pre foreclosures??

Got Juice · Mar 21, 2006

my friends dad has been into this the past year or so.. last year he made 4 deals and cleared over 100k last year, somehow showing he made 0$.

apparently, he gets listings of people who are about to be foreclosed on,, he can see how much equity they have in their home, how much they owe, etc... he goes and talks with the owners basically "helping" them out if you will by paying off their house and letting them walk about without having to be foreclosed on by the banks destroying their credit... depending on how much equipty these people have in their homes, sometimes he will give them 10k or so to help move the deal along.. apparently he takes all the equity out of the homes, then puts them back on the market and sells them and can even make money on that.. so if they have 30k in equity, that goes into his pocket, then he puts the house back on the market..

does this sound legitimate, anyone else doing it? any info would be appreciated.. he's pretty hush hush about it for whatever reason.. i think he's scared im going to steal his business away..haha

Thanks,

tbonus · Mar 21, 2006

There are a lot of different ways people do this.
Here is one example:
I work with an investor that will offer the people some cash upfront and have them sign a power of attorney and a quitclaim deed. Then the company is in title to the house. They have someone lined up to buy on contract or a lease with the option to purchase who will give them a down payment. So now, they have people paying the monthly mortgage payment and usually have a year or so to get financing on the house. Once the contract buyer gets permanent financing they will usually make some more money along with having some for the initial seller. With the power of attorney they can negotiate with the mortgage company to possibly get fees, etc waived when bringing the mortgage current.

tbonus · Mar 21, 2006

There is a decent book out called Flipping Properties. A lot of info for under $20.
I am working on a book also with some investors. I have done a handful of these over the years and did well. My biggest problem was when I decided to be a landlord and also had some apartments that burried me. By far, the best investments for me have been the short term deals and flips.

mung · Mar 22, 2006

There is a book that deals with this subject specifically called, "The Pre-Foreclosure Property Ivestor's Kit". If he made $100,000 and is showing $0, that may be why he is so hush-hush!

It really helps if you are in a large metro area, but yes, as you describe, people do make money doing this. In my area, typically, the bankers simply call a few people they know who are buying properties and ask if they would like to get the REO property off their books. It does pay to know bankers! Where is your buddies dad getting his pre-foreclosure information? Is that part of his hushness?

Vengeance · Apr 21, 2006

tbonus said:
There are a lot of different ways people do this.
Here is one example:
I work with an investor that will offer the people some cash upfront and have them sign a power of attorney and a quitclaim deed. Then the company is in title to the house. They have someone lined up to buy on contract or a lease with the option to purchase who will give them a down payment. So now, they have people paying the monthly mortgage payment and usually have a year or so to get financing on the house. Once the contract buyer gets permanent financing they will usually make some more money along with having some for the initial seller. With the power of attorney they can negotiate with the mortgage company to possibly get fees, etc waived when bringing the mortgage current.

A lot of people are doing this. One piece of advice... if you are planning on giving this a try - instead of a "quit-claim" deed, use a "Grant Deed". Same process, but it gives you a much stronger (warrentable) position in the property

bigp3 · May 4, 2006

Guys I have been in the mortgage and real estate business for 10 years now and own several businesses related to it. In the last 2 years we have lived in an exceptionally easy market. A monkey in the last 2 years could have bought a house and made money, but those days are now over. This made to many an investor over confident in their skills and now these guys are getting toasted. I have seen investor after investor after investor this year losing their asses.

Flipping houses is a dangerous investment strategy guys. Very similar to day trading with stocks. The real investors, in stocks or real estate do it for the long term not the short. The short term investors always get burnt in the end. It is like playing poker, and going on a winning streak. Sooner or later it ends and it is ending now for the guys flipping properties in a bad way. The guys that have long term success in this business have deep pockets and hold their properties for years.

