Hunter Craig asked:


There are an incredible number of scams that promise you can make huge returns on foreclosure and pre-foreclosure investing without using a cent of your own money. They take the form of supposed "investment clubs," expensive how-to courses, books and e-books.

Unfortunately, the majority of these programs are about making someone else rich, not you. Though it would be great to have confidence that most advertisements involved legitimate, helpful products and services, the reality of human nature forces us to exert caution and weigh any business or investment opportunity before jumping in headlong.

Despite the risks, there are ways to make money on foreclosure investing without risking a large chunk of your own nest-egg, and here's how.

1. Buy a Property with Tenants

A foreclosure or pre-foreclosure property that already has tenants allows you to claim that rental income on your mortgage application. So, if you're applying to a lender for a mortgage loan, that rent will be seen as income and property, both reducing your borrowing rate and increasing your eligibility for a higher mortgage.

You will have to pay closing costs and a down payment, but the rental income will allow you to pay the mortgage until you're able to sell the property for a profit.

2. Find Tenants for the Property

If you have the cash to put a down payment on a foreclosure property and carry it for a few months while you locate good tenants, the potential rental income could pay the mortgage on the property while you wait for the property to appreciate in value. At that time, you can sell it for a profit, all without having to carry the lending costs associated with it.

3. Buying Direct from the Owner

Buying direct from an owner is an option that allows you to take over the deed and the mortgage of the property while retaining the existing owners as tenants. In turn, the owners may engage in a buy-back or rent-to-own program or simply continue as tenants until you decide to sell the home. If your credit is good, you can renegotiate the financing to obtain a lower rate.

Buy-direct and rent-to-own programs are legally tricky, meaning you'll have to invest in quality legal advice, contract preparation and real estate consulting, but you can save big on down payments, purchasing costs and interest.

4. Don't Get Involved in Investment Clubs

Unless you're dealing with trusted family members and very close friends, don't involve yourself in a foreclosure investment club. These supposed money-making ventures seek to pull together small investments to buy foreclosure and pre-foreclosure properties, sell them at a profit and then send the returns to the original investors.

Unfortunately, properties are often never bought, returns are frequently deflated and profits can be heavily skimmed.

If you're considering an investment club strategy, try taking it on with a group of close and well-known friends, and do so with a transparent structure and well-written legal contracts.

Foreclosure investing can be a lucrative business opportunity for the savvy investor who is will to take sufficient time to learn the details and "practice" them before placing huge sums of money at risk and simply hoping for the best.



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Mark Walters asked:


Buying a home facing foreclosure can seem attractive to real estate investors, for obvious reasons. The thought of walking away with an amazing deal hits the money buttons, and screams profit more than any other opportunity.

Before you begin pursuing foreclosure real estate, a simple question needs to be answered. Do you really know what is involved? You may know the financial results and the manner in which a below market value purchase can affect your balance sheet, but do you know the effect it has on a family?

Foreclosure Investing

Home owners facing foreclosure are usually in distress due to job loss, difficulties with family, or relocation issues. Or they could just be having trouble managing their income and making mortgage payments.

Most people losing a home through foreclosure have just been spending more money than they earn. By the time they are losing their home they have exhausted every source of cash in an effort to stay current with their mortgage payments.

Many real estate foreclosure investors herald the benefits they can offer owners by buying their property. An experienced investor can get home owners out of a tight spot and keep a foreclosure off of the family's credit history.

As you move into foreclosure investing just be sure to square your business mind with your conscience before you proceed. Assuming you don't have a problem, and that this kind of investing is part of your overall plan, the following tips and ideas should ensure that you have every chance to make this particular buying strategy one of your specialities.

Foreclosure Properties

Once you have made up your mind to invest in foreclosure property, a few things need to be considered. There are three periods in a foreclosure action and you must choose which ones to focus upon:

1. Preforeclosure

2. Foreclosure auction

3. Bank owned homes

Each of these buying opportunities has pluses and minuses for investors. To be successful you must understand how to cope with the problems and opportunities presented by each of them.

It is also very important that you are familiar with the laws governing foreclosures in your state. For example: In some states, foreclosures due to mortgage arrears could leave the previous owners in the home for up to a year following the foreclosure. Not allowing for that could seriously affect your investment plan.

Some home owners are working feverishly to bring their mortgage payments current and hold off a foreclosure. This scenario applies particularly to those investors who are prospecting for preforeclosures. If an owner is moving heaven and earth to find the cash to make mortgage payments, you could find yourself sniffing around a property that will stay with the owner, and ultimately be just a waste of your time and effort.

Take time to know the property. Will it need major or minor repairs after you take title? Are you going to have to evict occupants? Will the embittered occupants damage or strip the property on the same day title is transferred into your name? Does you state's foreclosure law allow the former owner a redemption period? If so, can you take the chance of spending money to rehab the property; while there's a chance the former owner can find the funds to cure the default?

Have contingency plans for all eventualities, and stick to them. All of them cost money and reduce your profit.

Buying foreclosure property can be lucrative. Just make sure that you are being purely business minded, and that you prepare for all eventualities. Consider state regulations on foreclosures, carefully determine the real value of a property, and you should be able to turn a profit.



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