your profit may not be as great with this method of real estate flipping, you’re more likely to sell the property quickly, thus realizing your profit quickly.

Buying, then selling “for terms”: When you do a real estate flip this way, you buy the property, fix it up, refinance it at its current appraised value, and sell it on a lease with option to buy.   The rent payment you receive should cover your mortgage payment.  Because you don’t have to pay a broker’s fee, you gain more profit when the tenant exercises his option.  You can even benefit from a lower capital gains tax rate with this method of real estate flip.

If you enjoy the challenge and rewards of making money at real estate, consider one of these methods of real estate flipping to realize substantial profits.

Pre foreclosures, flipping, probate property…You’ve heard it before: Investing in real estate is a solid wealth builder. If only you had thousands of dollars lying around to invest, right? The truth is, you can get involved in real estate investing – with very little cash – by investing in pre foreclosure properties.

You may already know that investing in pre foreclosures (properties where the homeowner has defaulted on the mortgage payments) is one of the best ways to get involved in real estate investing. But if you’re still not quite convinced, here are some more reasons why pre foreclosure properties can be a great way to profit with very little cash up front.

The pre foreclosure period is the period when a mortgage loan is in default, but has not yet reached the auction stage. No one has been making the payments on the pre foreclosure property. The bank wants payments on the property, and the property owner wants payments on the property to occur. What this means to you as a pre foreclosure investor is that you don’t have to worry about holding costs. It also means that the seller of the pre foreclosure property is likely to be open to your offer, since he just wants to get rid of the problem, and you can help him do just that.

When a loan is in default, resulting in a pre foreclosure situation, you, as a pre foreclosure investor, have the opportunity to enjoy large equity spreads. Why? The bank is under pressure to liquidate the bad loan rather than be forced to take the property back. You can request that the lender discount what is owed on the payoff – something you can’t do unless a loan is in default.

When you buy a pre foreclosure property, you can take over the financing already in place. You don’t need to be pre-qualified, or have your finances under a magnifying glass. The best part of this is that, even by taking over the payments on the pre foreclosure property, you’ll still enjoy the tax advantages – without the risk of being personally liable for the mortgage and the property.

So let’s put it all together: A motivated seller, a willing bank, a large equity spread, and little or no liability – what’s stopping you from being a prosperous pre foreclosure investor?

If your resources are limited, if your credit is less than stellar, or if you just enjoy making a profit, one of the best ways to get started investing in real estate is to buy foreclosures. There are three stages in the foreclosure process, providing you with three opportunities to buy foreclosures: default, or pre foreclosure; auction/sale; and REO (Real Estate Owned). Each stage carries its risks and rewards.

Buy Foreclosures at the Pre Foreclosure Stage At the pre foreclosure stage, the homeowner has defaulted on his mortgage loan. The bank has begun the foreclosure process, which will end with the foreclosure auction. In pre foreclosure, the owner still has a chance to preserve his credit by selling the house and thus getting rid of his mortgage debt. He is often anxious to “unload” it, to end his financial troubles. If you want to create a win-win situation for you (you get a property at a deep discount) and for the seller (he sells his property), buy foreclosures while they’re in the pre foreclosure stage.

Buy Foreclosures at Auction A public auction can be more nerve-wracking than working directly with the seller to buy a pre foreclosure property. First, you’ll be competing with the lender, as well as with many others who also want to buy foreclosures. The process moves quickly, and the property is auctioned off to the highest bidder. Though you may need to have a large amount of cash up front, and sometimes the remainder within weeks or months, you can often get great property at 35-40% off market values.

Buy Foreclosures in the REO (Real Estate Owned) Phase When the lender takes back a foreclosure property to cut its losses, the property is called “REO.” An REO property can often be very easy to buy, because lenders generally don’t want to be in the business of owning property, and want to move the property quickly. If you buy foreclosures in the REO phase, you may not get discounts as deep as with auction sales or pre foreclosures, but, on the other hand, your risks are generally lower.

Each stage of the foreclosure process offers a distinct way to buy foreclosures. If you do your homework, you can buy foreclosures at minimal risk and maximum profit.

You may already know what a huge profit potential there is in foreclosure investing. You may also know that investing in foreclosure properties is a great way to get started in real estate investing. But here are three more reasons to invest in foreclosure property:

In today’s economy, many foreclosure properties can be found in upscale neighborhoods.

