There are all kinds of deals to be made in the real estate business.  Three deals in particular on the least desirable properties can bring you profits.

We love the ugly and awful.
~Andy Heller

There are all kinds in real estate investment.  All kinds of real estate investors, all kinds of deals and all kinds of property to make a deal on.  You’ll definitely find that having all kinds in this business makes for a great amount of variety and plenty of opportunity for earning profits.

There are three basic ways to make a profitable deal in the real estate investment industry.

1. Pick up a Pre-Foreclosure
2. Pick up a Property at the Foreclosure Sale
3. Pick up a Post-Foreclosure

These are the three states of the defaulted property before it usually ends up back on the market as a classic home for sale with a real estate agent.  A pre-foreclosure involves finding homeowners who haven’t been keeping up with their payments and working with them to buy their home, while also getting them out of their defaulted mortgage.

The foreclosure sale is where you can go to pick up mortgages and properties that have already been foreclosed on by the bank.  A post-foreclosure is a property that didn’t sell at the foreclosure sale for whatever reason and has gone back to the bank.

These last properties are usually undesirable for many reasons.  They may look bad, need a lot of repairs, may have a very high mortgage to cover or even have an IRS lien placed on them.  The real estate investor must realize that banks are not in the business of real estate.  They are in the money business.  In fact those post-foreclosure properties in a bank’s portfolio are listed as non-performing assets.  The banks don’t want them!

Give Us your Poor, Your Tired, Your Huddled Masses…
In real estate investment you’ll come to love those properties that are in disrepair.  These properties are not attractive to the general public, or those people looking to buy a home to live in.  Once a home becomes ugly and awful, you’ll find that it’s pretty much only attractive to the post-foreclosure property investors. 

As a property grows more and more neglected, fewer and fewer investors will be interested in that property.  However, this ugly and awful property is also an excellent way to get a major discount from the bank or the homeowner.  You can ask for multiple discounts on the sale price of a property because of shabby appearance, neglected maintenance, problem placement of the home on a lot and more. 

Don’t turn down a property deal just because that home looks ugly and awful.  In a business with all kinds, the leftovers can really turn out to be diamonds in the rough.  If the safety inspection shows the home to be sound and termite free, then you can bet that a property that just looks bad is a great property investment.

You’ve got your list of defaulted homeowners and defaulted mortgages, but don’t feel comfortable ringing them up.  Well, you can initiate contact with the homeowner through direct mail letters.

In the old days it used to take a lot of time to find and contact all of the default mortgages out there.  Now, it is way easier these days to find the names of homeowners in pre-foreclosure than it used to be and as a result contacting them is easier too. 

Looking for the Foreclosures
In the old days you used to have to go down to the courthouse and scroll through the lists of homes in foreclosure on microfiche in order to find pre-foreclosure deals that fit your needs and get the names of potential sellers that you could send letters to.  In fact, if you wanted you could still do this.

If you want to save yourself some time and stress on your neck, try buying into a mortgaging list that sends you all of the default mortgages.  There are all kinds of list providers out there today.  They’ll send you lists filled with pre-foreclosures and foreclosures in areas across the country.

How to Start Direct Mailing
You can now contact all of these wonderful foreclosures and pre-foreclosures available on the market by making use of direct mailing practices.  Direct mail involves sending a form letter to the homeowners you’ve selected as potential clients.

Once you get your list of homeowners in default or even a list of homeowners with their own mortgages you can start sending out direct mailing letters.

If you are uncomfortable with your own letter drafting skills, you can look up some pre-formatted sales letters that are available online, or just use a letter template from your word processing program (such as Microsoft Word) to create your own simple and direct letter to the homeowner. 

In your letters be sure to state your reasons for contacting the homeowner about his or her pre-foreclosure and provide your business information.

That includes:

• Your name and company name (if any)
• Telephone number
• Mailing address or office address (if any)
• Email
• Business card

Including a business card in each letter you send out may be a little costly at first, but in the long run those homeowners you contact about picking up their homeowner mortgages or pre-foreclosures are more likely to keep a business card than the letter.

Some suggest being prepared to send out your direct mailing letters to defaulted homeowners up to seven times before you’ll get a response.  That’s the average number of times someone needs to see a piece of information before they’ll act on it. 

