Rich Dad’s Guide to Foreclosure Investing

Rich Dad's Guide to Foreclosure Investing

Introduction
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Returns from investing in foreclosures can be huge. Depending on what stage of the Coaching Absolutely Free
foreclosure process the property is in as well as how prepared you are as an investor when you enroll in a new pro-
can greatly influence your ability to turn a profit. gram and mention this offer!

Buy right and you will be in the black. Buy wrong or make an uninformed decision Just call 1-800-240-0434
and you will find yourself on the other end of the equation. Understand and prosper. and mention extension 2891
Overlook and perish. to receive this special offer.

Every investor has what it takes to be successful with foreclosures. It is just a matter of
whether one is willing to put in the time and effort to develop his or her knowledge. If
you are willing to put forth the effort, read on and you, too, can be well on your way to
foreclosure riches.

Understanding the Foreclosure Process

Why Foreclosure Is Not Attractive to Lenders

To become successful in foreclosure investing, you first need to understand how
lenders approach foreclosures. Financial institutions are not in the real estate business,
they are in the lending business. As such, they look at foreclosures as an expensive
and time-consuming headache. They would rather be lending money and receiving
interest. Managing non-performing assets are a waste of their resources. Because of
this, lenders are motivated to work with borrowers whenever possible. However, when
it becomes obvious that a borrower is in “too deep” and making concessions would
only delay the inevitable, lenders opt to initiate foreclosure proceedings.

Foreclosure Process
Technically, when a borrower misses one payment, they are in default. Nevertheless,
since banks do not have the desire or time to begin the foreclosure process on
everyone that has missed one payment, lenders typically wait for the borrower to get
3-6 months behind on payments before they begin foreclosure proceedings.

As an investor, you must know that the foreclosure process is not the same for every
state. Depending on the location, a foreclosure can be either a judicial or a non-judicial
foreclosure. The former goes through a court while the latter does not. Knowing the
foreclosure process for your state will greatly influence your investing strategy and
approach in acquiring foreclosure properties.

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Rich Dad’s Guide to Foreclosure Investing

Pre-Foreclosure
Once a lender decides to foreclose on a borrower, a notice of default is recorded or
lis pendens (meaning a pending suit) is filed and the process begins. This stage is
most commonly referred to as pre-foreclosure. This is the first public notice and is Receive 6 months of Rich Dad
considered the grace period of foreclosure. Pre-foreclosure can be a great time as an Coaching Absolutely Free
investor to contact the borrower directly to see if you can work out a deal with them. when you enroll in a new pro-
gram and mention this offer!
By working directly with the homeowner, investors can offer viable solutions to a
homeowner’s situation. Empathy, patience, diligence, and the willingness to create Just call 1-800-240-0434
a win-win-win for the homeowner, lender and you as the investor, can be rewarding and mention extension 2891
emotionally as well as financially. to receive this special offer.

Auction
A foreclosure auction is the next stage in the process. It occurs after the pre-
foreclosure grace period given to a homeowner. If no remedy has been found during
pre-foreclosure, the lender is now forced to try to recoup as much money back as they
can. By selling the property to the highest bidder, the foreclosing lender hopes to get
back some, if not all, of its losses.

Auctions can be very competitive and at times even cutthroat. However, this
environment can be very lucrative for investors that are aggressive, knowledgeable of
markets, enjoy competition, and are confident in their evaluations. Regardless of your
personality though, observing an auction can be an educational experience and is
highly recommended. At the very least, you will gain an understanding of the process,
know what types of properties are most in demand, and network with other investors.
If you are serious about your education, you could also follow the progression of a
property someone else purchases at the auction to see what he or she does to turn a
profit. The fact that you’ll already know what a property sold for at auction will give you
a bit of insight on how far below market you may need to purchase a property in order
to make money.

Banked Owned or REO

Finally, if a property is not purchased at auction, the lending institution takes back
ownership. These properties are referred to as real estate owned or REO properties.
They are also considered non-performing assets by the lending institution. Because of
this, they are usually anxious to get rid of these properties, particularly if they have too
many of them. This is where you can benefit as an investor.

However, banks will often list REO properties with real estate brokers, so there will
be more awareness of these properties and as a result, more competition than if
you purchased them earlier in the foreclosure process. However, if you can build
relationships with those who manage REOs for a bank, you may be able to get a leg
up on the competition. Also, keep in mind that the more non-performing assets a bank

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Rich Dad’s Guide to Foreclosure Investing

has and the longer those assets have been on the books, the more flexible the bank
may be in working with you.

One other plus of buying an REO property is that they usually have a clean title. That Receive 6 months of Rich Dad
means there are no outstanding liens on the property that need to be paid. For you as Coaching Absolutely Free
an investor, this can cut down on a number of headaches and surprises. when you enroll in a new pro-
gram and mention this offer!

