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If you were a real estate investor watching the real estate boom of early 2000s closely, you could have predicted the foreclosure investing opportunities that would become available today in virtually every real estate market in the country.
In the last two years mortgage lenders have been reporting dramatic increases in defaults and foreclosure rates nationwide causing many sub-prime lenders to go under. But that's just a tip of the iceberg.
Will You Be Able To Capitalize On This Foreclosure Boom?
On the surface it seems easy enough. Get a list of properties in default. Contact homeowners. And get the deal done at a juicy discount, before the bank takes the house. Then you can fix it up and flip it, or keep it as a rental with an instant built-in equity profit. Right?
Well, not quite.
Getting into the foreclosure investing game could be an extremely lucrative move that alone could not only feed your family but pay for lavish lifestyle and vacations. Or it could turn into a big black hole consuming all of your time, energy and marketing dollars.
Very few real estate investors actually succeed in foreclosures on a consistent basis. Why? Because, they're using the wrong approach in a very crowded market.
How Will You Differentiate Yourself in a Crowded Foreclosure Investing Field?
To say it's crowded is a huge understatement. The field of foreclosures is probably the most competitive area of real estate investing. It routinely gets more attention from mass media. So more people flock to pursue it. Hundreds of investors in your metro area are mailing to homeowners facing foreclosure. They're even harassing homeowners on the phone and knocking on doors.
In short, if a homeowner is behind on payments, you can be prepared for a major fight for his attention. Just imagine for a moment that person sitting at his kitchen table plowing through a pile of letters from lawyers, bill collectors and investors.
Your mailing piece is just one of many that goes straight to the garbage can. You must find a way to differentiate yourself from the investment crowds. Here's an idea that will put you ahead of the competition.
The Only Ethical Way To Approach Foreclosure Investing
Truth be told, for most people who are behind on mortgage payments and in danger of losing their home - talking to a real estate investor about selling the home is the very last thing on their mind. They often perceive foreclosure investors as sharks taking advantage of their situation.
So, if you want your phone to ring with people in foreclosure, contact them with an offer to 'keep the home'.
Here are 3 Reasons Why You Should Offer Homeowners Facing Foreclosure the Chance to Keep Their Home, Even if You're Really Interested in Buying it- First, trying to help a family in financial trouble is the ethical thing to do. You'll be preserving the American Dream.
- Second, you'll actually make money doing it. You can help them negotiate a repayment plan with their current lender (the process is called Loss Mitigation) and collect a fee for your service. There're several companies nationwide with an in-house list of Loss Mitigation department contacts for literally every lender in the country that will do all the work for you. So, even if you never buy a single home, with tens of thousands of foreclosures in your hometown, offering Loss Mitigation services could turn into a lucrative income stream by itself.
- Third, this is the most profitable approach. In many cases you will end up buying the home. Remember, the Loss Mitigation process will only work for those owners who got behind, but now recovered their ability to pay. Most won't qualify for a repayment plan because they can't prove their hardship is behind them. And they won't know it until you helped them to pencil their income and expenses on paper and submit it to their lender. Now they have undeniable proof they can't keep it. Once the reality settles in, they'll start talking 'sale'. Who will they sell to? You, of course. You have now earned their trust and it's the only next natural step to take.
So again I ask you: Will you be able to capitalize on the booming foreclosure market? If you follow my advice, you will be able to profit from foreclosures for the next 5 years or even longer.
One of the very best parts about most fixer-uppers is that you don't have to be an interior designer or a master builder to turn them into sheer profit, provided you know the 10 quickest steps to making it happen.
After obtaining the proper permits, if necessary, and ensuring all contracts are drawn up to be fair and in order if you're using outside builders and contractors, here are eight quick and simple steps to take to turn your fixer-uppers into cash:
Step #1: Remember the Importance of Curb Appeal
Curb appeal is perhaps one of the most important, but overlooked aspects of selling a property, especially fixer-uppers that may not be quite as aesthetically pleasing as the rest of the area's surrounding properties. Curb appeal gives you the ability to make an excellent first impression and compel buyers to stop and take a look inside. Be sure the lawn is neat, add flowers, shrubbery, and remember the mailbox, the house numbers, railings, and anything else you can see from "the curb."
