subject: Real Estate Investment - Minimizing Risk [print this page] Real estate is one of the best places to invest your money. Unfortunately, for the uninitiated, real estate can also be one of the riskiest ways to invest your money. The best single way to minimize your risk is to purchase properties for as little as possible, and the best way to do that is to purchase foreclosure property - specifically, tax foreclosure property.
Tax foreclosure property beats mortgage foreclosure property every time. Why? Well, by the time a property becomes delinquent on taxes and makes its way all the way to the tax sale, you can count on it no longer having a mortgage. If it did, the mortgage company would have stepped in at some point and bailed it out. Thus, the property is free and clear, and all you have to do is figure out how to buy it for cheap.
You may be thinking "tax sale." Wrong! There's way too much competition at tax sale to get a good deal, and you also can't inspect the properties you want to bid on beforehand. This makes investing at tax sale very risky. Not to mention, you get paid off 95% of the time by the owner in the year long redemption period following the sale.
The best way to get this property is to wait until after the tax sale, all the way until a month or two before the end of the redemption period. Owners that can will have redeemed by then, and at that point only properties that a) don't have a mortgage, and b) have owners who can't pay off the taxes, remain. By approaching these owners at this specific time, you have the best chance of finding them motivated enough to sell to you for a small fraction of what their properties are worth.
If you want to minimize risk completely but still want the big money that comes from real estate investing, try making money without owning property at all - by delving into tax sale records and finding overages that owners haven't claimed yet. Many owners don't realize they're entitled to the leftover funds from their properties after tax sale, and move on, leaving the money behind. Eventually, it's lost permanently to the government.
If you can find the records, find their owners, and connect the two, you can legally charge 30-50% for your service. Since these funds amount to a whole lot in many cases ($10,000-$100,000 or more), your commissions on these transactions can add up to be even more profitable than property investing - with none of the risk.
