Archive for June, 2009
June 30th, 2009 | 
Author: It’s not rocket science.
If you want to cash in on a particular market, you look for an area or a commodity that’s currently hot and you capitalize on that. You observe, you study, you think and you act.
For example, if it’s baseball season, you don’t go out and sell hockey pucks or basketball cards – you sell baseball caps, baseball cards, baseball stuff. If you’re a store owner and it’s summer, you don’t display ski gear, cashmere sweaters or rubber boots – you display and sell beach gear, bikinis and flip-flops.
The same is true for real estate investors.
The current economic crash shows a definite trend. Homeowners (a whole bunch of them) who bought their homes a couple years ago or so with 100% financing or did cash-out refinancing are finding themselves up to their eyebrows in muddy waters. Their home values dropped drastically and now they owe more than what their homes are worth. Result – foreclosures – lots and lots of foreclosures.
With foreclosures at an all-time record high, even banks are finding themselves in a lot of trouble trying to get rid of too many properties in their portfolios – properties they don’t want since it’s not their business to own them, properties that they need to liquidate fast, properties they need to move quickly, properties YOU CAN GRAB AS EASILY AS GRABBING CANDY FROM A CHILD.
Remember, Federal Law requires that banks set aside up to eight times the value of a foreclosed on property for liability reasons (such as if the house gets vandalized or someone goes in and gets hurt and sues the bank etc) from the property. So instead of using that money for other expenditures and investments, the bank is forced to set that money aside until such time that the property in question gets sold at an auction or gets liquidated, one way or another. And they’re required to do that for each and every property they foreclose on. No wonder even banks are starting to get muddy.
Now, if you were the bank and someone offered to take one (or more) of these properties off your hands at a price that’s less than what is actually owed on the property, what do you do?
Do you say ‘NO’ and continue to hold the property until such time that a more reasonable offer is made (which may be in 50 years) and continue to hold a big amount “hostage” for liability costs for the property? Or do you say ‘YES’, and liquidate the property immediately (albeit, at a small loss), “free” the money set aside for that property for use in other investments and ultimately help the economy “move”?
I believe the answer is obvious.
So, as an investor looking to make a killing in the present economy in real estate, where do you think is the money at?
It has been forecasted (conservatively?) that foreclosures will continue to rise all through the following year. Estimates put the number of foreclosed properties year to date at 267 million homes and only a handful (about 37%) have been put in the market so far.
Moreover, realizing the huge potential of the foreclosure market, a lot of private lenders, hard money lenders and the like have been actively joining the ray by providing transactional funding, proof of funds and such other services to investors all over the country just so they can profit from this goldmine too.
In effect, any investor brave enough and smart enough to take the plunge can actually begin making huge profits from these foreclosures without using their own cash or credit.
Now if that’s not yet a clearer than crystal message that foreclosures are today’s millionaire-makers in real estate, I don’t know what is.
Somehow, some broker, some realtor, some investor or someone will make money out of these foreclosures. Why not you?
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It’s true!
Andrew Carnegie once said, “Over 90% of millionaires become so through owning real estate.”
Before your eyebrows encroach on your hairline, let me explain.
It is a proven fact that investing in real estate (at least when done properly and dynamically) is the surest way to secure financial security in any economy.
Let’s face it. There’s one commodity that stays at constant supply no matter what the shape of the economy is and its market value, more or less, fluctuates in a rather predictable manner – real estate.
During recessionary times like what we have at present, real estate values plummet. Foreclosures are at a record high. Homeowners desperately seek out buyers just to stay financially afloat. Buyers hold on to whatever cash or credit they have like a lifesaver and wait out the storm. Banks and lenders start asking for souls of your children as collateral for loans. While traditional entrepreneurs scream death, a new breed of savvy investors take advantage of the situation and of the rock bottom prices and make offers on every available real estate deal they set their eyes upon.
And the reason is simple.
Sooner or later, the recession will break and guess what happens to real estate prices?
Now you may be saying, “That can only be true if you have enough cash to buy real estate today. What if you don’t have money to buy real estate at the present low prices and hold them till the market normalizes again? What then?”
Easy!
You get a hold of the properties at their bargain prices then flip them immediately to investors who do have the means to hold them till the market breaks. Finding these investors is actually easier than you think. Most of them (since they have money), don’t care about getting the deals themselves. They’d gladly pay people like you to bring them the deals.
This way, you don’t have to wait out the recession to profit. You actually put money in your pocket during the recession.
