Flipping Homes: Why This May Be the Best Time Ever

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 is more difficult for someone 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 homes, which can often be purchased at well below the market values. Though foreclosure homes 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.

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Wondering if Real Estate Profits Can Be Yours?

In past blog posts, I introduced you to some real people who had amazing successes with their very first foreclosure deals. None of them was convinced at first that they could really do it, and each of them was astounded at the profits they made – each with an investment of just $10 for a contract.

I know you may be saying, “That’s all well and good, but I still don’t think it will work for me. My situation is different.”

Well, today, I’m going to address the most common reasons why people feel they have circumstances that will prevent them from making amazingly profitable foreclosure and probate deals.

I’m here to tell you that just about anyone can do this. No matter what your situation, with a little effort on your part, you can make great money from preforeclosure and probate homes.

Read this carefully, and take heart – no matter what the circumstances, just about anyone can make thousands or even tens of thousands of dollars from preforeclosure and probate deals by using my step-by-step methods.

Do either of the following sound like you?

“I don’t have any money to invest” (or, “I don’t want to risk my money”).

You don’t need to put any of your money at risk when you do a preforeclosure or probate deal. In fact, you barely need any money at all – just 10 dollars is all you’ll need to secure a deal.

“I have bad credit.”

Don’t worry – you don’t need good credit to be successful at preforeclosure or probate investing. These deals don’t require credit checks because you won’t need to take out any mortgage loans.

I could on and on with the excuses I have heard over the years from folks who did not think they could make money in real estate. The fact is, almost every real estate investor has had to start somewhere. There is no nationwide school that can teach investing because each real estate market is different from state to state. In fact, real estate markets vary widely from county to county — let alone an entire state! Next time you catch yourself making excuses about why you cannot become a successful investor, ask yourself this: Am I making another excuse while others are out there making their dreams into realities?

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Preforeclosure –6 Other Alternatives Homeowners May Be Considering

Buying preforeclosure homes can be a highly profitable real estate investing opportunity. If you invest in preforeclosure home, however, (or if you plan to), you need to understand the other options that a homeowner who is currently in preforeclosure or who is facing foreclosure may be considering.

Forbearance Agreement – A homeowner who is in default, but not yet in preforeclosure, may be allowed to make low mortgage payments or no payments at all for a period of time (commonly 3-6 months). After that period of time, however, the homeowner is usually required to make payments that are higher than the original monthly mortgage payment until the loan is brought up-to-date.

Special Forbearance – If the homeowner has an FHA loan, he may be eligible to postpone making mortgage payments for a minimum of four months to avoid lapsing into preforeclosure. There is no limit to the number of months the homeowner may postpone payments, but payment delinquency is not permitted to exceed the equivalent of 12 monthly PITI installments.

Short Sale – This has been a popular way for homeowners to rid themselves of a home they cannot afford. Technically, this is not a way for homeowners to keep their home. It is a way for the homeowner who is in preforeclosure to let the bank allow a sale of the home for less than its value. In recent years, more and more homes have been allowed to go the short sale route. In 2013, the general real estate market has improved throughout much of the U.S. Less and less homes are “underwater” (meaning the homeowner owes more against the house than it is worth) and banks are becoming less willing to allow short sales.

Loan Modification – Homeowners can avoid preforeclosure with a loan modification, which changes one or more terms of their mortgage. It is difficult for a homeowner to be granted a loan modification, though, unless there are justifiable reasons, such as extreme hardship.

Reinstatement of the Loan – A reinstatement loan allows a homeowner whose property is in preforeclosure to avoid foreclosure auction by paying the lender a lump sum payment that includes missed payments, late fees, legal fees, foreclosure costs, and all principal owed during the period of preforeclosure. In short, this means that the homeowner has caught up on all missed payments and late penalties. If the bank had already hired a foreclosure attorney, then the homeowner would also be required to pay the attorney’s fees up to the point the foreclosure proceedings were stopped.

Repayment Plan – Homeowners whose properties are in preforeclosure may make a written agreement with the lender to make higher monthly mortgage payments than the regular monthly payment amount until the mortgage is no longer delinquent.