Many people simply can’t afford to continue making large mortgage payments on their upscale homes, and consequently, they default on their loans, placing their homes into foreclosure. When this happens, many people in this situation can be encouraged to avoid a foreclosure auction and preserve their credit by selling their property quickly to someone who can solve their problem by taking their foreclosure property (and their loan) off their hands. If you’re that “someone,” you may get a fantastic deal on a high-value home you may not otherwise be able to afford.

Buying foreclosure properties can allow you to invest in other properties with the money you save (foreclosure or not). Or, you can use the money to convert the foreclosure property into a rental home, or flip it and make still more profit.

You can buy a foreclosure property quickly (provided the owner is willing, and he usually is) and without undergoing financial scrutiny. Because the foreclosure process is a fast process (usually about three weeks, from beginning to end), and because you’re likely to have a cooperative seller under the circumstances, you don’t have to go through the regular financing channels. You can deal negotiate with the owner to take over his/her loan, offer cash (if you have it), or use other creative financing that doesn’t involve a long, drawn-out financial process.

Foreclosure investing has always been a great investing opportunity. In today’s economy, it may be just a little easier to take advantage of this opportunity.

While you’re probably aware that pre foreclosure investing is a great way to profit from real estate, you may be finding it hard to come up with ways to find those pre foreclosure properties that others haven’t already thought of. Here are some unique ideas for being the first to find out about potential pre foreclosure investments.

Build your army of pre foreclosure headhunters. Make it widely known to everyone you come into contact with that you buy pre foreclosure homes (you’ll probably have to educate them a little about what to look for). Let them know you’ll offer them a bounty (say, $500) if you end up buying a property they tell you about. Tell your mail carrier, your grocer, your neighbors, your hair stylist, your kids’ parents…and give each of them a stack of your business cards.

Post flyers wherever you can. Post your pre foreclosure bounty offer at your church or synagogue, your health club, your coffee stop, your gas station, the laundromat – anywhere there’s a bulletin board.

Contact utility companies. Sometimes the gas or electric company can be a good source of leads on vacant or troubled property (which may be in pre foreclosure). Make sure they know about you, and that they have your business cards.

Place an ad at a widespread online service such as Craigslist. Millions of people frequent these classified ad services every day, including people whose property is in pre foreclosure, as well as people who may know of a property in pre foreclosure

Don’t limit yourself to single family homes. Other types of properties go into pre foreclosure, too. Mobile homes, duplexes, churches, farms, even raw land can all have owners with financial difficulties that have forced them into pre foreclosure.

These are only a few of the more creative ways to find potential pre foreclosure properties that can result in huge real estate profits for you.

You’ve probably heard that in this soft market, flipping homes is not a good real estate investing bet. But once you really understand what flipping homes is all about, you realize that it’s sometimes best to ignore what you may have heard.

Flipping homes involves finding an undervalued property, rehabbing it and making it appealing, then quickly selling it at a profit. Though it may seem logical that flipping homes works best in a booming market, the reality is that in a rising market, it may be impossible for someone interested in flipping homes to find bargain basement properties in desirable areas.

In a falling market, flipping homes can still be profitable, because your holding period is normally too short for the value of the property to fall lower than the discount price at which you got it. And since you will have raised the value of the property by rehabbing it, your likelihood of making a profit is still high.

Additionally, in the current market, you’ll find many opportunities for flipping homes among foreclosure properties whose owners want to unload their houses quickly in order to get rid of their financial burden and salvage their credit.

In fact, many people who make money flipping homes only deal with foreclosure properties, which can often be purchased at well below the market values. Though foreclosure properties may sometimes require more rehabbing than do other undervalued homes, they can still provide you with great opportunities to profit at flipping homes. Flipping homes can be highly profitable in any market, but there are definite advantages to flipping homes in a soft market.

You may already know about the fantastic profits to be made from foreclosure investing. And while foreclosure investing can be a legitimate and rewarding way to quick profits, it’s not a completely fool-proof way to easy money. Being able to honestly answer the following four questions can help ensure that your foreclosure investing ventures are always good deals (and can help you to stay away from the money pits).

How much money will I need to spend in order to make the house saleable?It’s not a foreclosure investing deal unless you can make a profit. Many would-be investors underestimate the cost of necessary repairs. If at all possible, get an inspection, or at least walk through the house with someone who is knowledgeable about what needs to be done to make the house livable and safe. If you’ll be doing the work yourself, get estimates for material costs. If you’re hiring someone else, get estimates for their total costs to you.

