“Foreclosure Profit Machine” Chapter 5
"Foreclosure Profit Machine"
Ethical Foreclosure Investing Strategies for Massive Wealth Creation
© Copyright 2008 Asset Solutions 2100, LLC All Rights Reserved
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Chapter 5
STEP-BY-STEP
1. Locate prospects.
Check our glossary for ways to can get your hands on weekly leads. Then, start the process of writing letters or cards. Note that some of these sources also provide this service for you. Anytime you can save some time, money, or effort, take advantage of it. You’ll find this is a numbers game that requires you to automate much of the process, in order to compete. Don’t be “penny wise and pound poor.”
2. Evaluate transactions carefully and perform due diligence.
You need to be able to evaluate a transaction quickly to determine its viability. Time is of the essence when dealing with pre-foreclosures.
3. Construct transactions as we have taught
Quick reminder, there are 3 Ways to Profit in the Foreclosure Buying Business
- Buy, then quickly sell.
- Obviously, when you sell the property, you are going to cash out the old loan, thereby stopping the foreclosure. This equates to quick cash.
- Buy and hold the property using the current loans.
- This means you need to have the ability to take ownership of the property. Get the deed signed over to you and get the loan reinstated quickly with available funds or loans. We often refer to this process as taking the property "subject to" existing financing or a “subject to” transaction. This method may require you to put some money into the transaction to make it all work. If you buy at low enough prices, it is fairly safe to use your own credit to bring the back payments current, negotiate a reduced payoff with the lender, make necessary repairs, and hold the property until you resell.
When you find buyers, their down payment can go into your pocket or to pay off the initial money you borrowed.
- This means you need to have the ability to take ownership of the property. Get the deed signed over to you and get the loan reinstated quickly with available funds or loans. We often refer to this process as taking the property "subject to" existing financing or a “subject to” transaction. This method may require you to put some money into the transaction to make it all work. If you buy at low enough prices, it is fairly safe to use your own credit to bring the back payments current, negotiate a reduced payoff with the lender, make necessary repairs, and hold the property until you resell.
- Buy the property with a new mortgage.
- There are more risks with this method, but you also buy more properties as a result of having this option available.
- You could use a partner with down payment and credit to buy these, if you don’t have sufficient credit yourself.
This last type of money can be expensive, but if your margins are large enough, it works. It is better to pay a higher rate to borrow money and earn $30,000 than to seek a lower rate and not earn anything from your efforts.
Take the money, please!
Then it becomes time to exercise an effective “exit strategy.” Your strategy will be determined by your immediate needs, be they short-term cash or long-term wealth building.
Essential Skills You Should Develop
…in addition to learning more about real estate:
Learn to negotiate effectively:
Study as many books as you can on the art of negotiation. I can tell you from my own experiences, you will develop your own style. But there are certain things that work in this business better than others. The bottom line is, don’t be afraid to negotiate. I consider negotiating to be where my money is made. It’s where I beat the competition. So if competition is an issue with you, learn to negotiate better. I LOVE to teach Power Negotiating: it is truly the million-dollar skill and is very teachable.
Get a thorough understanding of the foreclosure process in your region or state.
If you know a local attorney who can explain the foreclosure process in alive environment, buy lunch and learn about how foreclosure works in your area. Quite frequently, there are many local issues you need to be aware of, which a real estate attorney can help you better understand. If you know a real estate broker who is also well versed in foreclosures, ask for a personal consultation. Realtors eat lunch, too.
Built a “dream team” of professional associates
You’ll find executing this business alone to be somewhat difficult. But if you have a good realtor, a good lender, title company, attorney, contractor, accountant, and other key people, you will accelerate the process and make your life easier.
Set up a professional office
At first, a simple home office will do. Try to established a place where you can keep your work separate from your home life. Remember, this is a business. If it looks and feels like one, it will more likely become one.
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You might consider a professional mentor or coach, or seek
advanced training from the best experts you can find. This is where we feel we can help you the most. Be sure to check out
our resources for additional training, found at www.tjmarrs.com. |
How to select a good Realtor and why
First of all, a good Realtor can be a great source of foreclosure leads to you. They can bring pre-foreclosure deals, as well as those already owned by the bank. If you want their attention, however, be sure you can perform on your side of the deal. Interview these Realtors carefully, to be sure they understand what your buying criteria are, and be sure they bring you only those deals. It is far too easy for them to bring the wrong deals, which only increases your risk of loss.
Realtors can also be a good resource for other services and resources you might need along the way. For example, you might need a referral to the lender, a title company, attorney, or other professionals essential to your success.
This is what I do…
Would you like to take possession of properties with existing loans against them, and then simply ask the lenders to reduce the payoff balances on those loans, thus creating more equity for you? Of course you would.
Unless you were just sleeping when you read the last sentence, you are learning about a huge profit center.
Many times, in these foreclosure situations prior to the auction, lenders will discount their payoffs in order to cut their losses. This is a very carefully thought-out process. It combines some skill, negotiation, recognition of the right deals to attempt, and time. We do offer more advanced training on this subject in our courses. I will give you this advice, however. Find a Realtor who likes to negotiate short sales for other people, and they will do most of the work for you. Of course, be sure they are actually experienced and skilled at this, or they may just get in your way, rather than help. They usually negotiate their fee right into your payoff with the bank.