They come out to pitch their expensive (and unrealistic) plans and programs about how to get rich in real estate through foreclosures.
Right now, the residential real estate market is softening, which sadly means that more families are losing their homes due to foreclosure.
In a strong real estate market and in a strong economy there may only be a couple of foreclosures in a neighborhood at any given time. Right now, when the real estate market is sorting itself out from the sub-prime debacle, foreclosures abound.
A lot of people have the idea that one man's loss is another man's gain. But when it comes to foreclosures, one man's loss may be the next man's loss, too.
Why buy foreclosed properties? When you buy a house that's been foreclosed upon, you're buying a house that didn't sell. The owner of the house couldn't sell it and the bank couldn't sell it. They're just hoping that a sucker — I mean an "investor" — like you will come along, ready to take that white elephant off their hands.
Let's first consider the question: "What is a foreclosure?" Very simply, it's when an individual who owns a house, has taken out a mortgage and can no longer make the payments. They couldn't sell the house for a price that would allow them to pay off the mortgage so the bank stepped in to recoup as much as it could of what turned out to be a very bad investment all around. If you buy it, you own it, and need to pay the mortgage on an empty house that likely hasn't been maintained.
How long can you afford to do that?
More often than not, investments in foreclosed property turn out not to be like winning a lottery, but a path to bankruptcy! You might be willing to offer more than the other speculators, but what does that tell you? It means that all the other real estate investors in your neck of the woods were not willing to put down as much money on that property as you...in your infinite wisdom!
It's too bad they already made a TV show called "The Biggest Loser," because that’s how I would describe anybody unfortunate enough to offer the most money, out of all the speculators, to the owner of a foreclosure property.
Once again, you've got to ask yourself whether you're smarter than all the other investors looking at foreclosures, and all the home buyers who passed up the opportunity to buy the house from a realtor or directly from the owner, and the bank or government entity currently in possession of the house.
If this sounds harsh, I'd rather you learn from me that foreclosures don't work than learning the hard way. I don't want you to learn the hard and painful way, by going through the time, trouble, and expense of a property that costs you more in money and heartache than you could ever make... even if things really worked the way the foreclosure hucksters would like you to believe.
I can offer you the stories of countless people with sad experiences who thought they could make money in real estate through foreclosures. By and large, they didn't. But a new generation of hopeful investors arises every day, and the people with those full-page ads for seminars on how to make money in these fields continue to prey on them.
Can you still make a fortune in real estate?
You bet! Do it the right way, and you'll be very satisfied with your results. It's a turnkey approach that is disciplined but very effective.
It is truly the #1 way to invest in the # 1 investment in America -- which truly is real estate!
Chuck Salisbury outlines the safest, most conservative way to invest in real estate in "The Incredible Investment Book." For more investment advice and a free newsletter go to www.TenPercentDown.com.
Excellent!
ReplyDeleteThanks, Victor!
ReplyDeleteI've made good money buying foreclosures. There are many great opportunities. Yes, you don't want to assume it's a good deal just because it's a foreclosure. But, nearly EVERY property sells to the highest bidder, so that's not a good argument against buying foreclosures. With foreclosures, as with any property, buy it either because it will rent for more than the PITIH, or it will appreciate, or both; or, buy it because it is worth significantly more than you're paying, after counting all costs of renovations, closing costs and carrying costs while you re-sell.
ReplyDeleteThe answers are contained in my two recent news items. I don’t doubt that people made money in the past flipping property and buying foreclosures. I did too because when prices are going up even your mistakes make money. However, we are talking about NOW, June 2009, not 1996 through 2006.
ReplyDeleteGold made money over the last two years but not the previous 25 years. People made money in the stock market up to the 2008 crash that took the Dow from 14,000 down to 8,000. History is always a good reflection on how you made money but not a window towards continued success.
Some people still run infomercials talking about buying property for pennies on the dollar from tax sales and that is no longer possible. And buying property with "no money down" is also currently impossible. If you are stuck in the past then good luck. As for me I need to make money today and that is decided by what I buy today not years past.
Hope this helps!
--Chuck Salisbury