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. This is known as purchasing a home “subject to” the existing mortgage. 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?