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How to Make Money Investing in Bankruptcies

January 31st, 2008
It seems that every time you turn on the television there is some real estate guru overly excited about what a great deal they made on this property or that one. They talk about the millions you can make investing in bankruptcies. This may be true but many of these so called real estate experts have made most of their money selling systems to people about investing in bankruptcies. Very few have made the millions they claim with real estate deals. There are so many little things which can make investing in bankruptcies a high risk business. Although the money can be made there are certain steps you must first take to realize a good profit.
 
The first thing you must do is develop a marketing plan. Every successful business owner has a marketing strategy. Without this plan of action there is no direction. The same is true when investing in bankruptcies. You must know what you are going to do and how you are going to accomplish your goals. It is a matter of simple planning.
 
One of the priorities is determining what you are going to do with the homes you want to buy. You can buy them and resell them, called flipping, or you can use them as rentals. You may even want to sell the homes on land contract to low income people. The choice is yours, but it is a choice you should make before even trying to buy your first property.
 
When you decide what you are going to do with the properties you are purchasing, determine who your buyers are going to be. This allows you to target the market. You will know to only look at single story homes with a low square footage if you are singling out the senior citizens in your area. If you want to deal with large families then the three and four bedroom homes are the ones you will want to look at for investment purposes.
 
Developing your strategy and niche will help you avoid costly mistakes you may otherwise make when investing in bankruptcies. You will not be tempted by properties which do not fall into your marketing plan. The marketing plan you create will guide you each step of the way when investing in bankruptcies. 
 
Any property you can purchase at below market value can become an income producer for you as an investor. By investing in bankruptcies you are gaining an edge in the real estate market. Since most of these properties are being offered at below market value you are already starting with equity in the home. Sometimes there is as much as 30% of the market value left untapped. Many people feel this is a great yield on an investment. Others feel this is too low. However, to put this in perspective, if you were to buy a $100,000 home for $67,000 and sold it for $100,000 you would profit $33,000 before expenses. Doing this two or three times a year can actually give you a nice income.
 
There are times when it is best to hold onto the property until a slow market begins moving again. This may even increase your profits. This is risky for any investor, especially one who is new to the real estate market. Taxes and insurance are still due and so are the mortgage payments. Calculating the risk must include these financial obligations. Either way there is money to be made when investing in bankruptcies.

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How to Become a Professional Investor

January 30th, 2008
The first thing you should do to become a professional investor is to educate yourself in the world of real estate. If you do not know the terminology or financial strategies you could find yourself lost in the middle of a deal you know nothing about. Worse yet, you could lose the money you were trying to make in the first place. There are many ways to find out about real estate. The Internet is full of web sites which offer many real estate articles concerning investments. 
 
Do not pay attention to the no money down deals you hear about all the time. These are rare and very few and far between. If someone is selling their property because of financial problems they are not going to take back a note on the property. You need to understand there are things like closing costs which someone has to pay, as well. There may be times when you can get the seller to pay them. However there are still other fees you will have to pay on your own. This includes appraisals, title insurance, property insurance, and even taxes. The no money down deals sound too good to be true because they usually are.
 
You will also want to know your laws and regulations in the area in which you are going to be investing. You do not want to find you have purchased a property you can do nothing with because there is a clause in the sale stating the owner has six months to come back and reclaim the property. Bankruptcies are protected in many areas. Just because a property is on the market because of a bankruptcy does not mean you are getting the deed free and clear. You may have to give the home owner time to pay off the money owed. This is why you need to know what laws are in affect governing the real estate in your market.
 
There are three people you will want to have as friends when it comes to investing in real estate. The first one is a real estate agent. This person can show you the new properties on the market. He or she can also give you pertinent information on the market. They know what is selling and what is not moving. They can tell you want the homes in the area have been selling for and how long it took a property to sell at the asking price. The second person you want on your team is a qualified inspector. Someone who can look at a property and tell you what repairs are needed comes in real handy. This way you can tell whether a good deal is really good or nothing more than a money pit. You do not want to invest in the money pits. Lastly, a lender should be someone you know on a first name basis. They can show you which types of loans you will qualify for with each property. They can also let you know when there are foreclosures coming into the market. You can be one step ahead of the other investors in the area. Also, with a lender being a close acquaintance, you can know what you will qualify for when it comes to buying an investment property.
 