Think about it. With all the foreclosures going on, some realtor or broker or investor is going to get paid for them. Why not you?
This is exactly how most underground investors make millions in real estate during a recession.
Of course, those investors who get to hold the properties until the prices are up again make a lot more than you, but you won’t be doing bad either. Besides, they’ll make their money after the recession – you make yours during.
“But even if you go for this strategy, you’d still need some cash, right?”
Believe it or not, even in the middle of this recession, you can still make deals work without using your own cash or credit.
They’re called hard money lenders.
Unlike banks or traditional lenders, hard money lenders are more interested in the deal that you have than your credit score. And if they see a winner, they won’t hesitate to open their wallets for you because they know that there’s something in it for them too.
“You’re making it sound all too easy which can mean it’s not…”
Gosh, you’re a hard sell, aren’t you? J
But that’s okay. It’s understandable.
But to answer your question, you may be right – then again you may be wrong too.
Look at it this way, how much do you want to change your financial situation? If you really want it, would you let anything get in your way? Would anything be so hard? I can show you a bunch of people who have made it in real estate investing starting with nothing. I have also met a lot of people who say they want to achieve financial freedom through real estate investing but when it came down to it, all they did was bicker and complain so, they ended up worse than their original situation.
Being successful in real estate, or in any business for that matter, entails not only a strong foundation on the basic principles and strategies of the business, but it also requires a lot of positive thinking and optimism. There’s no sense getting started in a business with negative thoughts and the belief that you’re going to fail.
That being said, fact remains that history has proven over and over again, that the only business endeavor that has produced more millionaires in any period of time and in any economic situation, with or without any cash or credit to start with is real estate investing.
It is up to you to believe it and make the title of this article as true or as false as possible for yourself
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Most people believe that investing in real estate during a recession is a risk that’s not worth taking. They claim that the market is too volatile, that no one is buying real estate since cash is very limited and that instead of buying houses, people opt to rent apartments since it’s a lot friendlier to their pockets and because most of them probably got foreclosed on and so on and so forth.
This is simply untrue.
You see, from the last argument alone (that people are moving to apartments and rental properties because they probably got foreclosed on), you’ll already be able to see two real estate investing opportunities – rental properties and foreclosures.
All you simply need to do is to try to look at the situation at a different perspective.
It may be true that this entails a risk that’s too high for comfort – if you’re using traditional or ‘old-school’ investing strategies.
What you need to understand is that recessionary times call for a more creative approach to real estate investing. You don’t necessarily have to abandon the business altogether. You just need to ‘shift your gears’ and approach your deals from another angle.
So what strategies DO work during a recession? Here’s a few:
Owner Financing / Subject To’s / Lease Options
A lot of homeowners who need to sell their houses find it difficult to find buyers so most of these houses are just sitting there vacant and sometimes even neglected but most of the time, these homeowners continue to make mortgage payments on them so these properties become more and more of a financial drag that they need to get immediate relief from.
Now you don’t really need to have these properties at a deep discount in order to make the deal work. As long as you can make the homeowners agree to owner finance the properties to you and so you can take the property under terms then that’s already a good deal.
For example, the property is worth $100K. You can buy it for $200K and still make money.
How do you do it?
If the owner is willing to owner-finance it to you (and most of them would be happy to do that), and you don’t have to make any mortgage payments for 30 years and after that time, you pay them $200K, do you think that will make the deal work? Of course it does! That’s because the home price will go up and you didn’t have to pay any interest and all that.
These strategies work really well right now because a lot of these homeowners really need to sell their houses fast.You just need to get these houses under flexible terms to make it work.
Wholesaling
In the present economy, this strategy is really hot. This is because you can get a house at deep discount so you can still sell it cheap and make a lot of cash.
The reason you can do this is the same as the first one, we discussed. Homeowners are really desperate to get rid of their unwanted properties right now because they have a hard time finding qualified buyers and a lot of them would settle for literally pennies on the dollar (40 to 50 cents to the dollar). All you need to do is grab these properties and flip them for a quick profit.
For example, a property with an actual value of $100K which the owner desperately needs to sell and would settle for $50K. You get the property under contract for $50K, flip it to another buyer or another investor for $60K and you pocket a quick and easy $10K.
Short Sales
Short sales work like a charm nowadays because there are so many foreclosures going on and a lot of homeowners actually owe more than the actual value of their houses (mostly because they probably got their house on 100% financing or did a cash-out refinance and now that their property value dropped, they end up owing more than what the property is worth).
