Posted by John Behle on October 14, 1998 at 23:26:17:
I look at foreclosures as someone I might be able to help. The primary ways people try to help are to help them by buying the property.
I like to take it a step or two further. I want to know if they want to sell the property or keep it. Of course, if they want to sell it, I can buy it. If you have a license, you could also list it. Using creative skills you might be able to help them and still profit. So, being a buyer is TOOL 1. Being an agent (or creative “flipper”) might be TOOL 2.
If they want to keep the property, I can make them a private loan (TOOL 3). I create high yield paper and a good yield. If the margins are there, I have a safe return too. You might look at this as flipping it back to the seller. I can also do a sale/option/leaseback (flipping it back to the seller on a lease option).
Having lender relationships (for a referal feel) may result in finding them some financing to bail out of their problem and keep their property (TOOL 4). Having a relationship with a credit repair agency (TOOL 5) can result in them fixing their credit and getting better financing (another lender - another referal from the lender and the credit repair company).
Here’s an example. A friend that does foreclosures (Jeff) found a deal. They didn’t really want to sell. Jeff called me. They were in foreclosure, bankruptcy, had the worst credit I’ve seen and were at high risk for a heart attack and even family problems.
The private second was foreclosing and wanted the property. We made a $4,000 hard money 5th position loan to solve the immediate problem. We lined up a $40,000 private loan to take out the second and liens if needed as a contingency - it wasn’t. We then placed a new second with a B,C lender to take out the problem second and bring things current. A credit specialist worked on their situation and a few months later we refinanced them at a lower, more attractive rate with a new first.
Lots of happy people. Plenty of profit and problems solved. I love having more than one approach and tool for solving problems. I also love doing deals that another investor sends to me because they don’t know what to do - he got a referal too.
It also led to loan referals from his family.