Here’s a painful truth: Investing isn’t as psychologically comfortable as it used to be. The wild gyrations of Wall Street have made many people shy away from the stock market. After all, no one wants to risk seeing their lifetime of savings go down the drain next time the economy takes a nose dive. And that creates a dilemma for the average Joe (and Josephine) who must figure out a solid place to invest their money. According to ex-auto mechanic turned real estate millionaire Peter Conti (how’s that for a buildup)? the key to long-term wealth building is real estate . . . and the hottest new niche is foreclosures.
“If you’re looking for low-risk, solid investment vehicles, you can’t beat real estate,” says Conti, co-author, along with David Finkel, of Making Big Money Investing in Foreclosures without Cash or Credit. “History shows that it almost always appreciates in value. Plus, it offers tax breaks that simply aren’t available for other types of investments. The fact is, wealthy people invariably make or hold their money in real estate.”
“The key to making money in real estate is finding motivated sellers,” says Finkel. “That often means investing in foreclosures and preforeclosures. And because of layoffs and other societal and economic trends, these situations are plentiful right now. For the right type of person-basically, anyone who is willing to do the work involved-it can be a ticket to undreamed-of financial success. Literally nothing else is required.”
That’s right. If you have the motivation to learn the ins and outs of real estate investing-to negotiate with sellers, buyers, tenants and lending institutions-you can succeed in this lucrative investment niche. As the very title of this book makes clear, this is true even if you have very little money or a credit history that prevents you from working with traditional lenders. It’s all about discovering the “win-win” situation for everyone involved in the transaction . . . and structuring your own profitable deals.
So, let’s say you’ve decided to invest in foreclosures. You may think the first thing you need to do is to look for “foreclosure deals.” Wrong! You need to focus on the single highest-paid activity you have as an investor: connecting with motivated sellers. (The deals are by-products of this process.) There are a number of techniques for finding motivated sellers; here are just a few of them:
Write an “I Buy Houses” Classified Ad. Want motivated sellers to come to you? A small ad in a local paper can generate several hot foreclosure leads each month. There are three places you should test your classified ad: the Real Estate wanted section of your local daily paper, your local Pennysaver or Thrifty Nickel-type paper, and specialty papers in your area (for instance, if you have a military base nearby, try placing your ad in the papers that cater to military personnel).
Do a Postcard Campaign. Send “I Buy Houses” postcards to property owners in the beginning stages of foreclosure. In most states, this will mean either a Notice of Default has been recorded against the property or that a foreclosure lawsuit has been filed and a lis pendens recorded against the property. Incidentally, you can get the Notice of Default list for free: just call a local title company (look under “title company” or “title insurance company” in the yellow pages) and ask for it.
Visit Sellers in Default in Person. Out of the 50 other investors who could have the Notice of Default or lis pendens information about a seller in the early stages of foreclosure, 25 of them will mail a postcard or letter to the sellers. Five will track down the owner’s phone number and make a phone call. And only one or two will actually face their fears and knock on the seller’s door. You might be thinking that homeowners wouldn’t want you to come to their door. But the truth is, in many cases they are in desperate need of help. Handle your visit with finesse and compassion and they may very well welcome you.
Network with Attorneys. Attorneys may know more sellers who own unwanted or problem properties than members of any other profession. While they can’t pass out confidential information, they can refer clients who need a fast sell or solution to call you. Network with the following types of attorneys: probate, bankruptcy, divorce, real estate, and foreclosure specialists. You can “pay them back” for their referrals by referring other homeowner clients to them.
Send out Your Bird Dogs. Bird dogs are people who spend a lot of their day outside around houses, and are in places to spot bargain opportunities. Examples are landscapers, meter readers, postal delivery people, FedEx drivers, contractors and movers, just to name a few. Tell them what you’re looking for-vacant properties, ugly houses that need a lot of work, houses whose utility services have been turned off for nonpayment, etc.-and promise to pay them a “finders fee” for successful deals.
Tap into “Trigger” Documents. What documents get recorded before a foreclosure is initiated? Here is a list of documents to tap into at your local courthouse or county recorder’s office:
Notice of Appointment of Successor Trustee. If you live in a deed of trust state, here’s a powerful tip: many lenders do not process their own foreclosures; they hire an outside firm to handle the entire foreclosure for them. To pass the legal power to this outside firm, the lender appoints this firm as the new trustee under the deed of trust. This successor trustee will record the signed document from the lender called Notice of Appointment of Successor Trustee. You can look up any new appointments of successor trustees at your local recorder’s office.
Filings for divorce. Foreclosures are often triggered by the ending of a marriage. The divorce process, like any other court process, begins with a specific filing at the local courthouse. In some areas, you can get access to this information; in other areas, you have to wait for these filed documents to age for 60 to 90 days; in still other areas, you won’t ever be able to access them. However, it’s worth a try.
Filings for bankruptcy. This legal process begins with a specific filing at your local courthouse.
Probate filings. One of the most drawn-out legal processes is the probate process-the legal means by which a deceased person’s will is “proven” and his or her property is disbursed. All of the deceased person’s estate will be filed on record at the courthouse.
Create Your Own Ugly-or Vacant-House List. One of the first signs of a pending foreclosure is that homeowners stop spending time and energy taking care of the yard. So drive through the areas you want to buy properties in and write down the addresses of any houses you see that look vacant or where the yard has been let go. Get your bird dog or others in our network to refer these types of leads to you. Here are five ways to find owners of vacant houses:
1. Knock on the door. If no one’s home, leave a letter or note on their door telling them you’re a local investor who might want to buy their house and to please call you.
2. Visit the neighbors. Let them know you’re an investor who’s interested in buying that eyesore on their street and fixing it up.
3. Mail a letter first-class, clearly marked, “Do not forward-address correction service requested.” If there’s a forwarding address, the U.S. Post Office will send you notice of what the updated address is.
4. Look up who owns the house and their mailing address in the tax mailing address records (online, at the recorder’s office, or through a local title company). From this, try to get a phone number from the telephone information service in the city where the owners live.
5. Search on the Web. There are specific websites you can use to track down owners of abandoned properties.
The above list should give you some idea of the kind of work involved in the creative, unpredictable world of foreclosure investing. It also reveals the reason why vast numbers of people aren’t rushing headlong into this amazingly lucrative venture.
“The truth is, not everyone is cut out to do this type of work,” says Finkel. “It does require dogged determination, patience and a willingness to interact with many different types of people. Everyone doesn’t have these qualities. But the major reason people don’t pursue real estate investing is that they simply don’t know enough about it to get started. They don’t realize it’s an option for them. We hope our book will change that. We want our readers to realize that there is a great alternative to Wall Street-and it’s open to anyone with the motivation to make it work.”
About the Book:
Making Big Money Investing in Foreclosures without Cash or Credit (Dearborn Trade Publishing, 2003, ISBN: 0-7931-7365-5, $18.95) is available at neighborhood and online booksellers or by calling (800) 245-2665. Conti and Finkel explain the intricacies involved in funding investment deals, using various buying/closing methods and employing exit strategies. The book is filled with potential scenarios, sample contracts and scripts for each encounter with sellers. And numerous real-life examples show how average people made thousands, even millions, of dollars using the techniques in this book. Best of all, the information is presented in a clear and easy-to-understand fashion.