With foreclosures at an all time high, banks are finding themselves with more foreclosures than they can actually handle and so they are need to move these properties real quick.
That’s where short sales come in.
In a nutshell, what you do in a short sale is to negotiate with the bank to accept payment on a property that is lower than what is owed on it or even lower than its actual value. Banks are very willing to do this since they’re not in the business of owning homes. Simply put, they’d rather take a short sales offer on a home and make some money than to be stuck with a bunch of properties they don’t need and want.
Indeed, as a real estate investor, there are a lot of alternative ways of approaching deals in the present economic situation that will still prove to be profitable for you.
You don’t have to listen to all those doomsday-mongers who keep screaming that the world is coming to an end.
Well is you go ahead and believe them and abandon your real estate investing business, that may exactly be what will happen to you.
It’s true that the times are difficult, but that does not mean all hope is lost. You just have to look at the situation from another angle and take it from there.
Remember, “Extraordinary times call for extraordinary actions.”
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Banks are not in the business of owning foreclosed homes. This is why as soon as a bank forecloses on a property, the same almost immediately goes up for sale. And in doing this, most mortgages are usually entrusted by the bank rather than have the establishment mediate the transaction between the closing parties. There are two obvious reasons for this. First off, these banks are more likely to have more money to both loan out a large amount to the property owner, and give value to the asset held up for mortgage. Second of all the bank would be more credible and trustworthy when holding these transactions because, more often than not, it has already established itself in the local or even national and international community.
Let’s take a more detailed look at how a bank foreclosed home goes for sale.
When people need to make a loan involving a large sum of money they usually put up their valuable real assets like houses for mortgage. A contract is then signed as a manifestation of an agreement that the bank would have property rights over the mortgaged assets in as an interest for the money they are meant to collect within an agreed period of time. In the event that the owner fails to pay these debts, the bank sends a foreclosure notice announcing that the owner has lost his or her right to redeem the property, resulting to the repossession of the asset in question. Quite simply, a bank foreclosure.
Once repossessed, they then put up the bank foreclosed homes for sale. The deed signifying the ownership of a specific asset is either sold to a direct buyer or put up for auction. Either way, the proceeds of the sale of the same bank foreclosed house will serve as compensation for the unpaid debt of the owner. Should the proceeds form the sale prove to be insufficient for the total amount due, then the property foreclosed extends to other possibly salable assets that belong to the owner.
Looking for bank foreclosed homes for sale is quite easy. You can either search the internet for online lists of bank foreclosed homes for sale, or you could ask your local banks in the locality for such listings. This way, you get a good look of what’s available at the moment, which could likely be more than enough to let you make an informed choice in the end, should you find yourself torn between a number of these bank foreclosed homes for sale and other real estate opportunities.
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If you look at the business sections of most papers in these past months, particularly on economic analysis, there’s probably one concept you’d come across several dozen times – foreclosures. Indeed, there is a “foreclosure epidemic” that has been plaguing the country for several months now and this spells a lot of bad news for most homeowners.
A foreclosure is a legal proceeding in which a bank or lender sells a repossessed piece of real estate due to the owner’s inability to make scheduled payments on the mortgage or deed of trust. Banks and other lenders typically consider a mortgage to be in default when several months have gone by without payments having been made.
Real bad news.
Despite this seemingly doom and gloom aura that radiates from the concept of foreclosures, though, this poses a great opportunity for real estate investors looking to buy an investment property or a house to live in at a discount. The sophisticated nature of the foreclosure process comprises of three stages, each offering a significant bargain buying opportunity. We’re going to discuss the first stage of the process which is considered by most investors to be the best time to buy a foreclosure property – Preforeclosures.
The preforeclosure period is the time between the bank/lender’s notice to the borrower (homeowner) of his default on the mortgage payments and the time when the property will be sold at a foreclosure auction. At this stage, the bank/lender has already informed the borrower/homeowner that he is in default and if such is not fixed within a specified period (as may be determined by sate law), the property involved will be sold at auction to the highest bidder. Within this specified grace period, the borrower/homeowner should reinstate the loan by paying off the default amount. The easiest remedy will be for the borrower in default to sell his house and use the proceeds to pay off the mortgage debt (even when these proceeds might sometimes be less than the amount owed). More often than not, the borrower ends up losing money or equity in this process, but most borrowers take this as a better alternative than having the property go into foreclosure. This is because failure to satisfy the loan obligation by letting the house go into foreclosure will pretty much result in the borrower totally losing all interest in the house; and more importantly, a foreclosure would almost completely ruin the borrower’s credit score. Finally, if the foreclosure auction does not fetch enough of a price, the bank may go after the borrower for a deficiency judgment. All this, while sad, provides weighty bargaining leverage that you can bring to bear on the homeowner in a negotiation to buy the property at a discount.
