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.
Article written by Ben Innes-Ker
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/
Realtors
Foreclosures sell fast. With virtually every Bank, Government and
Institutional Seller you'll find your next investment waiting for you.