Finding Good Foreclosure Opportunities Just call 1-800-240-0434

As you can see, each step in the foreclosure process represents an avenue for a savvy and mention extension 2891
investor to develop a niche. However, there are some rules of thumb that investors to receive this special offer.
should take into consideration when determining whether to invest in a distressed
property.

Above all else, the cardinal rule is “just because you can buy a property at a significant
discount, doesn’t mean that you should buy it.”

So how do you know whether an opportunity is a good deal or not? The first step is
knowing your market.

If you know your market—and know it well—you will easily know not only what a
“3-bedroom, 2-bath single-family home” sells for, but how much rent you could expect
every month. If you know your market, you will know the demographic and economic
trends of the area. In other words, could you charge a premium because the house is
in one of the best school districts in the area? Or, would you have a hard time renting
the house because of recent layoffs at the local plant?

The point is that a foreclosure does not reside in a vacuum. A number of factors will
influence not only what you can do with a property, but also how well you will be
able to do it. If you know your market, you’ll not only keep yourself from making a
purchase that you’ll later regret, but you will be able to think more creatively and see
opportunities with a property that others may miss.

Making Money with Foreclosures

In order to make money in any type of real estate investment, the investor needs to be
educated as well as having a strong team of experts from which to pull upon in order
to avoid problems and correctly manage unforeseen obstacles. Foreclosure investing is
no different and in some regard, it is even more important.

Homes go into foreclosure because the owner has come face-to-face with some
difficulties in his or her life. What makes foreclosure investing tricky is that people can
respond to their problems in ways that may not be the best. Sometimes, they bury their
head in the sand hoping the problem goes away. Sometimes, they become angry and

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Rich Dad’s Guide to Foreclosure Investing

lash out in destructive ways. Regardless of what they have done or not done, if you are
not careful when purchasing a foreclosure, you could not only be getting the property,
but also inheriting the consequences of the previous owner’s behavior. You may be
taking over a number of liens or maybe a plumbing system that had concrete poured in Receive 6 months of Rich Dad
it as the previous owner’s left the home. Coaching Absolutely Free
when you enroll in a new pro-
Now none of this is meant to dissuade one from investing in foreclosures, but to gram and mention this offer!
underline the fact that an education and a strong team will be necessary for optimal
returns. And when you look at it that way, it is no different from any other type of Just call 1-800-240-0434
investment. and mention extension 2891
to receive this special offer.
So what can you do to help increase the likelihood for success with your foreclosure
investments? Consider the following:
• Supply and Demand – How long would it take you to sell or rent your
purchase? What is the average time-on-market for comparable homes in the
area? For rentals, what is the capitalization rate? Even if you get a “bargain,” if
you are not able to rent or sell it and turn a profit, your bargain has become a
liability.
• Liens and Fees – If you are buying an REO property, you will more than
likely have a property with a clean title. The same cannot always be said for
a property purchased in pre-foreclosure or at an auction. Any liens or fees
associated with the property become your concern when you purchase the
property. Having a title agency as a member of your investing team can help
make sure that there are no liens or encumbrances on the property.
• Costs – When it comes to making money on a real estate investment, there
is more than just how much your mortgage payment will be. Holding costs,
transaction costs, marketing costs, and even depreciation should be factored
in when performing your due diligence. All of which leads to…
• Capital Reserves – In an ideal scenario, your new investment would sell or rent
the first day it hits the market. While that is possible, it isn’t necessarily likely.
Having some capital in reserve to weather any unforeseen expenses can make
the difference between riding out the storm or going belly up. Now, if you have
factored in the various costs associated with a deal (see the previous point),
you may not need as much in reserve. However, if you buy a foreclosure at
auction and find that the inside has been vandalized, you will definitely be glad
you have funds to cover the unexpected cost.
• What Do the Numbers Say? – Finally, make your investment decisions
with your head and not your heart. Successful investors refuse to fall in love
with a property. “Fix and flip” TV shows highlight grand plans of remodeling,
upgrading, and turning a dump into a dream. That’s just good TV, but this is
real life. Crunch the numbers. What do they tell you? If it does not make sense
on a financial statement, walk away.

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Rich Dad’s Guide to Foreclosure Investing

The Bottom Line

While investing in foreclosures adds a level of complexity that isn’t associated with
a “regular” property that does not mean you should be intimidated. By educating
yourself to the benefits and nuances of foreclosure investing, you can position yourself Receive 6 months of Rich Dad
to capitalize on opportunities that others—who are unwilling to invest in themselves— Coaching Absolutely Free
cannot. when you enroll in a new pro-
gram and mention this offer!
Hopefully, you will use Rich Dad’s Guide to Foreclosure Investing as a stepping-
stone to further your financial education around this powerful investment type. By Just call 1-800-240-0434
understanding the foreclosure process, how to find good foreclosure opportunities, and and mention extension 2891
some of the ways you can make money through foreclosures, you too can become a to receive this special offer.
successful foreclosure investor.

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