And, you guessed it right, this is where it starts to look good for you as the investor.
Buying a preforeclosure property is not a walk in the park, though. It requires determination and persistence and a lot of getting used to. Not to mention, these properties are a bit more challenging to find. One of the most effective options is to visit websites specializing in preforeclosure properties and similar listings. I would recommend GovernmentAuctions.org. You’d be blown away by their vast and comprehensive listings of proforeclosure properties. Another great thing about this site is that, when searching, you can narrow down your search by zip code radius and county.
Once you locate a preforeclosure prospect that fits your fancy, it’s time to initiate contact with the homeowner. The idea is to be able to communicate to the homeowner that you are interested in buying the property and you are willing to work out a purchase agreement that would be beneficial to everyone concerned – particularly to the homeowner by capitalizing on his potential to walk away with something to show for the property and ultimately avoid a bad mark on his credit history. This is real tricky as you wouldn’t want to appear all too forbearing and arrogant, instead, you would want to be seen as a friend willing to lend a hand.
The first step in buying a preforeclosure is to express your intent to purchase the property by mail. In most states, the grace period between the notification of impending foreclosure and the actual foreclosure can take several months. So don’t be surprised if most homeowners you would be contacting would not reply to your mail immediately. Typically, a homeowner’s first instinct when faced with a foreclosure notice is not to sell. He would first exhaust all options to remedy the possible foreclosure before even considering selling. That is why you, as the investor, should be patient – not to mention cautious. Dealing with homeowners in the preforeclosure stage may be like walking on thin ice.
Once contact has been made between both you and the homeowner facing foreclosure, proceed with the discussions and negotiations regarding the property. If all parties agree to push through with the sale, a Terms of Purchase need be negotiated. These negotiations will involve you, the homeowner and the bank/lender. A real estate agent can also be a valuable resource during the negotiating process as well as a real estate lawyer, especially if you’re not familiar with drawing up a purchase agreement (as most lay people are). Put everything in black and white and make mental notes (or physical notes if you prefer it that way) so you may familiarize yourself with details of preforeclosure closing procedures much quicker.
After all is said and done, buying preforeclosure properties truly is a challenging ordeal. But once you get the hang of it, it opens a whole new world of real estate profit opportunities for you.
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The mortgage crisis has been a nightmare for some and a dream for others. For the people who have lost their homes, it is a sad and life-altering experience. There’s nothing remotely pretty about losing your home to a foreclosing bank. But where they see despair, others see opportunity. These are people looking to make a good investment out of these bank owned foreclosed homes.
With foreclosed homes selling at below market values and interest rates at an all time low, many are looking to invest in the housing market. The problem, however, is how and where to find these bank owned foreclosed properties. Depending on where you live, you may find these bank owned foreclosed homes fairly easy.
One method is to search for bank owned foreclosure listings in various search engines to find these kinds of properties in your area or even across the country. With the ever increasing cost of property, buying bank owned foreclosed properties has become much more socially acceptable, not to mention highly profitable that most are listed online.
This is especially true in metropolitan areas since these areas seem to have been hit the hardest. You’d have no trouble at all finding bank owned foreclosed properties there. If you are a serious investor, aside from just looking for bank owned foreclosed properties in your area, you might want to travel and purchase properties in market hot spots as well. This includes places like Atlanta, Houston or Denver.
Whichever area you prefer, be it within your own backyard or from coast to coast, you have to do your homework in the areas you are interested in. Real estate agents have come up with some unique ways to show their database to online hunters trying to find bank owned foreclosed properties. It used to be quite rare that some realtors would have so many listings of bank owned foreclosed properties at one time, but now it is becoming more and more common.
As such, competition is also rising pretty steeply, which forced realtors to be really creative in their listing practices. Some have sought to offer tours through neighborhoods to show listed properties. It sounds silly, but actually it is a great way to get a look and feel of the neighborhood. If there are properties sitting unsold for long periods of time, you may want to stay away.
Don’t be afraid to ask questions. If you feel that you need to see the property several times before making an offer, go ahead and do that. There is nothing wrong with that. There’s a vast amount of resources that can be found online to help you not just find the location bank owned foreclosed homes, but practically everything you need to learn about these properties as well.
