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Getting Started in Preforeclosure Investing
Let's get straight to the point. You know that it's possible to make money in foreclosures... you don't need to a 10 page direct mail piece with hundreds of boring testimonials or some long online sales letter to tell you that.
Well if you were anything like me a year ago... you have bought some courses (maybe even gone to a seminar) and started to learn real estate investing... you know "what to do" but you are lacking confidence in exactly "how to do it".
For example you've been taught to target buying foreclosure properties at 70% of "market value" right? But you haven't been taught (or not very well at least) how to go about convincing a homeowner that it's a good idea to sell at that price.
You have also been taught that the earlier you find foreclosures (ie: preforeclosures) the better right? But how do you find these preforeclosures? and you have probably figured out it's not through a listing service :)
At this point in your real estate investing career it is important to figure out exactly what you don't know and search for specific resources or mentors that can help you answer your questions. Then after you have all your "ducks in a row" the only thing left is taking action... and nobody can teach you how to do that :)
So what did it take for me? Well I purchased a couple more real estate investing courses (one preforeclosure course was especially helpful because it was written by a guy who had bought and sold over 200 preforeclosure properties) and I also paid someone to mentor me (I can't give you their name because they are currently not interested in taking on any more students)... but finding a mentor is not hard.
Then it was simply a matter of taking action and I did. I didn't make as much as I would have liked on my first deal but that didn't matter. I had that so crucial first deal under my belt and the rest have been a lot easier to do (and a lot more profitable).
What Is Preforeclosure And How Can It Make You Money?
Preforeclosure is basically the time period between the bank giving notice of default (once the homeowners payments are around 90 days late) and the time the house sells at auction. The key to preforeclosure investing is equity, which is the difference between what a house will sell for and what is owed on the house. Preforeclosures allow you to buy a house for less than fair market value, creating immediate equity for yourself. If you discover that the preforeclosure has been owned for many years, often with a small mortgage and a large equity, the homeowner might be extremely eager to sell at a bargain price rather than lose the house at the foreclosure auction. What Type Of Preforeclosures Should You Invest in?
Preforeclosures with conventional loans on them are usualy better because you will get a better deal. If the property was purchased using a conventional loan, you can try asking the foreclosure attorney for the name of the contact person at the bank so you can make a low offer on the REO. Basically, you will be helping the homeowner by buying their property at less than market value but more than their loan would cost to pay off. The danger for the homeowner is that when they default on a home loan, their credit is ruined and it may stay ruined for years. So, preforeclosure properties are a great source of profit for you and you'd be helping someone avoid ruining their credit and defaulting on a loan. How Should You Approach Home Owners?
Many investors "take to the streets" and simply start knocking on the doors of people that are in preforeclosure. You might be thinking "Why wouldn't these people just slam the door in my face?". Just remember that in many cases, the owner of a pre foreclosure property is in need of help and with the right methods to sucessfully presenting a below-market-value offer to a homeowner you can have them eager to accept it. Be honest and sincere with them and point out how a preforeclosure will benefit both of you. Just remember it's also important to provide support and help along the way until you successfully make the deal and beyond. Where Do You Find The Money To Buy A Preforeclosure Property?
So... you have the knowledge, and now you need the money. There are many opportunities to make a great deal of money in pre foreclosures, but you can't make it unless you can first afford to buy and refurbish a house. But where do you come up with all of the money to pay the lender up front? You might have a stash you're just waiting to invest, but most likely, you'll need to find investors. There are two different, easy ways you can fund your property deals without having to use a cent of your own money. Once you do find investors, it's important to establish solid relationships with them. Chances are, if you find a home you are able to resell quickly for full market value, the investors will like to work with you again. Buying foreclosures can be extremely profitable for both you and your investors. How Do You Find Preforeclosure Properties?
I personaly was taught to forget most preforeclosure listing services and instead use methods to find foreclosures that have little or no competition from other investors. You can also try ads in newspapers. The added benefit of finding preforeclosure early is that you'll have lots of time to properly research the properties since you can buy a preforeclosure property up until the day of the foreclosure auction. By learning the right techniques to find preforclosure early, doing your homework and a little legwork... you should be able to capitalize on properties and earn excellent profits.Done correctly, buying preforeclosure properties can be an incredibly lucrative business. But as with any real estate investing, there are potential risks to flipping pre-foreclosures so it's important to educate yourself and if possible get a mentor.So it's important that you educate yourself on the tax laws in your state before jumping in.
by preforeclosureguy
Hello, my name is James and I've been buying and selling preforeclosures for a little over a year.
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