HOW Do You Make Money Through Foreclosures? - Posted by Nick

Posted by Rob FL on April 25, 1999 at 17:06:08:

There are several investors here in Orlando that I know who are doing one or two of these every month.

HOW Do You Make Money Through Foreclosures? - Posted by Nick

Posted by Nick on April 25, 1999 at 13:13:07:

Hello everyone;

Just HOW can a person make money through a foreclosure?
Do you buy a property for below market value and than sell
it to someone else for fair market value? Can you flip a
foreclosure deal to another investor? HOW can a person
make money through foreclosures?

Re: HOW Do You Make Money Through Foreclosures? - Posted by Mark A. Flores

Posted by Mark A. Flores on April 27, 1999 at 03:24:01:

Hello Nick…
From what I have learned there are 3 ways to profit from foreclosures.

#1 Pre-foreclosure = Buying from the homeowner before the house is sold at auction.

#2 Trustee Sale or Auction = For this one you usually need proof of funds.

#3 R.E.O = This is where the bank has taken the property back after getting no bids at the auction.

I myself intend to concentrate on foreclosures in my area. Well hope you succeed with which ever area of real estate investing you choose. Good Luck!

Re: HOW Do You Make Money Through Foreclosures? - Posted by Dave T

Posted by Dave T on April 26, 1999 at 23:45:36:

Last year, I bought four foreclosures that I have in my rental income portfolio. All were bought far enough below FMV that I get a positive cash flow at market rent.

I figure that I make money three ways on the real estate itself and one extra way with a tax shelter. First, I make money on the purchase because I have more equity in the property than my purchase price. Second, I make money with a recurring monthly income stream by operating the property as a rental. Third, I will make money by cashing in on the property’s appreciation if I should ever sell in the future.

The fourth way I make money may not apply to everyone, but in my case, my depreciation on the property is a deductible expense but not an out of pocket expense. Therefore, the depreciation offsets rental income and lowers the taxable income from my rental activities.

The idea… - Posted by Sean

Posted by Sean on April 25, 1999 at 14:45:16:

…is that people who can’t afford to make their mortgage payment have been in financial distress for awhile. Accordingly the property has probably developed some deferred maintenance - overgrown grass, poor paint job, needs new carpet, maybe a small roof leak or dirty windows.

So the bank takes back the home for say $80,000. It’s not in good shape and banks aren’t in the fix-up-homes business so it doesn’t get in any better shape. The person who got foreclosed on strips everything of value from the house that he/she can carry and leaves.

Enter you: The investor. You negotiate with the bank to buy the property. You realize that the property fully fixed-up will sell for $110,000 and it needs $10,000 of repairs. You’re going to need to pay closing costs to sell (perhaps including a Realtor) and we’re figuring that at $10,000 too. Figure also a few months of mortgage payments, taxes, insurance, whatever ($5,000) plus $15,000 profit.

So you offer to buy the house from the bank at $70,000 and since no one else wants a trashed, foreclosed house they accept. In lieu of a downpayment you put $14,000 into an account with a lender pledging to use this money to fix up the house.

Break out your credit cards and elbow grease and you get to work rehabbing the house. You fit the outside first so it looks nice and throw up for sale signs while you fix the inside.

If, at the end of that time it’s not sold, you enlist a Realtor to sell it and move it out. Your profit: $10-15,000. I understand really motivated/hard working people can manage 4 of these a year. That’s $40,000-$60,000 a year.

I think this method is called “retailing.” I don’t personally do it. Maybe others can clue you in better as to the fine details.

By themselves? - Posted by Sean

Posted by Sean on April 25, 1999 at 19:13:49:

That’s a lot of sweating.