The professional investor will know other investors in the area. The reason for this is because there may come a time when you have a property which just needs more than you can handle. Being able to turn to another investor for advice or even to form a joint venture on a property is a good thing. Knowing who else in the area does what you do can give you an opportunity to take advantage of properties you may have other wise had to pass up.
 
You will find the professional investor knows his or her market. They know what is going to sell and what is not wanted. They know which areas are on the rise and which ones are declining. A professional investor knows his or her business. The key to success when it comes to investing in knowledge. The more you know the better you are when it comes to investing.

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Formulating a Buyers List

January 29th, 2008
When you decide to start investing in real estate, one of the best things you can do to give yourself an advantage is to formulate a buyers list. This is simply a list of names and contacts you know who are looking for specific houses or properties. With a good buyers list you may never have to put a property on the open market.
 
The buyers list should consist of people you know who may be other investors, or private individuals who are looking for a specific property. It may be someone who is wanting to start investing in real estate and is only interested in a certain deal. There may be people on the list who are only looking for a certain kind of property at a set price. This could be another investor who only buys commercial buildings under $50,000. 
 
Formulating a buyers list is not hard at all. It can be done with a simple ad. By running an ad in the local paper you can find many interested people who are looking for properties. There may be many people who call and are just curious. The best way to deal with these people is to answer any and all questions. They may call back in a month or two and tell you they are in the market for a home. They could also call back and offer you a property you just can not turn down. Either way, the list is formulated by the contacts you make.
 
You can gather names from other investors, family, and friends. People know people. If you are planning to buy and sell real estate, then you need to know as many people as possible so your properties have a market. By formulating a buyers list, you can categorize the individuals into groups.
 
In a sense you can pre-qualify who is on the list. There will be the other investors who are looking for certain types of properties. This means when you see a great deal on a store front then you know who to call to help put the deal together. If there is a steal on a multi-family unit, there is a buyer on your list who is willing to look at it. You may have names on the list of people who have run into a bit of bad luck and just need help getting started again. These are the perfect candidates for any properties you would like to lease option or land contract out.
 
Formulating a buyers list means you have a good start on a marketing plan of action. You may not know which properties you are going to buy, but you do know who you can sell them to. Every business has a client base. Think of your buyers list as your client base. The more clients you have the more business you can do in the investment of real estate. The more you invest in real estate, the more money you can make. By formulating a buyers list, you are building a strong real estate investment business.

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Finding the Right Property

January 28th, 2008
We all want to make money. The problem is most of us think the only way to do it is with a 9 to 5 job. This is not the case. Investing in bankruptcies can yield a very profitable income with the right property. It is finding the right property which can become the issue. Not if you know where to look.
 
There are many homes right now that have become repossessed or are in the process of being foreclosed upon. These properties are the ones you need to look at for your investment portfolio. You can decide to rent them out or flip them. The nice thing about these distressed properties is you can buy them either with little or no money down and at a fraction of what they are worth.
 
The banks are not in the real estate business. They are in the business of lending money and earning from the interest. When there are non-performing loans on the books it does not look well for the financial institution. It appears they have problems with their judgment and investors will not want to invest in the lender’s portfolio. This, in turn, costs the lender money. By clearing the bad loans off the books, it puts the lender in better standing with their investors. This is where you can clean up.
 
The lenders will look at any offer that is made on a property. They will also say no to ones which are just too low for the value of the home. You need to do your homework. The first thing to do is find out how long a property has been in foreclosure or vacant. This will give you a good indication as to how much the lender will negotiate when it comes to the property. A new listing will be hard to obtain at a low bid. However, should you find one that has been on the market for a year or more, you can usually set your own price, within reason.
 