The above are commonly considered alternatives for homeowners who want to avoid foreclosure, or who want to avoid losing their home at a foreclosure auction. Understanding the pros and cons of each will help prepare you for your negotiations with a homeowner who is in preforeclosure, or who wishes to avoid reaching the state of preforeclosure.

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Why Preforeclosure Investing is a Great Deal

Investing in preforeclosure homes is one of the best and often one of the most profitable ways to get involved in real estate investing. Preforeclosure homes are properties in the default phase of foreclosure when the owner has missed a few payments and the bank has begun the paperwork for foreclosure. A property is in preforeclosure until the minute the foreclosure auction begins.

Why is preforeclosure investing a great deal?

Motivated sellers. Property owners facing foreclosure are highly likely to want to make a deal so that the burden of their property and the threat of financial ruin will disappear. By buying their preforeclosure home, they see you as giving them a way to preserve their credit.

Equity spreads. With the loan on a preforeclosure home in default, you can request that the lender discount what is owed on the payoff amount. Banks are often willing to do this just to be rid of the preforeclosure home and avoid having to liquidate bad loans. This can create a large equity spread for you when the preforeclosure home has little or no equity.

A well-defined niche market. When you concentrate only on preforeclosure investing, rather than on spreading your investment focus thinly over numerous types of real estate investing, you can focus your marketing campaigns on a very narrow target. This allows you to hone your processes and become an expert on preforeclosure investing, rather than spreading your efforts too thinly and not reaping much return in any area.

Less competition. When you buy a preforeclosure home, you beat the crowds eager to get a deal at the foreclosure auction. And because you’re working directly with the owner when you buy a preforeclosure, your chances of getting a great investment deal are high. And don’t forget, while you’re winning, you’re helping the homeowner win, too, by avoiding the foreclosure auction.

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Real Estate Investing: Four Ways to Find Foreclosure and Preforeclosure Homes

Investing in preforeclosure homes (homes that are in the foreclosure process but that have not yet reached the point of the foreclosure auction) can be quite lucrative. So, how do you find these potential gold mines? Below are four ways.

Look for preforeclosure homes online. You can search for preforeclosure listings in the comfort of your bathrobe. It’s easy and convenient, but do keep in mind that numerous others will have the same quick access to this foreclosure information; you won’t be the first.

There are many online foreclosure listing services that provide information about pending bank foreclosures, as well as on bank REO (Real Estate Owned) properties (properties that were not sold at foreclosure auction). Most charge a monthly fee, so check out the trial services first to see which foreclosure listing services provide the most preforeclosure information, and which service you’re happiest with. Many foreclosure listing companies provide additional information on the preforeclosures, including name, address, loan amount owed, and additional loans outstanding. A few will provide contact phone numbers for the current owners of a preforeclosure home.

In addition to finding preforeclosure homes and REO (bank owned) properties through foreclosure listing services, you can often find REO information online at bank sites. Many national and regional banks list their REO properties at their websites, and this information is free.

Search the online newspapers. Search the Public Notice sections of your local online newspapers to find preforeclosure homes. During the foreclosure process, the Notice of Sale is required to be published in a public newspaper.

Search public records. At your County Recorder’s Office, preforeclosures are recorded with the County Clerk. Finding preforeclosure homes this way could be one of your best bets, because preforeclosure homes that are newly listed here may not yet have reached the online providers of foreclosure data, and finding the preforeclosure information this way is free. When looking for preforeclosure homes here, search for a Notice of Default (NOD), or a Notice of Trustee’s Sale.

Find Asset Managers. Asset management companies help lenders dispose of assets like foreclosed homes they can’t sell at foreclosure auctions. When a preforeclosure home goes to auction and completes the foreclosure process and is not sold at auction, it becomes an REO property. REO properties are an example of assets that lenders don’t want to hold onto, so you can often find REO properties through asset management companies, and it can be as easy as visiting the websites of these companies.

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Why Preforeclosure Investing Can be Your Best Bet

Of the three stages of foreclosure (preforeclosure, auction, or REO), preforeclosure may offer the most investment advantages, overall. Briefly, here are some pros and cons of investing at each stage.