Kaiser · May 6, 2006

Here in NJ, USA, we buy out property tax liens. So, say the people are in arears $10,000 of property taxes. You look up what is owed on the house via the township, then do your calculations from there. You buy out the outstainding tax lien from the township, then the owners have a year to pay you back or you can forclose and resell the property. Remember leave yourself a gap because as a rule it costs about 5-10% of the value of the house to forclose. If they decide to pay you back you can charge up to 18% interest on your money. So even if you wanted to put money out for loaning purposes, this has a guaranteed return either way. People may feel bad about doing something like this, but believe me, if you dont jump on the right oportunity, someone else will.

swollengoat · May 9, 2006

bigp3 said:
The real investors, in stocks or real estate do it for the long term not the short.

I always liked the quote 'Bulls make money. Bears make money. PIGS GET SLAUGHTERED.'

bf5%yes · Jun 28, 2006

Sounds good till

It all makes sense until the person paying the note stops!! It does work and I have done it the last two yrs to the tune of over 300k per yr but I also have 4 properties that are now vacate and cost me a shit load until I rent them! You MUST make sure you can cover the note until it is rented again i.e. re-rented. Go for it but be carefull!!!!!!!!!

Crowler · Jun 29, 2006

If you set it up correctly you HOPE the person stops paying, you evict, legally keep their deposit and do it again.

BTW Grant Deeds are not legal in every state. Learn the ins and outs of your state and get a lawyer to draw up the contract or at least have him approve the one you are going to use.

CROWLER

Vengeance · Jun 30, 2006

Crowler said:
If you set it up correctly you HOPE the person stops paying, you evict, legally keep their deposit and do it again.

BTW Grant Deeds are not legal in every state. Learn the ins and outs of your state and get a lawyer to draw up the contract or at least have him approve the one you are going to use.

CROWLER

Very true. As with anything, educate yourself thouroughly before putting your money and credit on the line. I have seen a ton of ametuer "investors" get wiped out in the past couple of years because they did not educate themselves. What they were doing is not investing, it is speculating. They got caught up in what looks like easy money and paid dearly for it. True investors treat it like a business.

mrjacked · Dec 4, 2006

sounds good

maxsupplements · Dec 5, 2006

bigp3 said:
Guys I have been in the mortgage and real estate business for 10 years now and own several businesses related to it. In the last 2 years we have lived in an exceptionally easy market. A monkey in the last 2 years could have bought a house and made money, but those days are now over. This made to many an investor over confident in their skills and now these guys are getting toasted. I have seen investor after investor after investor this year losing their asses.
Flipping houses is a dangerous investment strategy guys. Very similar to day trading with stocks. The real investors, in stocks or real estate do it for the long term not the short. The short term investors always get burnt in the end. It is like playing poker, and going on a winning streak. Sooner or later it ends and it is ending now for the guys flipping properties in a bad way. The guys that have long term success in this business have deep pockets and hold their properties for years.

THANK YOU!!! glad someone who KNOWS this business chimes in also.. i have worked in R.E. for about 4 years myself, and i must say.. this is a risky business... i just watched a friend recently file bankruptcy due to this little "side" job he "thought" he was making money at....

well, some do it and make good money, but some lose their ASSES in the process also. for all you know, GotJuice, Your friend might be protecting you for losing your ass as well. he may be making money, in a Accounting sense, as in using the "flipping" as a tax shelter. but other than that, be EXTREMELY careful when you start to do this.. my ex-wifes father as well lost his ass not to long ago too... and i live in the 7th most affordable city in the UNITED STATES...

Approach with CAUTION

littlemack · Dec 5, 2006

maxsupplements said:
THANK YOU!!! glad someone who KNOWS this business chimes in also.. i have worked in R.E. for about 4 years myself, and i must say.. this is a risky business... i just watched a friend recently file bankruptcy due to this little "side" job he "thought" he was making money at....

well, some do it and make good money, but some lose their ASSES in the process also. for all you know, GotJuice, Your friend might be protecting you for losing your ass as well. he may be making money, in a Accounting sense, as in using the "flipping" as a tax shelter. but other than that, be EXTREMELY careful when you start to do this.. my ex-wifes father as well lost his ass not to long ago too... and i live in the 7th most affordable city in the UNITED STATES...

Approach with CAUTION

Agree 100%! Right now is not the time to be doing this, and I have also seen my fair share of people losing their asses with this. Approach with caution!