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7 Big Reasons To Invest In Pre-Foreclosures
By Ben Innes-Ker
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.
About the Author
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/
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