Foreclosure Heaven!
How to Make Money Without Succumbing to Hype, Lies and Circus Acts
7:21 AM
The news media is all doom and gloom about the current real estate market and the economy in general.
I’m here to tell you. You can still make money with foreclosed property, especially in today’s economic climate.
But it’s crucial to separate the facts from fiction and ignore the hype.
I’ll show you my strategy for foreclosed and bank-owned property. I’ve had a great success with this, and I think it’ll work for you too.
With the way things are today it may seem that the best way to make money with foreclosed property is by telling others how to how to buy and sell it.
In fact, one of the top infomercials in 2008 promoted a product about buying and selling foreclosed property.
Let’s be honest……
Most of the so-called “real estate entrepreneurs” we see on TV make the lion’s share of profit by selling real estate “secrets” (information) to others, rather than actually buying or selling properties themselves.
We all know it’s true.
On top of that, most entrepreneurs approach real estate investment with the exact same way. Almost no one approaches real estate from a unique angle.
People convince themselves they’ll make a ton of money quickly, without risking any money whatsoever, by applying the same shallow ideas.
You’ve probably seen some of these investors profiled in the media. They’re the ones who were “caught short” when the real estate bubble burst….losing everything or they’re STILL HOLDING property and are underwater.
What’s more, most of the real estate product “hawkers” these days conveniently ignore the red tape involved, government bureaucracy, title search problems, contingencies, not to mention a lack of legitimate deals.
The get-rich-quick impresarios almost never reveal the full downside risk.
The downside risk is the biggest of deals for me.
For example, one risk to consider right now is buyers are very hard to find.
What’s more; the days of “fix and flip” are over in the short term (let’s just say next three to five years is a good guess). Buyers are scarce in most parts of the US and Canada.
Despite the downside, the opportunities for making money with foreclosed and bank owned properties can’t be ignored… even for entrepreneurs coming into the market for the first time.
This is especially true if you are acquiring foreclosed or bank owned properties at deep discounts.
Before jumping on the “foreclosed train” …..keep this in mind
Just because a property is foreclosed, or a bank owns it, does NOT mean it’s a good deal.
As with any business or investment opportunity, due diligence is always the best approach. You can save and make a bundle with just a little diligent research.
What’s more, it’s a good thing to know who is privy to a particular deal.
In other words, how many lawyers, accountants, real estate agents, appraisers, city council members, bankers, or other real estate entrepreneurs know about your so-called “foreclosure deal?”A multi-millionaire real estate mogul always reminded me this “golden rule”.
You see, when people have advance knowledge of so-called foreclosure “deals” then they can act.
Most people, and especially street smart real estate investors, speculators and developers know what a good deal looks like. So you won’t be alone.
But the upside advantage is most real estate pros will not have a long term strategy like you and I.
Most real estate pros are aware of the foreclosures or bank-owned property deals in their area. This is something my real estate mentor taught me. When it comes to real estate investments, like all investments, you’ll always find amateurs and professionals.
The amateurs are new and uninitiated. The professionals are often more seasoned and very knowledgeable of specific facts.
I’m not sure which camp you reside. I just wanted to pass this insight along.
Whatever your experience level, the best foreclosure deals can always be identified by diligent, patient research.
Most people are in a hurry (or desperate) to make money and so they usually ignore or skip over important details in order to close a deal.
In addition, a lot can be said about the importance of a strategy.
Is your strategy based on an actual market demand or your demands? Are you seeing what you want to see, or how things really are?
The current trend in real estate emphasizes rental revenue (versus appreciation). That’s why foreclosed and bank-owned property is worth a look.
If people can’t afford their homes or condos where will they live? The answer is smaller, more modest homes and/or rental property.
So there are still buyers and renters out there, but they are looking at certain types of property. That’s where the opportunity lies for you.
The Perfect Insiders Strategy
One strategy would be to capitalize on the current market demand and acquire foreclosed homes or bank-owned properties at deep discounts ? and rent them out.
When I say purchasing foreclosed property and bank owned property at deep discounts I’m talking about desperate sellers.
In other words, I’m referring to a seller that MUST SELL no matter what.
Billionaire real estate developer Sam Zell is known as the “Grave Dancer” because he dances on a property when it’s almost dead and gone… and no one wants it.
You should apply a similar strategy if you want to make money with foreclosed and bank-owned property.
One of the largest banks in the world is Bank of America. They have a new website featuring hundreds of bank-owned properties for sale. You’ll be amazed at some of the deals featured on their site. But don’t go hog wild… be patient and develop a clear strategy for your business.
Another downside to acquiring, fixing, and holding a foreclosed property with the intention of renting it is a lack of renters.
The housing boom in the US (and Canada) is deflating in a big way. Millions of so-called investors were left holding the bag.
In other words, most people were planning on making big bucks on their “buy, fix, and flip” strategy. But now they’re holding properties that are worth less than what is owed. And most of the homes flippers are trying to unload are too nice (or pricey) to offer as rental properties. Not good.
In larger cities renters have been easy to come by. But what happens if the renter market softens or collapses? What if hundreds of new fixer uppers hit your market at the same time?
Bank on It - Rental Rates Will Go Down in Most Areas
Can you afford a foreclosed or bank-owned property if the rental income goes down? This is a calculation you must make before buying any property.
The key is buying foreclosed or bank-owned properties at DEEP discounts.
Let’s say you purchase a foreclosed property within two-miles of a Super Wal-Mart for $50,000 (that’s my strategy).