Step #2: Checking or Repairing the Plumbing and Electrical
Next is the aspect of tending to the plumbing and the electricity, first making sure all is in order and won't need repaired after you've treated the walls and ceilings. Retain a licensed electrician to handle any changes with the wiring, and likewise, an experienced plumber should any of the pipes have leaks or need replaced.
Step #3: Interior Painting
Fresh coats of simple paint can quickly turn fixer-uppers into a welcoming place ready for habitation. While most of painting lies within the preparation, the quality of the finished product will make a world of difference when it comes to selling the property. One thing to remember is, leave your personal tastes and style at the door and instead choose a neutral color that will appeal to a wider audience.
Step #4: Updating the Kitchen and Bathrooms
All buyers look for a clean, functional kitchen that they'll feel at home in. If cost is a concern, consider a quick facelift using paint, new fixtures and inexpensive countertops to make the room After the kitchen, the bathrooms are the rooms people often pay the most attention to as this room can be costly to renovate, something that will send buyers running in the opposite direction.
Step #5: Replacing or Repairing the Windows
Repair or replace any windows or frames that are damaged, removing cracked or peeling paint and increasing the curb appeal by adding flower boxes or shutters if possible.
Step #6: Replacing or Repairing Floors and Doors
Replace front and back doors if needed, or simply dress them up with new fixtures and knobs. If your property has hardwood floors, a good polishing or re-staining can work wonders and be far less costly than a complete replacement. Stick with neutral carpeting or inexpensive vinyl for floors in fixer-uppers that will be used as rental properties.
Step #7: Don't Forget the Window Treatments
Window treatments can really alter the look of a home, both from the inside and out, and come in a variety of options ranging from elegant draperies to simple mini-blinds. Choose relatively inexpensive treatments, again in a neutral color and style.
Step #8: Adding the Final Touches
The final touches, like light fixtures, door handles, outlet covers, and all of the other small accessories that can really tie a home's décor together shouldn't be forgotten either as they can all truly enhance an otherwise boring home, turning fixer-uppers into eye catching properties.
And, by following these eight steps, that can be all it really takes to turn structurally sound fixer-uppers into money in the bank.
Making money in real estate is a dream that millions of people have. Few will actually see that dream become a reality. Why is that? Well the fact is that it takes a person with a strong will and a stiff upper lip to make it in this cutthroat business. You cannot be the kind of person that is given to allowing others to take what you have or want. To make the money that you need you have to be willing to stand up and make it happen.
The profitability of investing in real estate depends on the market as much as it does the person doing the investing. The general rule is that you have to be smart and lucky at the same time. Knowing what to buy, when to buy it and how much to pay for it all have to ring in your ears at every potential investment. Lacking even one of these components can put you at risk for serious losses in the financial department.
This is key when you are looking to get a better grasp on real estate value and what affect it can have on your profit margin. Basically you are having to do a risk assessment before you make every deal. This can be time consuming if you are not knowledgeable in this area. However, with a few key tips and a bit of advice you can make the right choice. So below we have provided a few of these tips.
The Value and Price Gap
Learning to bridge the gap between value and price is vital to your success. You can sit there all day long and read appraisals and still not come away with any better idea as to how much you should pay for a property. This is due to the fact that appraisals are based on more factors then you need. They are giving a value that is used by the mortgage companies to determine how much can be loaned. The price is actually what a person or company would pay. Knowing how to fall in between those when buying is how you make a profit.
Risk
There is also the idea of risk that has to be considered. Any real estate deal is going to be risky but some more than others. You have to learn how to properly assess the risk and determine whether it is too high for you to make the investment. While high risk ventures do tend to be more valuable in the long run, there is the chance that you could fail. As such you have to be sure that you are prepared when establishing real estate value and the risk involved.
Long Term
As a person that is looking to make an investment in your future you have to see that true real estate value is based on the long term. Short term factors do exist but in most cases you have to assess the value on a term that is far longer. The more that you have to sit on the property the more the value could change, either for the better or for the worse.
