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7 Big Reasons To Invest In Pre-foreclosures
By Ben Innes-Ker, Fri Dec 9th

Looking for an "in" to real estate investing?

Working a nine to five job swapping time for money can beincredibly dispiriting. After the futility of it all hits home,it's all you can do to limit the number of home businessopportunities you investigate to twenty per week.

One of the more compelling home business opportunities is realestate investing. Real estate investing is the perennial wealthbuilder, and the transition from working a job to achievingwealth through real estate investing is becoming increasinglywell documented.

You've probably thought about investing in real state yourselfbut you've not gone for it because you thought you needed tensof thousands in savings for a down payment, and perfect creditalong with strong banking relationships.

Well, you can get all that together if you want. It doesn't hurtto have those resources. But it's not necessary to have a hugepile of cash and perfect credit to buy a house cheap and resellit for a profit.

It's especially not necessary in the preforeclosure market.Preforeclosures are houses in the default phase of foreclosure;where the bank has filed initial foreclosure papers but theSheriff Sale or Trustee Sale where the bank auctions off theproperty, or repossesses it if no-one buys at the auction,hasn't occurred yet.

Buying during the preforeclosure period is one of the best waysfor anyone to get involved in real estate investing. With littlemore than a few hundred dollars and some specialized knowledgeyou can buy a house at a substantial discount and resell itretail picking up a five figure profit check in the process.

Don't believe it?

Well, let me give you seven reasons why it's true:

1) When people are in default on their mortgage they havestopped making payments to the bank. So when you are negotiatingwith the seller, and the bank, right up until the point whereyou buy, no-one is making the payments. For novice investorsworried about holding costs this is a huge advantage.

2) Preforeclosures are a very well defined niche market. One ofthe most deadly mistakes rookie investors make is trying to be ajack-of-all-trades, going after any and everything they can laytheir eyes on. The result of this lack of focus is they are soonback at their jobs. By being a very defined market,preforeclosures allow you to develop focused marketing campaignsand standardized processes to get deals completed and closed.

3) One of the fundamentals of real estate investing iscontacting and talking "only" to motivated sellers, and avoidingall the rest. Sellers in preforeclosure are some of the mostmotivated sellers you will find. Their world has been turnedupside-down, they are about to lose their house, and theirmotivation is such that they just want out of the house and thebank off their back. By buying houses from people inpreforeclosure, creating 30%+ equity spreads on houses often ingood condition is not a difficult thing to do.

4) Buying houses in preforeclosure enables you to createunusually large equity


spreads. Recent economic uncertainty hascaused a lot of foreclosures, and rising rates will cause morein coming years. If banks had to take back all of the propertiesthat went into foreclosure the FDIC would shut them down. Theyknow this, so they try not to take properties back they don'thave to. By requesting the Lender discount what is owed on theirpayoff, large spreads of equity can be created on houses thatare totally "maxed out" with loans. This can't be done on loansnot in default.

5) Because Lenders are under pressure to liquidate bad loansrather than take the property back, large discounts can benegotiated. After becoming familiar with the issues that causeLenders to discount, larger and larger discounts can be achievedas you hone your negotiating skills.

6) If your plan is to buy and hold the property, having goodenough credit and financials to get bank financing excludes agreat many people from getting into real estate. On top of that,if you do get a bank loan, your financial exposure is at it'smaximum when everything is in your own name and personallyguaranteed. Buying houses in preforeclosure allows you to simplytake over the existing financing already in place. No qualifyingneeded. You can take title to the property in a Land Trust,begin making payments on the existing mortgage(s), and still getall the tax advantages, appreciation, depreciation without anyof the risk of being personally liable for the mortgage and theproperty.

7) If you have ever bid at auction for property at thecourthouse steps, you are only too aware of the competitionbreathing down your neck. Lots of mind games. The 40 thieves aretalking trash to you trying to get you not to bid. If you areLarry Bird, no problem. Make sure you have $500K on your creditline though. However if you are not the 'Bird' and you don'tpack half a mil' of credit, you can sneak in and avoid this NBAshowdown by buying the house during the preforeclosure period...before the auction.

Make no mistake about it, there are many ways to make healthyprofits in real estate investing. But when you look at how easypreforeclosure makes it to buy houses cheap and resell for fivefigure profit checks, all the while helping people out ofagonizing life circumstances, it makes little sense to pursuereal estate investing any other way.

Ben Innes-Ker is a full-time real estate entrepreneur,best-selling author, and real estate investing warrior. He hasdeveloped the "Foreclosure Investing Letter" to help real estateentrepreneurs and investors do more deals with less effort andincrease profits.

About the author:Ben Innes-Ker is a full-time real estate entrepreneur,best-selling author, and real estate investing warrior. He hasdeveloped the "Foreclosure Investing Letter" to help real estateentrepreneurs and investors do more deals with less effort andincrease profits.


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