Foreclosure Investing For Dummies. Ralph R. Roberts

buy REO properties and the following other properties that government institutions and law enforcement agencies take possession of and then often sell at deep discounts:

       Properties seized due to nonpayment of taxes

       Properties seized by customs and law enforcement agencies because they were paid for with profits from illicit activities

       Houses that were repossessed when homeowners defaulted on HUD (U.S. Department of Housing and Urban Development) or VA (U.S. Department of Veterans Affairs) loans

       Fannie Mae and Freddie Mac properties that were repossessed and then turned over to these government-sponsored loan programs

       Bankruptcy properties that are being liquidated to pay off loans

       Properties that the U.S. Department of Transportation purchased for road improvements and must dispose of after completing the improvements

      

When you buy a property from the government or a bank, don’t assume that you’re getting a good deal. Homes are typically sold in their “as is” condition. You must still research the title carefully and inspect the property with your own two eyes. If you see ads or late-night infomercials selling lists of bank-owned properties, don’t fall for the hype; these lists are usually outdated long before they arrive in your mailbox.

Assembling a Team of Experts and Advisers

      Flying solo on foreclosures may seem like a good idea. After all, any professional help you get will eat into your profits, right? Flying solo, however, is a good way to go bust or at least to limit your potential profit. Developing synergistic relationships with top-performing specialists has been a key to my success (and to the success of almost all the top real estate investors around the world).

      In addition to providing expert guidance and advice for seizing opportunities and avoiding common pitfalls, experts deliver leads to potentially profitable properties, affordable financing, and quality contractors. They can assist you in managing your finances and in renovating and selling your property for top dollar after you purchase it. And, by delegating some of the workload to others who are better equipped to handle it, you free up time and resources for finding the most profitable opportunities.

      In Chapter 4, I explain how to assemble a solid foreclosure investment team consisting of the following members:

       Real estate agent

       Real estate attorneySTAND BY YOUR MAN — OR WOMANTell your spouse or significant other about your plans to invest in foreclosure properties and ask for help. If your spouse is a couch potato and would prefer to remain anchored to a lounge chair than to help you work nights and weekends, you're likely to find yourself swimming upstream — right into a concrete dam.Your better half needs to know that you’re planning on earning tens of thousands of dollars per deal, and because you’ll probably be spending that money together, there’s no room on the team for a couch potato.I strongly recommend against making any attempts to invest in foreclosures without the full consent and eager assistance of your partner. I would hate to hear that after reading this book, you and your better half stopped calling each other “honey” and “sweetie pie,” and started calling each other “plaintiff” and “defendant.”

       Mortgage broker

       Accountant

       Title company

       Home inspector

       Contractors

      In Chapter 5, I lead you to sources of financial capital to fuel your investments, and in Chapter 6, I lead you through the process of developing a strong support network that virtually ensures that you’ll never run out of leads on profitable foreclosure properties.

      

With a solid team in place, you take on the role of manager and decision-maker, and you can create an efficient system that minimizes risk while maximizing profit.

Getting Your Financial Ducks in a Row

      In real estate, cash is king. In foreclosure investing, cash is the grand, high-exalted mystic ruler. Investment capital enables you to step in at any stage of the foreclosure process and buy out anyone who has a claim on or an interest in the property.

When I say cash, I’m not talking about the money you have stuffed in your mattress. I’m talking about borrowing certified funds from a bank or other lending institution or from a private investor. See Chapter 5 for details.

      Cash gives you the upper hand with the four Cs:

       Credibility: With cash, you have instant credibility that you can deliver on your promises without hesitation. In most cases, homeowners need cash to escape their current financial crisis. Lenders need cash to cut their losses. With cash on hand, you can give homeowners and lenders what they need to achieve their goals while you take possession of a profitable property.

       Confidence: Cash provides you the confidence to pitch offers to homeowners and lienholders, knowing that you can deliver in a timely manner.

       Creativity: Putting together a foreclosure deal that satisfies all parties often requires a great deal of creativity. With sufficient capital, you liberate your imagination from financial limitations.

       Competitiveness: Multiple real estate investors often compete for the same property. Cash gives you a competitive edge because it enables you to execute a deal much more quickly. Both homeowners and lenders are eager to put the current crisis behind them. An ability to act quickly often separates the successful investor from the wannabes.

      The question “Where am I going to get the money?” often derails the novice investor before the train leaves the station, but many of the most successful investors started with only a few bucks in their pockets, including yours truly.

      

Don’t let a lack of investment capital discourage you. In Chapter 5, I explain how to estimate just how much money you need to get started; then I steer you toward sources of capital that can fuel your foreclosure investments. At first, the cost of investment capital (mostly interest) may chip away at your profits, but as you develop a stronger financial position, the cost of money gradually decreases.

Finding Foreclosures and Seized Properties

The first step in foreclosure investing — finding potentially profitable properties — is often the most difficult for first-time investors. Plenty of foreclosures and seized properties are available, but where do you look for them? The answer to that question varies depending on which part of the foreclosure process you choose to focus on, but here’s a list of where you can find leads on foreclosure properties:

       The neighborhood grapevine, including neighbors, churches, cafes, clubs, and even people who contact you directly for assistance when they know that you buy distressed properties

       Auctioneers

       County offices, especially the sheriff’s office

       Drive-bys (driving through neighborhoods looking for dontwanners — homes that are unkempt, indicating that the