There are many properties listed on the government repossession lists. This is one of the best places to start looking for the right property. You can find some of these homes with prices of less than $10,000. The key to negotiating a deal with the HUD office is to be patient. You can offer as little as $500 for a property which has been listed as a foreclosure. Many of the properties for sale under $10,000 will actually sell for far less. The nice thing is most of these homes are valued at over $30,000.
 
The best way to make money on the properties is to resell the property either as a rent to own or land contract. Finding the right property for this is not very hard. It is finding the right buyer you could have problems with. There are so many people who have poor credit or have not been on the job long enough to establish a good credit rating. These are the ones you will most likely be dealing with if you choose to lease option or land contract the house. Finding the right property for these people is simply a matter of asking.
 
You can form a buyer’s list. This is a list of people who are looking for a specific property to buy. You will know what they are looking for and have it all listed. This will ensure when you come across the right property you know who to contact to sell the home to. It is a win win situation. You can sometimes create a deal with no money out of pocket when you have a buyers list. It is a simple matter of negotiating.
 
You would set up a deal with the seller. The buyer would be able to tour the home. If the buyer is willing to purchase, he or she would come up with the money to purchase the property. You would be acting as the middle man. For a percentage of the sale, or an agreed upon price, the deal would be sealed. All it takes is finding the right property.
 

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Choosing Your Real Estate Niche

January 27th, 2008
A marketing niche is what can turn an idea into a multi-million dollar corporation. A simple concept like flavored water advertised by a talking drink pitcher has made billions. Even though other companies offer the same type of beverage, the marketing niche has always belonged to the original brand. The same holds true with any other business. Any type of business which does not cater to a particular crowd of people may find themselves on a roller coaster ride when it comes to profits.
 
By focusing on a real estate niche, you can corner the market on the types of properties you want to invest in. You may choose to buy only repossessed homes to resell. You may want to specialize in helping others by investing in bankruptcies. This particular niche not only can yield a large profit for little investment, but can also generate more income when the seller of the distressed property gets on their feet and wants to become homeowners again. You already have a rapport with them which makes it easier to sell them another home.
 
It does not matter which type of property you choose to purchase as long as you know in advance what you are targeting. This makes the finding of these properties easier than just scouring the paper for good deals. By familiarizing yourself with a particular market you will know what properties are available and which ones are worth the time to invest. You will be able to spot a good deal and walk away from a potential money pit.
 
The lenders are more willing to work with someone who has a specialized field. Someone who has made several good deals in the same market is someone who knows what they are doing. Experience is an important aspect of obtaining a loan. The lenders are leery to loan to an investor who has never had any experience. For instance, someone who has only every bought single family homes may not understand the commercial market when it comes to real estate investing. The lender will see this and may not be so willing to offer the loan for the purchase. Yet someone who has specialized in commercial properties could easily obtain the financing.
 
By choosing your marketing niche you can focus on one type of property. This will enable you to learn all there is about the creative financing programs available. You can build a stronger buyers list. You will know who to market your investments to should you decide to sell them. You can become more familiar with the market. One of the advantages to specializing in a real estate niche is when someone has a property they do not know what to do with, they will call someone who does. This could be you. If you are recognized as having professional experience with the type of property they have, you will be the one they call. This means you could actually come into some great deals simply because of choosing your real estate niche.

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Buyer Beware When Investing in Bankruptcies

January 26th, 2008
Many real estate investors talk about how much money they have made when investing in bankruptcies. What they do not talk about are the pitfalls to watch out for in the properties. There are many things which can go wrong with any real estate deal. Investing in bankruptcies opens up an entirely new realm of possible problems.
 
Most bankruptcies are vacant properties. This means the property has sat for quite some time with no one living in it. The power has been off, as well as the water and heat. The house has had a chance to adjust to it’s environment. This is when the problems can occur. Many an investor has been excited because of a great purchase only to find there were so many repairs needed on the property the result was a financial loss.
 
The first thing you should do to avoid complications when investing in bankruptcies is to have a property inspection. This is well within your rights as a buyer and do not let anyone tell you otherwise. You will want a qualified contractor to look at the property. This will ensure you know exactly what you are buying. 
 
