7 Big Reasons To Invest In Pre-Foreclosures
Looking for an "in" to real estate investing?
Working a nine to five job swapping time for money can be
incredibly dispiriting. After the futility of it all hits home,
it's all you can do to limit the number of home business
opportunities you investigate to twenty per week.
One of the more compelling home business opportunities is real
estate investing. Real estate investing is the perennial wealth
builder, and the transition from working a job to achieving
wealth through real estate investing is becoming increasingly
well documented.
You've probably thought about investing in real state yourself
but you've not gone for it because you thought you needed tens
of thousands in savings for a down payment, and perfect credit
along with strong banking relationships.
Well, you can get all that together if you want. It doesn't hurt
to have those resources. But it's not necessary to have a huge
pile of cash and perfect credit to buy a house cheap and resell
it for a profit.
It's especially not necessary in the preforeclosure market.
Preforeclosures are houses in the default phase of foreclosure;
where the bank has filed initial foreclosure papers but the
Sheriff Sale or Trustee Sale where the bank auctions off the
property, or repossesses it if no-one buys at the auction,
hasn't occurred yet.
Buying during the preforeclosure period is one of the best ways
for anyone to get involved in real estate investing. With little
more than a few hundred dollars and some specialized knowledge
you can buy a house at a substantial discount and resell it
retail picking up a five figure profit check in the process.
Don't believe it?
Well, let me give you seven reasons why it's true:
1) When people are in default on their mortgage they have
stopped making payments to the bank. So when you are negotiating
with the seller, and the bank, right up until the point where
you buy, no-one is making the payments. For novice investors
worried about holding costs this is a huge advantage.
2) Preforeclosures are a very well defined niche market. One of
the most deadly mistakes rookie investors make is trying to be a
jack-of-all-trades, going after any and everything they can lay
their eyes on. The result of this lack of focus is they are soon
back at their jobs. By being a very defined market,
preforeclosures allow you to develop focused marketing campaigns
and standardized processes to get deals completed and closed.
3) One of the fundamentals of real estate investing is
contacting and talking "only" to motivated sellers, and avoiding
all the rest. Sellers in preforeclosure are some of the most
motivated sellers you will find. Their world has been turned
upside-down, they are about to lose their house, and their
motivation is such that they just want out of the house and the
bank off their back. By buying houses from people in
preforeclosure, creating 30%+ equity spreads on houses often in
good condition is not a difficult thing to do.
4) Buying houses in preforeclosure enables you to create
unusually large equity spreads. Recent economic uncertainty has
caused a lot of foreclosures, and rising rates will cause more
in coming years. If banks had to take back all of the properties
that went into foreclosure the FDIC would shut them down. They
know this, so they try not to take properties back they don't
have to. By requesting the Lender discount what is owed on their
payoff, large spreads of equity can be created on houses that
are totally "maxed out" with loans. This can't be done on loans
not in default.
5) Because Lenders are under pressure to liquidate bad loans
rather than take the property back, large discounts can be
negotiated. After becoming familiar with the issues that cause
Lenders to discount, larger and larger discounts can be achieved
as you hone your negotiating skills.
6) If your plan is to buy and hold the property, having good
enough credit and financials to get bank financing excludes a
great many people from getting into real estate. On top of that,
if you do get a bank loan, your financial exposure is at it's
maximum when everything is in your own name and personally
guaranteed. Buying houses in preforeclosure allows you to simply
take over the existing financing already in place. No qualifying
needed. You can take title to the property in a Land Trust,
begin making payments on the existing mortgage(s), and still get
all the tax advantages, appreciation, depreciation without any
of the risk of being personally liable for the mortgage and the
property.
7) If you have ever bid at auction for property at the
courthouse steps, you are only too aware of the competition
breathing down your neck. Lots of mind games. The 40 thieves are
talking trash to you trying to get you not to bid. If you are
Larry Bird, no problem. Make sure you have $500K on your credit
line though. However if you are not the 'Bird' and you don't
pack half a mil' of credit, you can sneak in and avoid this NBA
showdown by buying the house during the preforeclosure period...
before the auction.
Make no mistake about it, there are many ways to make healthy
profits in real estate investing. But when you look at how easy
preforeclosure makes it to buy houses cheap and resell for five
figure profit checks, all the while helping people out of
agonizing life circumstances, it makes little sense to pursue
real estate investing any other way.
Ben Innes-Ker is a full-time real estate entrepreneur,
best-selling author, and real estate investing warrior. He has
developed the "Foreclosure Investing Letter" to help real estate
entrepreneurs and investors do more deals with less effort and
increase profits. To learn more about this powerful step-by-step
program and receive your free 5 part mini-course, go to
http://www.the-foreclosure-investing-letter.com/