How much time will be required to make the house livable?Be realistic. If you’re doing the repairs yourself, do you have the knowledge, skill, and time to make this foreclosure investing venture profitable? Many a would-be foreclosure investing tycoon has bought a “fixer-upper,” with great do-it-yourself plans to fix it up and sell it at a profit. In many cases, they’ve found themselves years later, still working on a seemingly endless bunch of repairs. And remember, a house that was obviously fixed up by a “do-it-yourselfer” (e.g., with an amateur drywall job) is not likely to be attractive to many buyers.

Is the house in a desirable neighborhood?This is not to say that your foreclosure investing has to take place in only the “best” neighborhoods, but you should keep in mind the level of appeal the property will have to potential buyers. Will a variety of people find the area safe and pleasant? Surroundings are part of the package you’re selling..

If I ask a realistic selling price for this property, will I still make a profit?
With rare exceptions, you can only sell a property at a price the market will support. In foreclosure investing, even if you’ve spent a pile of money on repairs and upgrades, you can’t expect to sell a property for $250,000 when the highest-priced homes in the area are going for $150,000. This is key to foreclosure investing success.

When you mention to someone that you’re interested in pre foreclosure investing, you’re likely to bring well- (and maybe not-so-well) meaning advice bearers out of the woodwork. Save yourself some aggravation by knowing the truth behind these common pieces of pre foreclosure investing “advice” you’re likely to get:

You’d better have a lawyer at the pre foreclosure sale. A lawyer won’t be able to do much at the pre foreclosure sale, since the terms will have already been set. The best protection you can have at this point is your title insurance policy.

If you buy a pre foreclosure property, the owner can force you to sell it back to him within one year. This concept, called the “right of redemption,” exists if the pre foreclosure property goes to the sheriff’s sale, but it does not exist while the house is a pre foreclosure property.

When you buy a pre foreclosure property, you’ll get stuck with huge closing costs. The only closing costs you will have when you buy a pre foreclosure house are the cost of the title insurance policy and the cost of recording the deed.

Most pre foreclosure properties are money pits. Though it’s true that some pre foreclosure homes will need extensive (and expensive) repairs, many, many owners who find themselves in pre foreclosure have beautiful homes. What’s more, because of the situation they’re in, they’re often willing to sell to you at a below-market price, simply to get out from under their burden. But you shouldn’t completely overlook those fixer-uppers, either. Sometimes, you can get them for such a bargain that they’ll turn you a handsome profit, even after the expense of repairs.

Pre foreclosure investing does require some caution, as well as some common sense. But don’t let naysayers talk you out of investing in a market that can yield huge profits.

If you’re looking for a real estate opportunity where the sellers are highly motivated, the properties can often be bought at a deep discount, and the competition is minimal, consider investing in probate real estate.
What, exactly, is probate real estate? When someone passes away, their inheritance is divided between the heirs. When the inheritance includes real estate, it is referred to as probate real estate, or, a probate estate.
Though investing in probate real estate can be highly profitable, many people shy away from it, often because of some common misconceptions. In this article, we clear up three of them.

Probate Myth 1: It’s extremely difficult to buy probate real estate. One of the most difficult aspects of probate investing is simply the waiting, not the imagined red tape or endless hoops to jump through. The process can sometimes be slow, because the decision to sell the probate property must be agreed upon by all of the heirs. But once this occurs, the estate executor can sell the property. Sometimes, the sale of a probate estate must also be approved by a judge. Even when this is the case, the agreement of the heirs is usually all the court needs to approve the sale.

Probate Myth 2: Owners of probate property (heirs) are usually hard to deal with. Although there’s no accounting for individual personalities or family dynamics, many owners of probate real estate are anxious to sell (sometimes even at a below-market price) so that they can settle the estate. Many times, the inheritance money is tied up in the property of the deceased, and a quick sale enables the heirs to pay off the deceased’s debts and divide the remaining inheritance as cash.

Probate Myth 3: Probate real estate is difficult to find. Probate real estate information is a matter of public record. At your local courthouse, you can obtain a list of all wills presented for probate. More courthouse research will uncover the records of deeds to properties held in the name of the deceased. You can also find information about possible probate estates in newspaper obituaries.

If you’re willing to do a little legwork, probate real estate can present a lucrative investment opportunity for you. Even though you do have to do some research, probate investing is much easier and more rewarding than many people believe.