A contractor who knows what they are doing will be able to tell you how old the roof is and when it may need replaced. He will also know if any weak spots should be strengthened also. He can look at the trusses and other framing to determine if there is any termite damage or other boring insects who have taken up residence. An infestation is something which must be reported to any potential buyers. This can scare off some people, so if you are planning on flipping the house you may not want one which has these problems.
 
Another problem some vacant properties have is with the plumbing. Although the pipes may have been winterized or emptied when the house was repossessed does not mean they are in good working order. Although it is almost impossible to see some leaks, a qualified inspector will notice water damage. They will be able to tell you if it was from a plumbing problem or from flooding. Either one is a potential problem from which you should walk away. Again, flood damage must be reported to a potential buyer.
 
The foundation is closely looked at when a quality home inspection is being done. The contractor will want to see if there are any cracks which indicate a shift. This is a good indication of a large financial repair bill. The footer may not have been poured properly or it may have been too thin for the environment. When the foundation has started to slide, there could be major financial problems. This is a critical point in the inspection which someone less qualified may know nothing about.
 
When you are investing in bankruptcies the seller, usually a finance company knows nothing about the property. It is up to the buyer to have the inspection done so there is no question as to the condition of the building. This is why it is considered a buyer beware market. A seasoned investor will have a contractor or inspector they can call on to check the homes the investor is interested in purchasing. Learn from what other investors do to make money when investing in bankruptcies. Have an inspection done of the property before making that offer.

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WHY A DOWN MARKET IS A GREAT TIME FOR MOVE UP BUYERS

January 25th, 2008
I’m sure everyone is aware that the value of our homes has eroded over these past two years. If you are planning to sell in the near future, you can expect to get from a buyer a price that may be 5-10% lower than in January, 2006. So, if I was planning to move up to a larger, more expensive home, why would this be a great time? Let’s look at the reasons.
The first reason is about choice. The inventory has stabilized in the past four months (a great sign that the down cycle has ended and prices will stabilize) and you have 5 times the choices you had 2 years ago. And, you can take your time looking and making a decision. The second, and most important reason is price. Even though prices have dropped across the board, the move up buyer has a distinct price advantage. Let’s look at a scenario to see why that is true.
An owner of a 3 bedroom townhouse in Bowling Brook Farms plans to buy a 4 bedroom single family home in Kings Contrivance this winter. The average selling price of a 3 bedroom townhouse in Bowling Brook Farms the past 6 months is $340,115 with an average seller subsidy paid to the buyer of $6200, netting the seller $334,000. The last 6 months of 2005, the 3 bedroom townhouses in Bowling Brook Farms sold for $352,134 with no subsidy. So the townhouse in Bowling Brook Farms has decreased in value about $18,000.
The 4 bedroom single family house in Kings Contrivance that they want to buy currently has an average sale price of $465,343 and they can likely get an average of $4000 seller help with closing. The average price of the 4 bedroom single family house in Kings Contrivance in the last 6 months of 2005 was $522,473 with no subsidies given. As a result they will be paying over $60,000 less for their new house while only losing $18,000 on their present home. That is a gain of $42,000 from 2 years ago.
And yes, you could do comparisons of communities all across Howard County and get similar results. If you are a move up buyer and want me to do a price analysis on both your community and one that you have targeted to move, please contact me and I’ll get you the results. It’s a GREAT TIME to be a move up buyer!!
Submitted by  Len Moyer

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Marylanders better off than nation overall as variable mortgages reset

January 24th, 2008
As homeowners struggled to make higher payments on adjustable mortgages, the rate of new foreclosures this spring soared to its highest level in the nearly three decades that records have been kept. Maryland, however, had a smaller rate of new foreclosures than many states.

The handful of large states feeling the brunt of the credit crisis helped to push new foreclosures in the second quarter to 0.65 percent, or 65 for every 10,000 loans, the Mortgage Bankers Association said yesterday. The rate of residential loans considered delinquent (at least three months past due) jumped to more than 5 percent of the nation’s 44 million loans, up from 4.37 percent of loans in spring 2006.

