Honest Realestate Agent

Posts Tagged ‘pre-foreclosure’

Hi there real estate investors and entrepreneurs.

I wanted to provide you with a checklist of “buy signals” that experienced pre-foreclosure investors. look for and find when evaluating an investment property.  These are sure signs that you’re on your way to buying your next investment property at a substantial discount.

You don’t need to have all seven buy signals in place, but usually when you find one, the others are sure to follow.

Buy Signal #1: Homeowner Is Behind On The Mortgage Payment

This is an obvious one, but I thought it needed to be included in the list.  Most homeowners who fall behind on the mortgage payment cannot catch up and usually lose the property at foreclosure auction.

When homeowners can’t afford to pay the mortgage, they cannot afford the others bills either.

Buy Signal #2: Grass Is Overgrown

After many years of running the streets as a pre-foreclosure investor, I learned to pick out (in an instant) the house in foreclosure as soon as I turned onto the street.

High, overgrown grass is a sure sign that the house is in trouble and the owners (if you can find them) will have a compelling reason to sell.

Buy Signal #3: Windows Are Busted Out

Busted out windows are usually found in vacant or abandoned properties.

When a homeowner in this situation moves out, the neigbhorhood kids can get together and take out the windows if you know what I mean. This involves honing in on the best possible target.

Buy Signal #4: Rotten And Exposed Wood

A house that has extensive rotten wood on the exterior has probably been neglected for many years. You would be amazed at what people will tolerate when it comes to sub-standard living conditions.

I once met with a homeowner who had a 3 foot wide hole in his kitchen ceiling. The hole was huge – you could look up and see the blue sky above. I met with the seller for several hours talking to him about his options with the house.

Not once did the seller acknowledge the huge hole in the roof. This was a very strange experience.

Buy Signal #5: No Garden Hose

I have found this one item in the list to be more telling than any of the others.

For some reason, whether or not the house had a garden hose connected to the outside faucet told me if it was occupied or vacant.

If the green garden hose was still attached to the house, it was almost always still occupied. If the green garden hose was missing, in virtually every case, the house ended up being vacant.

Buy Signal #6: No Furniture

Usually when you suspect that a house is vacant, you peer into the nearest window to confirm your gut instinct.

You’ll know in an instant that the seller has moved on if the furniture has been removed.

Buy Signal #7: Neighbors Haven’t Seen Them

Usually there will be a neighbor or two that can tell you something about the seller.

If the seller could fix the problem with the house, you could bet the neighbors knew all about it. They are sometimes a very good source of information

1.  Motivation, Motivation, Motivation

When it comes to investing in real estate, we’ve all heard how important a good location is when deciding to purchase an investment property.How many times have we all heard, “It’s all about the location?  Location, location, location.”

Well, I’m here to tell you it’s not about location, its about motivation.So say after me, “motivation, motivation, motivation.”

No matter your experience level in real estate investing, the fundamentals are the same for all of us.

Buy the best available investment property at the most attractive price. 

How can someone repeat this over and over again? I thought you’d never ask.

In order for the savvy real estate investor to buy investment property at a deep discount regularly, he or she must look for people who have compelling reasons to sell.What do I mean by having a compelling reason to sell?

These people are almost always forced to sell or they risk losing the house to the bank.

So instead of focusing on great property locations, start searching out sellers with big problems to solve? Help these homeowners out first and you will end up with the investment property.

What signs do experienced income property investors look for?

1. Divorce

Divorce plays a major role and affects many of us.This situation causes many homeowners to fall behind on the mortgage payment.A big mistake married couples make (over and over again) is to buy a house based on both incomes.  So in order to pay the mortgage, both incomes are needed.Guess what happens when one of those incomes disappears?

2. Unexpected Job Loss

In our current economy, job loss plays a major role in the real estate investing market.When someone takes that kind of financial hit (job loss), everything else is dramatically affected.The house is usually the first item on the list.  When the money stops flowing in, foreclosure is right around the corner.

3. Extended illness

It’s never a good time to get sick.Good things rarely happen when the primary bread winner goes down with an extended illness or sickness.  Cancer, heart disease, and a vast array of disabling diseases can hit at any age.If a seller is underinsured and doesn’t have disability insurance, he or she will not be able to pay the bills
Any remaining money would go directly to pay the medical bills.

4. Job Transfer

Sometimes that great job opportunity comes with a price.  For example, Bob lives in Houston and finally gets his big break.  It’s a job promotion that requires him to move to Atlanta.Bob accepts the new position and moves to Georgia without first selling his house in Houston.