There are lots of ways to invest your money.  Investing in the real estate market can be a great way to invest your money and even make money if you don’t have any capital!
You’ve probably heard a lot of people saying that the real estate market is a great way to make money and a great way to increase your returns.  Well, they are right. 

There are lots of opportunities in real estate for making profits, everything from flipping homes to buying defaulted mortgage notes and it’s all a consistent step-by-step process that’s simple to work once you know how. 

The average bank savings account makes you up to 6% interest if you are in one of the very high paying accounts.  The stock market deals in constantly fluctuating shares.  IRAs can’t be cashed in for years and they’re meant for your retirement anyway.  Real estate on the other hand, deals in property which is always there and mortgages which last for years.  Plus, you can work deals with average returns of 14-25% in profits. 

Cashing in on the pre-foreclosure market is an amazing way to make profits on your money, earn an income, or provide for your own retirement. 

One Woman’s Gain in Real Estate
Donna Bauer was a stay at home mom.  She made some money babysitting at a $1/hr per kid, but was really scrapping around for enough money to keep the family going about 20 years ago.  She could have gone out and gotten a job, but was determined to remain a stay at home mom.  So, she got into buying and selling real estate.

Three months later, she closed her first deal and earned over $5,000 and this was about twenty years ago.  So you can imagine how much more $5,000 was worth back then.  It was an amazing transition in her lifestyle.

To this day she’s making money in real estate and even teaching others how to do it for themselves.

You may feel that there are so many programs and real estate investors and real estate agents buying up the market that there isn’t any room left for you to get started.  However, foreclosures and pre-foreclosures come up in the market every single day.  This is a rotating market so there are always real estate deals for you to find and make a profit on!

It’s easy to start feeling bad when you work with a homeowner in foreclosure.  Many think foreclosure deals just take advantage of the homeowner, but you can help the homeowner about to go into bankruptcy get some of their equity back.
When you work with a homeowner in foreclosure it’s common to feel a need to help the homeowner out of their tough situation.  You may even feel a little as if you are taking advantage of the homeowner by profiting off of this foreclosure deal, but you are helping the homeowner.  By stopping the foreclosure you can keep the homeowner from having to file a bankruptcy.  Many of these homeowners have spoken with lawyers who are telling them that the only way out of a foreclosure is to file for bankruptcy.  No one wants a bankruptcy on their records for 7 years. 

Giving the Homeowner a Little of their Equity Back
You can also give the homeowners a little bit of cash in closing the deal.  Many times the homeowners you end up working with are not at high points in their lives.  You can usually work a short sale or some other type of property purchase in a way that allows you to give the homeowners some of their equity back. 

Buying Something for Cash
You can even help the homeowners with a deposit or some other fees if they need it to get into an apartment.  You may be able to purchase the appliances in the house from the homeowner and give them enough cash for the security deposit on an apartment.  Buy the appliances or some furniture in the household and write up a ‘bill of sale’.  This then qualifies as a purchase of personal property.  Actually do the purchase and keep the furniture or appliances, don’t let the homeowners walk away with it!  Then you can make this a business deduction on your taxes. 

Giving them a Side Contract
Another way to help the homeowners is through setting up a small side contract to clean the house before they leave.  Just set up a contract allowing that if they clean the windows, scrub the carpets, remove all trash, etc. before they leave you’ll give them an agreed upon amount of cash, say $2,000.  It doesn’t sound like much, but in the worst of circumstances when the homeowner has absolutely no equity to take from the mortgage it is at least enough for them to put down the security deposit on an apartment. 

Small Problems with the Banks
More and more these days, banks are requiring the foreclosure investors to sign an affidavit saying they have not done any deals of this type with the homeowner.  Basically the bank just wants to make sure the homeowner isn’t profiting from the default of their mortgage. 

You may not want to bother with setting up side deals and contracts in order to get the homeowner a little starting over cash.  If this is so, just buy the mortgage through a note purchase.  Then you’ll become the bank and you can give the homeowner as much cash back as you want.

You’ll also be helping the bank by letting them get this default property off of their books and freeing up the cash reserves that the banks are required by law to keep on hand to cover foreclosed mortgages.  You’ll be making money for yourself and your investors will be making money.  Foreclosure investing is a win-win situation all the way around the table.