Maryland, which has faced a less severe housing downturn than other states, had a lower rate of loans entering foreclosure — 0.36 percent. Of the just over 1 million loans being serviced in the state, about 3,750 were sent foreclosure notices in the second quarter, the bankers association said. The MBA figures for states are not seasonally adjusted. On a nonadjusted basis, the U.S. had new foreclosures at a rate of 0.59 percent.

In Maryland, though the percentage of new foreclosures was small, it has grown rapidly. In the second quarter of 2006, Maryland’s rate was 0.19 percent, having nearly doubled. That is still less than rates as recently as several years ago, when Maryland’s rate often topped 0.50.

Delinquencies and foreclosures are rising primarily because of homeowners falling behind on payments as adjustable rates have reset, said Doug Duncan, the banking association’s chief economist. Many borrowers took out adjustable loans with lower introductory rates as a way to afford homes that soared in value during the real estate boom.

The adjustable loans make up a big share of mortgages in states such as California, Florida, Nevada and Arizona, where investors were especially active and contributed to soaring real estate values that have since fallen, the MBA data showed.

"They are seeing declining house prices, which makes refinancing these ARMs difficult," Duncan said.

"The same forces at work nationally are at work in Maryland; they just haven’t had as severe an impact," said Anirban Basu, chief executive of the Baltimore economic consulting firm Sage Policy Group Inc.

"Many people took on adjustable-rate mortgages, and many of those mortgages are still in the process of resetting, and there still are people finding they cannot afford those mortgages," Basu added. "Housing appreciation has slowed in Maryland … and that is conducive to higher levels of foreclosure."

Phillip R. Robinson, executive director of Civil Justice Inc., a public interest law group in Maryland that helps victims of predatory real estate practices, said much of the data on foreclosure and delinquency rates appears to be conflicting.

But he said it is clear from the deluge of borrowers turning to his group for help that the number of homeowners in danger of losing their homes to foreclosure is increasing steadily.

"There’s a dramatic increase and shift in the kind of homeowner calling us," Robinson said. Previously, his group saw mostly "a homeowner who’s had a devastating life event and is not able to make payments."

But now, he continued, "We’re seeing a huge increase of very-good-credit borrowers who got mortgage loans that were unsuitable for them in the first place. The professional they relied on steered them to the highest-cost loan in which the professional could make a profit. They’ve gotten themselves in over their head. These are prime borrowers in subprime loans."

Still, Maryland has fared better than many states and the nation as a whole.

"Housing prices in Maryland have by and large held up pretty well," Basu said. "There is no part of the state where housing prices have fallen substantially … so as a result when people fall behind on their mortgages, they don’t go into foreclosure. They can sell their home."

Delinquency rates in the United States rose from the second quarter of 2006 for both prime loans and subprime, which are loans made to borrowers with weak credit, according to the MBA report, a survey of about 120 mortgage bankers, commercial banks and thrifts.

Duncan, of the MBA, said turmoil that has emerged in the credit markets since the end of the second quarter has further limited borrowing options for homeowners wanting to refinance high-cost loans.

And that means, he said, more increases in delinquencies and foreclosures before those rates hit a peak.

The upward trend, Duncan predicted, probably will continue more than the one to three economic quarters previously forecast.
(By Lorraine Mirabella, Baltimore Sun reporter)

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A Bankruptcy is a Bankruptcy

January 23rd, 2008
Many people run into hardships throughout their lives. This is not something that is reserved for the little guy. In this day and age there are many people who have had problems paying their bills for one reason or another.  The rich are not above the law when it comes to bankruptcies.
 
There are people who feel a half million dollar home is just not something they can deal with when it comes to investing in bankruptcies. This is not true. The same rules apply whether the house is worth $50,000 or $500,000. Someone had a problem paying their bill and the finance company had to foreclosure on the property. You may not know the reason and it really does not matter that there was a death or a lawsuit or even a divorce. The important thing is the property is on the market. You can buy it for far less than the market value.
 