Bob buying a new house in Atlanta is a really big mistake.  The two payments crush Bob and this so called “new opportunity” suddenly sinks him.Poor old Bob.

5. Drug and/or alcohol addiction

When you’re addicted to drugs or alcohol, it’s very hard to remain productive.When someone let’s this sickness in, it’s all down hill from there. 

When buying investment properites, search out these particular seller situations.When a homeowner cannot solve their problem with the house, come to their aid and bail them out.  You will be rewarded after you help others first.

Look for these seller situations in your future real estate investing efforts and you will be handsomely rewarded.  I promise.

How do you know what approach to real estate investing is really best for you?Many years ago, we learned about the power of foreclosure investing.  If you had to try and explain foreclosure investing, you could throw a wide net over everything from a homeowner missing their first mortgage payment all the way to the foreclosure property selling at the courthouse steps.

Then came pre-foreclosure investing.Pre-foreclosures begin with a notice of default being filed at the local courthouse and leads all the way up to the Sheriff sale or foreclosure auction. 

Reason #1 – Sellers Almost Always Have To Sell The Property

I don’t know why homeowners who fall into pre-foreclosure do the same thing every time, but they do.In virtually every case when this situation develops, the property usually falls into pre-foreclosure.

When a seller falls into pre-foreclosure, its very difficult for them to climb back out.

The main causes leading up into pre-foreclosure are:
1. Divorce
2. Job termination
3. Extended or prolonged illness
4. Job or position transfer
5. Drug and/or alcohol addiction

Homeowners who find themselves in pre-foreclosure almost always have to sell in order to avoid having the house sold off at auction.  Experienced foreclosure investors know that when they help sellers first, they are then rewarded with these steeply discounted investment properties.

Reason #2 – Less Competition For The Experienced Pre-Foreclosure Investor

Many who consider themselves real estate investors are not trained properly when it comes to searching out and identifying the most profitable investment properties.These so called real estate investors search through the classified ads each week and focus on buying investment property at retail prices.Some investors work with real estate agents and attempt to buy investment property – but these are listed properties with high retail prices.

You cannot build lasting wealth through real estate investing if you’re paying too much for investment property.  You must learn to pay wholesale or even lower – and this is possible.

Experienced pre-foreclosure investors don’t pay “retail prices” for investment property and they normally don’t work with real estate agents.  These investors know how to search out and find the best real estate investing deals on the market.  Pre-foreclosure investors don’t wait for sellers to come to them – they go out and meet these sellers. 

Now some pre-foreclosure investors mail out postcards and letters and some even make phone calls to homeowners who are in pre-foreclosure.I have found the most effective approach to pre-foreclosure investing is to physically travel out to each house and meet with the homeowner. 

This approach to real estate investing offers the highest return on your investment along with the least amount of competiton.  Pretty good combination if you’re trying to build long term wealth.

With so many challenges that can affect the inexperienced pre-foreclosure investor what are the critical factors?

The Location: Buying Investment Property In A High Risk Neighborhood

We’ve all heard the real estate investing mantra, location, location, location.  Experienced property investors can make many locations work in their favor.  A good location will produce stable and predictable outcomes for you as an investor.  Property investors do not normally acquire income properties in the more exclusive neighborhoods.

Most investment properties (for rental purposes) are acquired in the middle class, working middle class and blue collar sections of town. Property investors know that the risks go down when you buy investment property in these neighborhoods.

If you are new to pre-foreclosure investing, listen to this advice closely. Do not buy investment property in high crime or high risk areas.  If there’s trash all over with young men just standing around during the middle of day, do not buy foreclosure properties in these neighborhoods.

Even if you can buy a three bedroom two bath house for $10,000, you will only be able to rent to high maintenance tenants. And if you’re thinking about selling it, forget about it. Nobody in their right mind who could actually qualify for a new loan would want to live there.

Pre-foreclosure investing can be very forgiving if you stay in the game long enough. If you fail to follow this investment advice, you’re going to have some really big problems. When it comes to pre foreclosure investing, stay out of the high risk areas.

The Price: Paying Too Much For An Investment Property

I think by far, the most difficult real estate investing mistake to overcome is paying too much for a piece of investment property. Pay close attention.

No matter if the pre-foreclosure investor is planning to flip or rent out the investment property, he must know (in advance) how much the property will be worth in its fair market condition (after repairs).

