subject: Pre-Foreclosure - A Winning Property Flip for You and the Current Owner [print this page] Quickly flipping property for profit was all the rage a just a few short years ago. With a bit of research and a touch of basic handyman skills, a beginner entrepreneur could easily find a fixer-upper in a decent location, throw in a few upgrades and some paint, and quickly offload for a generous profit. In the current volatile real estate markets of the US, quick flips by amateur investors are risky at best, and more than likely to get the average person into real trouble. Being that so many people are loosing their homes to foreclosure, the present situation begs the question of what is a good way to make money at real estate today? Identifying financially distressed properties and making your purchase when an owner is in the pre-foreclosure stage is the true way to profit at real estate flipping regardless of the current state of the real estate market. Most people are somewhat familiar with what foreclosure means in terms of real estate, and it is a position in which no home owner ever wants to be. Pre-foreclosure then is the period initial phase of foreclosure and occurs when the borrower has not stayed current on payments and the lender initiates formal foreclosure proceedings. During this period, the current mortgage holder has a few options to rectify the situation, from refinancing to outright paying the loan in full or he/she has the option of getting current on payments plus any attached fees. It's highly likely that the current home owner of a distressed property hasnt the means to do any of these things, otherwise the property would not be in distress in the first place. This is where you as a savvy investor and successful negotiator have a true opportunity to find a winning property on which to make some serious quick returns. The most profitable properties are those in which the outstanding loan balance is less than the present value of the home, but finding such properties is not as easy at it may seem. Most troubled home owners are in their predicaments because they have borrowed more than what the property is now worth. Here are some basic steps for locating and purchasing homes in pre-foreclosure: 1. Locate Distressed Properties - There are various online services with sizeable databases to help investors locate properties that are in foreclosure. If you plan to work within the area in which you live, check county records of current home owners or regularly check the Legal Notices section of your local newspaper where information is often printed in regard to distressed property. 2. Contact the Current Home Owner - You can do this by a simple face-to-face contact with a knock on the person's door, or you can take the cold-call approach. Your best bet is to contact the home owner with a professional letter, informing them of your knowledge of their predicament and some initial information on how you plan to help them. With the current state of most real estate markets, you could even blanket a whole area with these types of letters. 3. Calculate Your Costs - Find out if any liens or other mortgages are listed against the property. If so, avoid the property as you will profit little if any at all, but if not, go on with a good inspection/appraisal to determine the property's current value. Ensure the present value includes enough equity to cover transaction costs, along with carrying and renovation costs. If you're only going to break even on paper, you're most likely going to end up in the red after the project is completed, so be careful. 70% of current value including all your costs is a good measurement since it gives you some leeway for fluctuations in the market. 3. Work Out a Purchase Agreement - If everything looks good and you want to go forward on the project, you have all the advantages since you will ultimately be aiding the current lender and the property owner when taking over a property in pre-foreclosure. The lender won't have to go through a costly foreclosure process, and the current owner may be able to get through the whole ordeal with minimal damage to their credit and reputation. If you go with the 70% standard, you can include a bit of cold cash to sweeten the deal for the current owner, which is ultimately an even greater encouragement for him/her to more forward with the deal. In the end, any form of investing is all about risk vs. return. So to minimize your risk at flipping property, ensure you do some good research into flipping pre-foreclosures. This is a sure way to profit in any real estate market.
Pre-Foreclosure - A Winning Property Flip for You and the Current Owner