Let’s say the mortgage payment is $415 month ($50,000 @ 5.75% for 15 years according to Mortgage-Calc.com).
Your objective would be to recoup the cost of your mortgage payment, simple maintenance, insurance, property management, taxes, and background checks on prospective tenants.
Just for the fun of it let’s say these expenditures add up to $650 month. In this case you’ll need to rent the house for $650 to cover expenses.
In most areas of the United States and Canada this property would be fairly easy to rent.
If hundreds of rental properties like this hit your market, then renters will have a smorgasbord of options! This would be bad for you. However, most real estate investors and developers are underwater.
Therefore the chances are good they will not be in this market. Most of their rental properties will be in the mid to upper range (because of the size of their investment).
Sam Zell is confident the trend toward “rental revenue” versus appreciation has already begun. This doesn’t mean a foreclosed or bank owned property will not appreciate. But don’t bank on it. Instead focus on revenue and patiently acquiring deep discounted properties.
In 10 years, when it’s time to get back into “buy, fix and flip” real estate, you can sell all of your rental properties for cash, or just sit on them with mortgages paid in full.
What happens if other landlords sweeten their deals to renters by including heat, electric, and water?
This may happen in apartment buildings, but I don’t see it happening in single family home rental markets. You’ll have to adjust your strategy accordingly if this occurs. But I think you’re safe.
We haven’t seen a renter’s bull market in the U.S. for a long, long time. Part of the reason is the phenomenal housing boom. In the past, people could own a $450,000 home with nothing down, no background checks, and no proof of income… and pay interest only!
Those days are gone for now.
Buying foreclosed property should be done with some forethought. It most cases it will mean diligent, patient research in locating deep discounted foreclosed properties.
A weak strategy would be one where you acquire foreclosed or bank-owned property (with the intention of renting it) without preparing for the worst possible outcome.
This would be hundreds of properties hit the market (in better condition than yours) with rental rates plunging!
You have to plan for this possibility. Like any business, you expect the best but prepare for the worst.
It is possible to make a great living and build substantial wealth purchasing foreclosed and bank-owned properties. And there are hundreds of bank-owned property websites popping up every month.
Why? Banks are NOT in the real estate business; they are in the MONEY business. And so they are eager to get these properties off the books (in some cases faster than others).
I also wanted to mention something about competent legal counsel. In my experience, most real estate lawyers are incompetent. But street smart, competent real estate attorney will be worth his or her weight in gold.
I’m amazed how many entrepreneurs enter into real estate transactions without competent legal counsel. Ask around and you’ll find one. I’ve had good success with the referrals at LegalZoom.com too.
Okay, how do you get your hands on deep discounted foreclosed and bank owned properties?
There are hundreds of powerful resources on the Internet. Most of the sites list foreclosed homes for sale.
But of course, real estate agents always try to get in on the action. Real estate agents seldom tell you about the properties that are not listed by their agency. But like attorneys, you can find agents that are unbiased and knowledgeable.
Here are some sites to help you locate deep discounted foreclosed and bank-owned property:
HUD Works
HUD Homes For Sale
Realty TRAC
iForeclosures
Foreclosure.com
Chase Bank Owned Property
Beal Bank
Fannie Mae
Bank of America
Bid Select
ForeclosureNet
USDA
HSBC
Wells Fargo Bank Owned Real Estate
Downey Savings
GovDeals.com
Your Humble Host,
Marc Charles
Marc Charles
***** Action Strategy *****
Buying foreclosed property can be a lot of fun and it can be very profitable. But it’s important to avoid the typical “foreclosed property spin.”
As the current renter’s bull market develops you’ll want to be sure you’re not left holding the bag. In other words, it’s always best to consider the worst case scenario.
There’s always the possibility something will go wrong –especially when it comes to real estate!
The upside is foreclosed property can often be purchased for less than the market value.
You can contact the top 20 mortgage lenders in your state. Ask for the Real Estate Owned (REO) department. They’ll send you a list of the properties that are currently available.
Banks typically sell foreclosed properties “as is,” which is similar to buying anything “as is”… there are no warranties, guarantees, or conditions.
You can review the property (and its assessed value) once you obtain the tax map location. The next step will be to submit an offer to the bank (with proper due diligence of course).
Banks almost always respond with counter offer which is higher than you expected.
If you feel the property still has tremendous potential you should counter their offer with a new offer. You’ll be amazed how aggressive banks are in the current environment to “unload” properties.
Granted, locating and purchasing a property BEFORE it reverts to the mortgage company is always the best way to go. But this is one way to get started quickly.
The main objective is to find smaller homes at DEEP discounts and rent them out to qualified tenants.
If you purchase two deep discounted properties this year and two properties each year thereafter for the next ten years, you’ll have twenty rental properties. The debt service on deep discounted properties should be manageable.
Let’s say you rent each of these homes for $1,250 per month. If the debt service, taxes, insurance, and maintenance on these twenty homes is $12,000 (about $600 per property), you could conceivably net $13,000 per month!
I hate generic illustrations.
But if you work the numbers you’ll find acquiring deep discounted bank owned real estate with a view toward renting them makes sense.
******* Valuable Resources *******
GovDeals.com (worth repeating)RealtyTrac (daily foreclosure updates)
Bank of America Bank-Owned Property
Dean Graziosi – Be a Real Estate Millionaire Now (street savvy buyer)
GovernmentAuctions.org
Realty Times
The Bargain Network
Wachovia Bank Owned Real Estate
Trulia (real estate research tool)
Inman Real Estate News
All Foreclosures.com
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