If the property investor does not know the fair market value of the investment property, how will he know what he can afford to pay in order for the investment to make sense?

If you pay too much for an investment property, you will be working for free or even at a loss for that matter.

Even when you rent out one of these investment properties, they don’t cash flow. Which means the rental income is less than your operating expenses.

When this happens, you then have an alligator on your hands. And alligators get hungry.

If you’re going to successfully invest in pre-foreclosures, you have to know the numbers. As a property investor, you can’t ignore this.

The Exit: Effective Pre-Foreclosure Investors Know Their Exit Strategy

Property investing can be thought of as a story that has a beginning, middle and an ending. Effective property investors know what the ending of each property investing story will be.  Knowing the end of the property investing story makes a pre-foreclosure investor very effective.

No matter if you’re investing in single family houses or apartment buildings. A property investor must know how to exit the investment before he puts any money into the deal.

Effective pre-foreclosure investors know what comparable houses are selling for in the neighborhood if the exit strategy is to sell (flip) the investment property to a retail buyer.

If you’re going to rent the investment property out for monthly cash flow and long term capital appreciation, the property investor must have a firm grasp on what the rental rates are in the area.

The Drivers: Pre-Foreclosure Investors Must Be Aware Of The Major Economic Drivers In The Area

The biggest economic driver in any real estate market is job growth. If the employment outlook is strong, more jobs will be created and more people will relocate to that market. You’ll have more companies with more jobs setting up operations in those markets as well.

On the flip side, if job growth is stagnant or even declining, the real estate market will take a big hit – just look at Detroit.

Experienced property investors know that in order to sell houses and rent apartment buildings people need to be gainfully employed. If people don’t have good employment opportunities, the retail and rental markets for property investors will be adversely affected.

There are many other economic factors that affect the real estate investing market, but job growth and employment are the biggest drivers.

If you want to improve your skills as a pre-foreclosure investor, make sure you consider each of these critical factors on every real estate investment.

There are literally hundreds of thousands of pre-foreclosure and foreclosure homes available for anyone wanting to invest in real estate or acquire a home at a price significantly below the market value.

A more comprehensive kowledge of the market and the foreclosure property process can result in bypassing good deals for the best deals. This article reveals some of the fundamentals of buying foreclosure homes.

Familiarize Yourself with the Foreclosure Process

There are three distinct stages in the process of foreclosing a home. The different phases represent the types of foreclosure properties. Both the first and second types are pre-foreclosure properties. The first stage is called the notice-of-default (NOD). The second on is called the notice of trustee sale (NTS). The property actually becomes foreclosed in the final stage. This is known as real-estate-owned (REO). This is a property that has be re-purchased by the bank.

Whether you want to buy a property as an investment or are looking for a home for yourself, the best option is to buy the property during the pre-foreclosure stages. Usually, a win-win-win solution is the result. The seller wins by freeing himself from a mortgage that he is unable to pay and, quite possibly, could lead to the ruining of his credit. The buyer wins by acquiring a home at price below the market value. Lastly, the lending agency wins by not paying the costs of foreclosing on the property.

Take Advantage of the Expertise of Foreclosure Professionals

Unless you have a lot of experience in the real estate market, there are probably a lot of legal aspects and jargon that you will not understand. As with any field, if you want to do something well, you need to surround yourself with professionals who are experienced in the skill you wish to learn. It is no difference when launching out to purchase a foreclosure home. Forming a team of foreclosure experts will serve to enhance your experience and maximize the potential for finding a good deal.

Some of the professionals you should consider are real estate agents, lawyers, lenders and rehabilitation experts. The best case scenario is to encounter one epert who understand all the angles of buying foreclosers.

Gather the Maximum of Information Before Bidding on a Foreclosure Property

There are many different issues that you need to consider as a potential buyer of a foreclosed property. One of the most important things to check out is the date the mortgage loan was made on the home. When almost no equity have been built up in a property before being foreclosed, the purchase price leaves little or no room for savings. It is imperative that the buyer know all the fees that he might be charged when he buys the property. You will pay more and earn less if there are additional fees that you were unaware of.

Once again, the greatest savings on the purchase of a foreclosure home is available when buying directly from the owner during the pre-foreclosure stage. In most cases, a buyer will get a much better deal if he acquries the foreclosure property directly with the seller rather than through a lender.  You can usually find out who the owner is by searching for foreclosure information in the local newspaper.