Real Estate Investing articles - Sure Profit Strategies From Foreclosures

We all want to find the great deals more easily, more frequently, and make more money from each of them.

The secret of making money in all investing is Buy Low and Sell High.

The fastest, easiest and safest way to profit is Buying Low and Selling High. Simple and obvious—just like all true principles. The trick is in the execution.

In the Real Estate Investment World, the core principle to buying low and selling high can be described in one word: Foreclosures. Yes, there are other ways to make money, but foreclosures are simply the fastest, easiest and best way to make money in real estate - especially when you're just starting out.

Ask yourself this question...

What if there were a foolproof way to make money in real estate by buying low and selling high?

Actually there is more than one way. And the basic principles for any of the strategies I’ll discuss are the same.

First, How low is low? You want a rule of thumb that won’t fail you: Purchase your property for MAO (maximum allowed value) or less. MAO is defined as:

MAO = 70% ARV – cost of repairs. (ARV = after repaired value).

That’s it. (By the way, do you think you could quickly sell this house at 90% of market value, or even 80% and still make a handsome profit?—duh!)

Now there are two ways to buy low. (1) have the seller agree to sell you his property way below market, and (2) negotiate a discount on what the lien holders will take for the amount owed.

For (1) we need to find a seller who is motivated usually by some financial distress which usually means that there may be a foreclosure looming on the horizon.

For (2) we need to talk to lenders who aren’t getting paid on their note. This means (a) the homeowner isn’t paying and the bank is moving toward foreclosure or (b) the homeowner has declared bankruptcy or (c) the property is an REO (real estate owned)-the term banks use for properties they’ve repossessed through foreclosure.

And did you know that last year was a record year for foreclosures all over the U.S.? Banks are just dying to get rid of these properties to avoid reducing their borrowing power and to increase their financial health. And did you also know that there are Five times more bankruptcies than foreclosures!? In other words, there are tons of opportunities out there.

OK, so you want to know how you’re gonna find these deals, how do you convince the homeowner to sell below market, how do you negotiate a discount with the lender, what the heck do you do with a bankruptcy and who do you deal with about REO’s?

All good questions, and each has it’s own specific answer.

Marketing is the way to find deals. Successful marketing requires a match between the Market, the Media and the Message. Based on the experts we work with here are some tips:

Market	Media	Message
Pre-foreclosure	Signs, Direct Mail, Knocking on Doors	Save your credit, get rid of creditor harassment, get out before the sheriff comes.
Bankruptcy	Signs, Websites, attorneys, trustees	Avoid the inevitable foreclosure, get a little cash, deal with the trustee
REO’s	Real estate agents (with pocket listings), banks	Quick sale, removal of a non-performing asset

Once you’ve found a homeowner facing foreclosure, getting the deal involves listening, understanding the seller’s needs and negotiating a deal (usually involving getting the property ‘subject to’ or working out a settlement if there is lot’s of equity).

For bankruptcy, you are looking for someone who has given up hope of saving their home and is looking for a way out. Often this requires persistent follow up since time and circumstance change things. Fortunately, there is even a way to follow the change of circumstances without even consulting the debtor.

There are two ways of getting the lender to take less than what is owed for their note. (1) Purchase the note at a discount; (2) Negotiate a short sale—that is get the lender to agree to take less than what is owed for payment in full on the loan.

The difference is subtle but important. In the first case, you can buy the note without the cooperation of the borrower, and you become the owner of the note and can foreclose off junior liens if you wish.

In the second case you need the participation of the homeowner and you actually remove that debt from the property. You still have to satisfy the other lien holders (if there are any) when you sell the property, or you need to negotiate discounts with them as well.

For REO’s, you really need to know the right people and build a relationship. This is because banks & lenders usually pass these properties onto a select group of real estate agents. And these agents often have a group of investors that they work with that will buy these homes. They are not often offered to the general public because they usually need some repair.

Once you’ve negotiated your deal, you’re going to need cash to pay off the lenders. This cash can come from you (not a first choice), money you raise from private individuals, a new buyer for the property, lines of credit, or a bank loan to name a few.

If you can sell the house quickly, you can use the buyer’s money to pay off the lien holders in the timeframe you’ve negotiated (you see why it’s important to buy low, so you can sell quickly below market and still profit). Other wise, you’re going to need a ready source of funds to pay off any lender with whom you’ve negotiated a short sale, before you get your buyer.

Obviously, you’ll want to know more about how to carry out these strategies. You could spend $10,000’s on seminars and home study courses, because until recently there was no one place you could learn about the entire range of these techniques in enough detail to go out and use them.

For those of you who want to pursue this, there is an event that you must check out. It’s called the Ultimate Foreclosure System.

You’ll be learning:

• The how-to’s of all the marketing strategies we’ve discussed, and more

• How to negotiate deals with the seller

• How to buy notes and do short sales

• How to profit from bankruptcies

• How to buy at foreclosure auctions and REO’s

• And much, much more.

Right now you can listen to Free teleconferences by the faculty. It’s a real opportunity for investors interested in foreclosure.