Do not be afraid to approach the finance company or seller when it comes to properties which are high dollar. If you feel you can make it work then go for the deal. You would be surprised how many of these homes sit vacant for so long because no one believes they have the were with all to afford taking on the financial risk. It can be done. There are really no differences in these types of properties than the ones in the neighborhoods you have been dealing in so far.
 
If you feel you may not be capable of creating a lucrative deal with an investment of this magnitude then pull in a partner. Find someone who has the understanding to handle a deal this big. This way it is not just you who has put up the money. There are investors who love these kinds of bankruptcies. They thrive on this type of property. Find one and you can form a join venture. It becomes a win win situation.
 
Should you be lucky enough to find a property which has a large price on it, do not just shrug and say it would be nice. Make it happen. Determine if the property has marketing potential. Find out how long other properties have been on the market. Check the past selling history of the area. If you know it will work then make it happen just like any other real estate deal. Do not invest in the property because it is for sale. You want to determine if it is a good investment. You will have to do the same homework on a big deal as well as the little ones. 
 
You may find the property was overpriced when it sold the first time. If this is the case you do not want to look at it as an investment. However, if you can get the property for two thirds of the market value or less, and you know it will sell quickly, then do not pass it up. You could be bypassing the investment you have always wanted to come across. The key to success when it comes to properties which are selling for large amounts of money is to have a good real estate agent working with you. This way you can turn the property into what it was supposed to be, a good investment. Do not settle for just the small properties. The large ones can be had as well.

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Choosing the Right Real Estate Investment

January 22nd, 2008
It can be hard to know which properties to invest in when you are first starting out in real estate. You know the money is there to be earned, but sometimes it is hard to determine if the money is worth the risk. The answer is yes. You can make a great income if you are choosing the right real estate investment. There are simple ways to determine if the investment is a good one.
 
The first thing you must consider when looking at a distressed property is what is the market value. This is not the appraisal value. The appraisal can be wrong. Just because the paperwork says the property is worth $175,000 does not mean you will get that price on the open market. The market value is what you can actually sell the property for. This could be thousands of dollars less than what the appraisal actually says. To determine the market value, speak with a good real estate agent. You will want to find one who is familiar with the area. Find out what comparable properties have been selling for, not what they have been listed for. You do not care what the asking price is. You need to know what the selling price of the other properties has been in the past six months. There was a time when it would have been in the past year, but times are changing. You need to know the market for the past six months. This will give you a good idea of what you may be able to sell the property for.
 
The next thing you need to know is how much equity you could get from the purchase. For instance, a home appraised at $175,000 but with a market value of $150,000 would not be worth buying unless you can get it for $130,000 or less. The reason for this is because there could be a fluctuation in the market making it difficult to sell the property. You will want to make sure there is enough equity in the home so you could still generate a positive cash flow out of the property if you have to sit on it for a few months. Although this is something which every investor dreads doing, it has happened more often than most will admit.
 
Another thing to consider when choosing the right real estate investment is how long properties in the area are on the market. You do not want to purchase a property which will be on the market longer than three or four months. Unless you are using the property as a rental unit, the quick sale is what you are after. Never buy in an area where sales are taking six months or longer. This usually is a good indication of a declining market. The property values will be falling. You want to find a prosperous neighborhood. This can be done by simply researching the job market and new construction in the area. A high rate of employment and new homes or buildings going up indicates a growth. Finding a distressed property in these areas is a real treasure.
 
Choosing the right real estate investment also means knowing what is in demand. You can do this by simply running an ad in the local paper offering homes for sale. People who call can be asked what types of homes they are looking for. You can tell the potential buyer you have something you would like to show them, or you can take their name and number for later contact. This does two things. It tells you what people in the area are looking for and it gives you a list of potential buyers. You can then find properties these buyers may want to purchase. This can insure a quick sale on just about any property you look at if you have gathered enough names. In other words, finding a property the buyers on your list want means you are choosing the right real estate investment.

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