Preforeclosure

Until it is sold at a foreclosure auction, a property in foreclosure is referred to as a “preforeclosure” property.

If you decide to invest in a preforeclosure home, remember that you’ll be dealing directly with the property owners, who might be difficult to contact. Courthouse research on preforeclosures can also be time-consuming.

But because you’re dealing directly with the owner of the preforeclosure home, it’s possible to create unique sales agreements. It’s also possible to score a 20% to 35% average savings off the property’s market value!

Foreclosure Auction

If the owner of the preforeclosure home cannot make the missed payments before a set date in the foreclosure process, the property is sold at a foreclosure auction.

Buying at a foreclosure auction can mean substantial discounts and great profits, offering a huge return on investment.

On the other hand, if you don’t do thorough research on the preforeclosure home before the foreclosure auction, you could lose. With foreclosure auctions, you rarely have the chance to conduct a property inspection, but you should do a title search. At foreclosure auctions, you will be required to have a large amount of cash up front for the deposit — usually much larger than when you buy a preforeclosure home. For example, you may need an up front cash deposit of 10% of the purchase price, and then be required to pay the balance in a matter of weeks or even days.

REO (Real Estate Owned)

When the lender takes back a preforeclosure home in order to cut its losses, the property is referred to as an REO (Real Estate Owned).

One advantage of buying an REO is that the title is usually clear, and the lender will probably have paid any back taxes on the property.

Profits from REO investing are generally not as great as with investing in preforeclosure homes or buying at foreclosure auctions. Though the risks are low, the savings are generally low, too.

If you do your homework, buying preforeclosure homes may result in the greatest overall rewards: lower risk than buying at a foreclosure auction, greater profits than investing in an REO, and the most flexibility as far as sales agreements, up-front cash outlay, and range of discount.

Happy investing!

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Investing in a Preforeclosure Home: Preparing Your Offer

You’ve contacted the owner of a preforeclosure home. You’ve talked to him about the possibility of saving his preforeclosure property from a foreclosure auction. The owner is receptive to what you have to say. Now it’s time to prepare the offer.

1. Determine the net equity in the preforeclosure home. Do this by calculating the difference between the market value of the preforeclosure and the default amount plus any liens and repair costs.

2. Negotiate with the holders of liens on the preforeclosure home. This would usually (but not always) be a bank. Lien holders are aware that they could lose everything if the preforeclosure sells at a foreclosure auction. Offer to satisfy the lien for, say, 20% of the lien amount. Buying out the lien puts more equity in the preforeclosure home, resulting in more profit for you.

3. If you plan to flip the preforeclosure home, remember to include closing costs in your calculations for the purchase and sale of the preforeclosure. Also include these costs:
• Carrying costs
• Mortgage payments and taxes and insurances while you hold, repair, and then resell the preforeclosure home
• Real estate agent’s commission if you use a broker to resell the preforeclosure home after you’ve bought and refurbished it
• Every other legitimate expense associated with buying, repairing, carrying and selling the preforeclosure home

The remaining amount must pay the homeowner for his preforeclosure home and produce a profit for you.

There are several ways that real estate investors determine how much to offer the owner of the preforeclosure home. Some real estate investors itemize every expense, show their calculations to the owner of the preforeclosure home and offer to split the profits. Some itemize expenses and pay the owner of the preforeclosure the remainder on the bottom line. Other real estate investors make offers on a preforeclosure home based on the bottom line, and negotiate from there. My courses show you exactly how to calculate all of your expenses using a simple five step formula.

Once they’ve acquired the preforeclosure home, real estate investors can make further profit by making repairs themselves, negotiating lower seller commissions, or selling the property themselves (without using a real estate agent).

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Get a Jump on Preforeclosure Investments by Knocking on Doors

When you’re looking for real estate investing deals, especially if it’s foreclosure properties you’re interested in, you can often find good real estate investing opportunities by literally showing up and knocking on the doors of owners of preforeclosure home. (A preforeclosure is a home that has entered the foreclosure process because the homeowner has missed several mortgage payments.) You’ll get a jump on the many others who have the same information you do about these preforeclosure properties.