Some of these online sources have listings that cover the whole country, and allows you to narrow down your search by zip code or even by county. This is the easiest and the most popular way to find bank owned foreclosed properties. It is a good thing to remember though to narrow down your search to a few properties prior to contacting an agent. You wouldn’t want to bite off more than you can chew.
The possibilities are endless. No matter what path you take in finding a bank owned foreclosed home, be sure to do all your research and to remember every detail you encounter. Be motivated and organized. This will save you time and money. Don’t purchase a property before you have personally inspected it. Some homes have been trashed by angry owners who do this as their way to deal with the stigma of having a foreclosed home and a ruined credit score. Some of these may not be worth the cost of repairing. You don’t want to be stuck with that problem, so while it pays to be aggressive, it also is a great deal to be prudent. So go ahead and try your hand with these bank owned foreclosure properties. They just may be your ticket to fortune.
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Real estate investing offers the best opportunity to make a really profitable living for any one. This diverse market can provide profitable deals in all sizes and shapes that fit anyone’s taste for business opportunities. Depending on your personal preference, you may indulge in wholesaling, retailing, rehabbing and a whole lot more. You can choose to focus your attention to ugly houses or pretty houses. It all depends on which area you’re more comfortable with.
One of the most sought after deals are those involving foreclosures. Whole most investors think that handling foreclosures is quite complicated and should be left to the hands of seasoned professionals; it can actually be quite a fulfilling experience once you get the hang of it. It is true though that you should pay attention to a lot of details when handling these deals. You owe it to yourself to go through these details and familiarize yourself with them right from the start. And that means from the moment a lender decides to foreclose on a home and sends out the very first notice of foreclosure on the property, up till the moment you find a buyer and close on the deal, you should be right at the thick of the action.
A smart investor knows that a foreclosed home presents a bargain, especially those who are looking for real estate investment properties. Usually, homeowners try to avoid foreclosure situations, as this hurts their credit, thus they usually agree to close at lower prices than the actual market value.
If you are a bargain shopper and are currently on the hunt for an investment property or even a house to buy for yourself, you may have heard stories of people finding great deals by buying foreclosed homes. And in the current market, there’s definitely no shortage of houses going into foreclosure. This is especially true if you are looking to buy properties in areas like Ohio, Indiana, or Michigan. The lending standards of the mortgage industry, particularly pertinent to the subprime or “bad credit” market, became increasingly lax during the last housing boom, this allowed homebuyers to get into homes they couldn’t afford with loans they didn’t understand. Now that the housing market has dramatically sobered up, most homeowners’ equities have dried up, and a lot of these homeowners found themselves neck-deep in trouble. Those with adjustable rate loans, especially those with ‘exotic’ loans like pay option ARMs or interest-only mortgage’s, have found it difficult to make their payments after their loan interest rates adjusted higher.
Learning from these, the first step in buying a foreclosed home is to make sure that you have the credit and resources to truly afford the house, no matter how great of a deal you get on it. This is to ensure that if push comes to shove and the housing market proves to be a real tough ride, you’re assured of ample financial cushioning.
Next, you need to know how to buy a foreclosed home. You can go to a state auction and try to outbid others for such a house. The risk though is that you are practically buying a house without having seen it first. You might end up buying a house at a price higher than what it ought to be and then find out later that it actually needs more repairs than you can afford. Thus, instead of finding a great bargain, you’d find yourself a great deal of headache. You will also have to be prepared to pay upfront with cash or a cashier’s check when you buy at an auction. Furthermore, in an auction, you might also find yourself in the unpleasant situation of having to evict the current homeowners if they are uncooperative about moving out. Despite these downsides though, auctions usually prove to be good enough venues for landing great deals.
You can also try buying a foreclosed home that is Real Estate Owned (REO.) This is when the bank repossesses the house and then accepts offers from other buyers. The benefit is that you get to inspect and have a title search done on the house before placing your bid. The downside is that the bank would probably want to get the highest amount possible for the property in order to cover the foreclosure losses – sometimes eating into whatever equity has already built up into the property. In which case, you might end up buying a house at its actual market value instead of a discounted price.
After all is said and done, buying a foreclosed house will probably save you some money right at the onset. However, you may have to shell out some money to cover for listing services or for necessary home repairs, as the previous owners probably didn’t have money for the home’s upkeep. The good thing about today’s market is that because of the overstocked inventory of new and existing homes on the market, as a buyer, you have a lot of negotiating leverage. And done right, this spells the potential to make a great deal of profit whether the house is in foreclosure or not.
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