Often viewed as the most profitable segment in real estate investing, pre-foreclosure investments are when an investor acquires a property before a public auction sale designed to recover the money borrowed by the property owner.
A widely misunderstood method of investment, pre-foreclosure investment arises out of an opportunity presented by a person who defaulted on their loan or mortgage payments. Lenders are then forced to file for foreclosure which allows them to acquire the property and resell it to recover the original loan amount and expenses.
Jeff Adams, the #1 real estate trainer, explains below some points to keep in mind when investing in pre-foreclosure estate.
Explain to the Borrower
As a buyer who is helping out a borrower who stands to lose his home and not have any money left, you need to explain your actions to the borrower in order to make sure he/she does not view you with animosity.
Speak to the homeowner and tell him about how you would be protecting their credit profile thus enabling them to borrow enough money to start a home again. Also, you can help them avoid the depression and social issues that arise out of a home being repossessed by lenders and auctioned off.
Do not Ignore Your Profit
Always make sure you are investing only in properties which will earn you a profit. It is important to keep in mind that the property you are purchasing from the homeowner is priced as low as possible. Ask for discounts and pay only after you negotiate. You can also consider taking over the loan and paying the installments in order to prevent foreclosure. Try negotiating with the lenders to settle on an amount lower than what they are owed in order to make more profit.
Research Well
The key to finding properties which can earn you a lot of money is always good research. Also for pre-foreclosure deals, you have to make sure you seal the deal before the property is auctioned.
It is possible to buy properties at three stages, which are
- Before the auction.
- At the auction
- Post Auction (Real Estate Owned)
However, with auctions generally being seen as becoming more risky due to strict conditions imposed by the lenders, the first choice is often the best one to make for property investors. If you choose to buy at an auction and the site cannot be inspected, be prepared for facing hostile tenants, issues with insurance and other more serious issues in other states.
According to Jeff Adams, the best chance for pre-foreclosure real estate investments is to deal directly with the owner before the property is sold and to keep the lender out of the equation entirely.
To know more about how you can gain the most profit by investing in pre-foreclosure properties, sign up for a free webinar on Jeff’s website today or visit any of the real estate platforms where he will be talking soon.