Let’s say 100 others in the real estate investing business have the Notice of Default information about a preforeclosure home. Out of those, possibly half will mail a postcard or letter, once, to the owner of the preforeclosure. Ten percent will bother to track down a homeowner’s telephone number and give them a call about the preforeclosure. But only about two or three will actually show up on the homeowner’s door and knock. Often, NO ONE shows up at the homeowner’s door!

Of course, knocking on the doors of preforeclosure homes can be time consuming, and may not always be worth your time, but if the homeowner has a great deal of equity, and/or the preforeclosure home is in a desirable area where you are interested in long-term real estate investing, you may end up with a great real estate investing deal.

If the preforeclosure home doesn’t meet one of the two above criteria, don’t waste time paying them a visit. Instead, give the owners of the preforeclosure a phone call or target them for your mailings.

If you’re thinking that the owner of a preforeclosure home won’t want you to knock on their door, remember that in many cases, the owner is in desperate need of help. The owner of a preforeclosure would like to avoid having his property sold at a foreclosure auction. This is where you have the opportunity to help him, and he has the opportunity to preserve his credit as much as possible by selling the preforeclosure home before it reaches the final step of foreclosure.

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A Big Lie: “It Takes Money to Make Money”

I recently had a friend of mine tell me, “It takes money to make money in real estate investing.”

I was surprised he said that because this little phrase is one of the biggest and most dangerous lies out there… It is a convenient excuse to not try to succeed.

It’s like the old joke:

Lord, I’ve worked hard all my life, why couldn’t you have just let me win the lottery?”

The Lord replied, “Why didn’t you just buy a ticket?”

When it comes to investing in preforeclosure homes or probate homes, you’ve got to try. And it doesn’t “take money to make money”…

I have done many foreclosure and probate deals where I put up no money at all… Instead, I put in “sweat equity.” Meaning that I found the good deal, and did all the work necessary to make a profit for my partner and myself. ‘

I did most of the work on these projects, adding value to our investment. I supervised the repairs that were needed. I made sure the grass was being watered and mowed. Remember, I put zero money in and I still made 50% of the profit on each probate home and foreclosure home that I found!

So in these cases, it didn’t “take money to make money in real estate.”

My situation is not unique in real estate… A common deal for one of my students goes like this:

My student knows the best deals are in probate homes, and to a lesser extent, preforeclosure homes. He finds a great deal on a probate home that he can buy for $200,000, put $40,000 into, and sell for $300,000. The problem is, he has no money. So he finds an old guy with money, and they agree to split the profits 50/50. If the deal goes according to plan, they both walk away with a $30,000 profit (minus some costs).

My student had the only two things you need: 1) he knew how to find bargain deals on probate homes and preforeclosure homes and 2) he had the willingness to get to work and make it happen… He did everything from finding the old guy and convincing him to invest, all the way through to selling the property.

In this example, my student didn’t even have any risk in the deal.

It doesn’t take money to make money. You just need two things:

1. Knowing how to find bargains on probate and preforeclosure homes.
2. Ability to roll up your sleeves and make it happen.

You can’t underestimate either of those things. The amount of effort and commitment required for probate and preforeclosure investing will be extraordinary. But that’s the way it goes. You’re trying to break out of the ordinary. So an ordinary effort won’t cut it. As a beginner starting out with no money, you will need to sustain an extraordinary effort.

This is the hard truth. But it’s how you make money in real estate.

It is much easier to give up. It is much easier to say, “It takes money to make money” and never try. It is much easier to complain that you’ll never win the lottery, without buying a ticket. (You know what I mean.)

Don’t ever catch yourself saying, “It takes money to make money in real estate.”

It doesn’t… It takes a great idea (like buying probate homes) and the willingness to make it happen.

Now get to it! You can do it and I’ll show you exactly how.

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How To Make Sure You Don’t Get Stuck With A Property

In previous blog entries, I took the mystery out of contracts. I showed you how easy they are to fill out, and how you can use them to work for you, as well as protect you.

