Income in Real Estate Foreclosure Onwards to a Financial Success – A Possibility?

Real Estate, What is the first thing that comes in to your mind? Basing on the current economic predicament we are in, the first few words would be Mortgage, Debt, Homes, Refinance, and Investment. These would best describe the sentiments people have nowadays due to the heavy encumbrance of the recession. Here is a thought, why don’t we all be optimistic and look at it on a different perspective? After all optimism definitely goes a long way which enables us to let our imagination run wild and be creative regardless of the negative stigma.

Before we delve deeper on key aspects that are of interest, let me give you a brief overview about me. Real estate business has been a lifeline for me and my family ever since, it’s in the blood if I may say so myself. I have been around construction, home improvement business, mortgage assessment for most of my life. Being 54 has never been so gratifying and rewarding, all thanks to my Real Estate roots. I can attribute my Real Estate success mostly due to my mom and step-dad being contractors and developers, while I was growing up I was immersed in the industry in one way or another. My keen interest construction enabled me to build several log homes in Montana, Monterey and Salinas, CA. I was also able to build numerous homes in Texas; all in all I had the pleasure to live in nine states following construction, home refurbishing and real estate booms.

So where has my quest taken me as of this time? I am currently residing in Northern CA, although recently hit with a huge downturn in the real estate market and, giving credence to the global recession that has everyone slumped and penny pinching for quite sometime now. Do I still build? It’s been a while, but my passion and enthusiasm for construction and real estate is undeterred. Is there still a market for real estate? You bet! Let me tell you about my latest business venture, buying bank owned homes….

FORECLOSURE: Defined as the removal of right to redeem mortgage, a legal process by which a mortgagees’ right to redeem a mortgage is taken away, usually because of failing to make payments.

It might seem pretty dry but let me put it this way… Take for example someone finds an exquisite home for sale. Then they would assess their personal finance on whether it would be an excellent investment. They could either take a home equity loan through various loan modifications; then process the transaction with one of the creative types of financing. Then due to some unmitigated circumstances something changes. It could either be an economic recession, interest rates, a job or an illness. The payments would unfortunately be stopped and now the home owner would be in a rut and left upside down in the loan. This simply means that the loan is more than what the house is worth. What can they do? They can’t sell it and they can’t afford the payment. And guess what? Life happens. FORECLOSURE!!!

You have lost the right to your Mortgage and your Home! Your credit is shot, quite possibly for the next 10 years. This is foreclosure. This is officially a bank owned home. This is the cold downside of life.

You can either whine for a while or get your act together. If you are that steadfast you can take it like a real man should and walk it off. Nah I’m just kidding, then again… But seriously there’s no need for a breakdown into depression. This is not a total failure, you can always start up again, although it is easier said than done but always keep in mind beneath every cloud is always a silver lining. Just hope for the best and prepare for the worst. Always keep an optimistic outlook in life and eventually things will turn out for the better.

Now eventually it will all come down to a Short Sale: This is when all the entities that a vested claim of interest in a property agree to take less than what it is worth, just for the sake of getting rid of it. You might be wondering why they would do this. Simply because they have so many mortgage homes on the books that a loss is better than one house for sale sitting around that has to be taken care of, taxes and insurance paid each month and a price that may take up eons to recover. So in short, (pun intended) Short Sales usually take longer than foreclosures (Ironic isn’t it?) Since most of the time there are more people to deal with. There could be several persons involved; these could be the lenders, the owners that may still be in the house, the lenders committees, the lender for the buyer so on and so forth. Simply put, it is a mortgaged home or an REO (Real Estate Owned) OK let’s get to what’s keeping me busy right now.

So I went to Sacramento for a meeting with an esteemed real estate agent. I have already informed the agent regarding my preferences. To say that the list of exceptional selections is truly phenomenal would be an understatement. I ended up looking for about 4 hours to find two likely candidates that sparked my keen interest and made a reasonable offer. At the time of this writing I am in contract on one and waiting for the response from the other.

Here’s a brief overview of what I deemed worthy to invest my hard earned money on. First off is a mortgaged house that has 1081 square feet, three bedrooms, a single bath with an attached garage. The walls and ceiling in the garage have been finished and the electrical is in excellent condition.

Here is the deal. As you might have perceived the home is in a foreclosure, the bank has it is being encumbered by all the houses they are repossessing. This nifty little piece of marvel was sold in 2005 for $315,000.00 when the bank got it back the previous owners had $207,000.00 in it.

They listed the house for $177,000.00 and we paid $117,000.00 for it, a $60,000.00 less than what the original list price was an almost half of the original price. Although the house is in need of some refurbishing and proper home improvement. You can’t argue the fact that it was an excellent steal for the price. Some minor home furnishing here and there which I don’t mind. A new roof, fixture upgrades, home appliances, paint jobs, carpet and wall decors.

Food for thought… When the real estate market is down, guess what, you would not know if the rental market goes up. Viola… caching!!! Instant income opportunity, as long as you play your cards right in this business, there is always money to be made.

This house will now be a rental, making a positive cash flow from day one. Once the market has recuperated and is back on track, imagine the income possibilities I would have.

I’ll be frank with you in saying that I was not in financial abundance when I made this deal. In fact I was scrimping as much as I can but believe me when I say that the lenders are definitely willing to deal. They don’t want all the houses they have and are willing to go low if you say “no go”. Be assertive and keep in mind you are the customer and your offer will always be taken in to consideration regardless of the marketing acumen of the lender.

You don’t necessarily need to have a business degree nor a marketing background. Just a keen eye, some intrepid curiosity, effort and a little bit of business aptitude and you’re all set for real estate success!

Let’s Go Make a Deal… but not just any deal let’s make it an “Excellent Deal”!