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!

You could approach the bank about a Short Sale on a defaulted property you’re interested in, but it does involve a lot of physical effort.  Another easier method is simply to buy the mortgage note from the bank on that same defaulted property.

You’ve been buying mortgage notes for a little while and are comfortable with the practice.  However, you’ve noticed that there are a lot of pre-foreclosure homes out there with mortgages on them too.  This is a large section of the mortgage note industry that remains untapped, but how can you get in on the profits with a defaulted property in the mix? 

It is possible to buy the mortgage note on a defaulted property.  When you use this method of real estate investment you still begin with the normal means of contacting the homeowner in pre-foreclosure through direct mail.

After you’ve spoken with the homeowner and they’ve agreed to sell to you, you’ll have the homeowner under contract to sell their home to you.  This is even though you are going to buy the note on their mortgage.  You’ll just have them sign the contract so they are locked in with you, and the homeowner doesn’t turn around to try and sell the house to someone else while you are working with the bank.  Once, you buy the note the contract becomes irrelevant.

How to Approach the Bank
Go into the bank and ask them if they would consider a Short Sale to you.  A short sale involves buying the actual real estate property at a reduced price and the bank writes off the remainder of the mortgage.  Usually they’ll say yes and begin to give you all kinds of information to turn in for final approval on a short sale.  Then, you can come up with, ‘Hey, wouldn’t it just be easier if I bought the note from you?”
 
If the bank knows how to do a note sale on a defaulted mortgage, then they’ll usually jump on your suggestion because it is so much easier to sell the note than get the process of a short sale through their system.

Once You Buy the Mortgage Note
After some negotiation the bank agrees to give you a note purchase on this property and they accept your offer of say, $70,000 for their mortgage of $115,000. 

By purchasing the note to the property you basically become the bank.  You buy the right to collect the remaining $115,000 left on the defaulted mortgage.  That’s crazy, right?  Nope.

Once you have the mortgage note you have a few options to move forward.  You as the mortgage note owner could continue on with the foreclosure and kick the homeowners out of their home, not very nice since you did approach them first.   Or you could get a “Deed in Lieu of Forclosure”. 

The Deed in Lieu of Foreclosure basically means that the property owner gives you the deed to the property when they can’t make payments on the mortgage.  When you first approach the homeowners about helping them out of their property, you’ll want to let them know that you aren’t going to save their mortgage you’re just trying to give them a clean escape from having that defaulted mortgage on their credit. 

This means that you aren’t going through with the foreclosure and the homeowner gets out without having a foreclosure mark on their record because they are just giving you the deed to the property.

The process of buying the mortgage note on a defaulted mortgage adds one more step to the basic process involved in a short sale.  However, it’s usually quicker, easier and lets you get your piece of real estate investment property