Today, I’m going to look at one of the big worries that new real estate investors have: “What if I get stuck with a property I cannot get rid of?” I want to remove all of the fears that may be holding you back from the very real profits you can make from foreclosure and probate investing!

In previous blog entries, I’ve talked about how easy it is to find homeowners in preforeclosure, as well as heirs to a probate property – both of whom tend to be anxious to sell.

I’ve also told you that you can often get such properties at very low prices, and then turn around and sell them at full market value for a good profit.

If you are new to probate and preforeclosure investing, I can’t blame you for thinking, “But what if I get stuck with a property? What if I can’t find a buyer?”

You may have imagined this scenario: There you are… you’ve just struck a great deal with an eager-to-sell homeowner who has found himself facing foreclosure. He has a lot of equity in the house, and you can see the potential for selling it at a huge profit after you acquire it. You sign the papers, get a loan from a small local bank, make some repairs and pretty it up a little, and put it on the market. There it sits for three months, six months…will it ever sell? What do you do now?

There are two ways you can avoid being stuck with a foreclosure or probate home (or any other house you are trying to sell). Make your probate home highly saleable, or flip it to an investor.

Let’s talk about the first option, making the property highly saleable. This involves two main factors: selling the property at the right price, and making sure it is in good condition and shows nicely.

Let’s imagine you’ve just acquired a preforeclosure home. If you did your homework, you acquired the property at a deep discount. This means that even if you have to do some repairs, you’ll be able to sell the property at a price that’s attractive to potential buyers, and still make a profit.

Make the property as attractive as possible. Don’t forget that curb appeal (how the house looks to people as they drive by) is a huge factor. Many
people won’t want to go inside and look at a property if it doesn’t look good from the street.

On the inside, make sure the house has a fresh coat of paint, is clean, and is in good repair. Make sure all of the windows are clean! My course gives you all the specifics on what appeals to potential buyers. It even tells you, step-by-step, what to watch for as you inspect the condition of a house. For complete details, go to http://propertyforeclosure.com/details.html.

Even in today’s slow real estate market, an attractive home at a lower-than-retail price is likely to sell.

But maybe you’re brand new to real estate investing and have very little money, or just have no interest in fixing up a probate or preforeclosure home? Or maybe you’re still a little afraid of getting stuck with even a cream puff of a house.

For newbies, the absolute best way to ensure quick turnover is by flipping contracts (also know as flipping houses). When you flip a real estate contract, you simply sell your contract to another investor, who then has the right to purchase the property at the price agreed upon in the contract.

“Ok, Lance,” you might be saying. “But don’t I still run the risk of being stuck with the property if I don’t have an investor?”

I have a solution to that, too: You line up your investors in advance. There are many ways to find investors who are ready and able to pay you to find good property deals — whether those deals are preforeclosure homes or probate homes. If you decide to invest in my probate and preforeclosure courses, you will learn, step-by-step, not only how to find investors, but how to make sure they’re qualified with the money, and that they’re sincere. Check it out at http://propertyforeclosure.com/faqs.html.

Here’s an example of how flipping to an investor can work: You have found an investor who would like to purchase the property for 70% of its fair market value. That means he would be willing to pay $140,000 for the property. Since your contract with the homeowner is for $130,000 and the investor is paying you $140,000, you pocket the difference of $10,000 at the settlement of the property! The investor will pay you $10,000 and then he will pay the homeowner $130,000 for a total purchase price of $140,000.

And remember, like I’ve talked about in prior blog posts, you can (and should) always use a “weasel” clause in your real estate contracts, just for extra protection, should anything unexpected come up. This ensures that you’ll never be stuck with a preforeclosure or probate home you cannot flip.

If you use one of the two strategies I’ve shared with you here, you’re certain to quickly turn around every probate and preforeclosure home you invest in.

Again, if you’re a complete newbie to preforeclosure and probate home investing, and you have any jitters at all, the flipping method is for you.

If you have more questions about how my real estate courses can quickly help you on your way to lucrative real estate investing, visit

http://www.propertyforeclosure.com/faqs.html.

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