Today’s real estate market is not like it was 20 or even 10 years ago. We have all seen areas where real estate prices have remained stagnant or dropped in the last few years. So what does the future hold? Will prices rise or fall?
No one knows exactly what will happen in the future (I am very optimistic and think prices will gradually go up). How would you like to be able to make a lot of money in real estate no matter what the market did? Is that possible? It sure is! Let me show you how.
Actually you can make money several ways with real estate regardless of current market conditions. The first step is to determine whether you wish to buy and immediately resell for a quick profit or buy and hold onto your properties, earning a nice monthly cash flow from the rental income while your property increases in value. I suggest holding onto your property to get the most profit from it, but it is your decision. Once you choose which way you want to go, the next step is to learn how to buy it so cheaply that your profit is built in, and this means buying it wholesale.
When you buy a property through an ad in the paper, whether FSBO (for sale by owner) or through a real estate agent, you are usually buying retail. To buy wholesale takes time and effort, but it is definitely worth it. Here are five ways to buy wholesale:
1. Call your local banks (a good place to start is your own bank!) and ask to speak with the REO (real estate owned) department. Ask for a list of their foreclosures. Look at the properties and write down the ones you like, making sure to keep tabs on exactly what you do and do not like about each property. Make friends with a real estate agent. Let them know you will be buying properties and will buy through them if they have any at a good price, and if they have a rental division, they can have your rental business as well. Get that agent to run comps (comparisons to get an approximate value) on the properties you like. Make an offer to the bank of no more than half of the amount shown on the comp. Yes, you will be turned down a lot, but you will also be surprised at the yeses and counter offers you get. This is one way to buy wholesale, but there are even better ways!
2. Buy at tax lien auctions. This used to be a real good way to get properties at hefty discounts, but has been so publicized that now there is too much competition, so the chances of the killer bargain is greatly diminished. Still, it is worth checking out, especially if you are a newbie, just to see how it all works. Go to your courthouse and ask about the tax lien auctions. They will give you all the details, including when and where (usually the first Tuesday each month at courthouse steps, but it can vary) and have a list of the properties that will be for sale. Go look at the properties and write pros and cons of the ones you like and get comps on them. If you see any you like at the auction that stay below half the comp price, buy if you have the cash. At these auctions you will pay all cash, so make sure have enough before you start bidding. Once you remodel and rent the place out, you can refinance your cash back out, or get it back plus much more when you sell.
3. Another good place to find deals is by searching for sellers who have to unload their properties now! Maybe they had to move due to a promotion at work or whatever, and now they are paying on two mortgages. You can sometimes make ridiculous offers and they will jump at them. These people can be found through real estate agents, talking with friends and relatives, running ads, etc. You can find them in some FSBO ads; just make sure they have the tell-tale signs in the ads such as “make offer” “must sell moving” and so forth. A few minutes on the phone should tell you if they are serious about discounting the property. Be very careful about these properties that there is not something wrong with the property itself, such as foundation damage.
4. Distressed properties, out of town owners. Drive around neighborhoods and look for properties that look empty and run down. Write down the address and do a property search. If it is owned by an out of town owner, you may have a winner! Contact the owner and tell him you may be interested in the property and then listen carefully to what the owner says. If they seem willing to sell at a greatly discounted price, get a comp and make the offer. Your real estate agent is going to be loving you soon. And you will be on your way to great wealth!
5. But by far the best place, in my opinion, is through discounted mortgages. Mortgages, trust deeds, land contracts, whatever they are called in your particular area, hold the potential to make you the greatest returns on your investment of all the other methods I have shown you combined! There are two basic types, performing (debtor is making the payments) and non-performing (debtor is not making the payments). The big investors that buy these investments want the performing notes because they want the payments, not the property. There is good money in it.
A lot of these investors routinely get 20 percent to 30 percent ROI (return on investment) annually. Not many investments give this kind of return. Especially not when you consider they are backed by real estate! But I am going to show you a much bigger return, and you will have far fewer investors competing with you. I am talking about buying the non-performing notes. Now you may ask, why in the world would I want to buy an investment where I already see that the person is not paying on it? There are two very good reasons. One, you are going to buy that note at an extreme discount, paying 5 percent to 30 percent of the original mortgage amount! Second, you are going to get the property! Have the same closing attorney that you have been using on these other deals to write a simple letter on your behalf (the lawyer should do it for free or very inexpensively) giving the delinquent payor two options, either give a “deed in lieu of foreclosure” (simple quit claim) which will save their credit (and save you a lot of hassle) or you will foreclose on them which will stay on their credit for 10 years.
Use a search engine and put in non performing mortgages for sale and you will find more of these notes than you can buy.
Each of these methods by themselves can make you wealthy over the next decade. Use them all and decide what you like best. I look forward to seeing you soon on the new millionaires’ list! Happy hunting!