Ralph R. Roberts - Foreclosure Investing For Dummies

Some foreclosure investors are more interested in discovering and acquiring foreclosure properties than they are in fixing them up and reselling them. These investors consider themselves to be foreclosure wholesalers who find and buy properties and then sell them to other investors.

Generally, I advise against buying properties from foreclosure wholesalers (or whatever they call themselves). Whenever someone tries to sell you on some great investment opportunity, ask yourself this question: “If the property were as profitable as they want me to think, why don’t they fix it up and sell it?” Another reason not to buy from other investors is that by doing so, you’re usually paying a markup or finder’s fee. Plenty of foreclosure properties are available, and they’re not that difficult to track down, so pocket the markup, and use that money for renovations or the purchase of your next property. But if you’ve done your research (as explained in Chapter 8), and the price is right, I certainly wouldn’t tell you to pass on the deal.

Just as I advise against buying properties from foreclosure wholesalers, I strongly discourage you from becoming a foreclosure wholesaler yourself. You can make more money by working the foreclosure from start to finish: buy, renovate, and sell. For details about renovating and selling a house for more than you paid for it, check out Flipping Houses For Dummies , 4th Edition (John Wiley & Sons, Inc.).

Many areas of the country give foreclosed-upon homeowners one last chance to get their homes back — through redemption. If the homeowners can come up with enough money to pay off the balance of their loans and all penalties and back taxes, they get to keep the property. In some cases, homeowners have up to a year to redeem their property before the high bidder at the auction takes possession.

The redemption period can affect you in any of several ways:

If you purchased the property at auction, you must wait to do anything to the property until the redemption period expires. Otherwise, you may invest heavily in renovations only to see the homeowners or another investor redeem the mortgage that you bought and cut you out of the deal. You may need to secure the home (particularly if it’s vacant) and perform repairs to make the property safe and prevent deterioration, such as from a leaky roof, but invest as little as possible during this period.

The homeowners may still be able to file for bankruptcy during the redemption period to buy themselves some additional time, which can throw your plans for renovating and selling the property for a loop.

If another investor purchased a property and is waiting for the redemption period to expire, you still have an opportunity to purchase the property. You can work with the homeowners to bump the other investor out of the deal, redeem the property, and buy it directly from the homeowners.

Surviving the redemption period can be tricky, especially if other investors take interest in the property. Chapter 16shows you what you should be doing during this time to protect your interest. Flip to the appendix at the back of this book to find out whether your state has a redemption period and, if it does, how long the redemption period is.

Part 2

IN THIS PART …

Build a successful foreclosure investing team, complete with an attorney, a mortgage broker, a title company, a tax specialist, building contractors, and a top-notch real estate agent.

Estimate the amount of money you’ll need to buy, fix, and sell an investment property and the profit you can expect.

Figure out how to get the money you need to finance your foreclosure investments and increase your leverage while reducing the risk to your own assets.

Evaluate financing options, including hard-money loans (from private lenders), conventional bank loans, self-directed Individual Retirement Accounts, and partnerships.

Develop a strong reputation and the kinds of relationships that lead to the best foreclosure investment opportunities so that opportunities come looking for you.

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