ForeclosuresMass - ForeclosuresMass Monthly - Feature Article - An Educated Investor is a Smart Investor (July 2005)

As a real estate broker and investor, I know how important it is to have a finger on the pulse of the investment market - especially when it comes to investing in foreclosed properties. Knowing the foreclosure process inside and out is very important, especially knowing how foreclosure laws differ from state to state. The more I educate myself, the more I can educate my clients and help them make profitable investments. The more they exhibit confidence in me, the more able I am to demonstrate my knowledge without overwhelming them with too much information.

Recently, I looked at a 3-family in Brockton that was in foreclosure. At first glance, it looked like a great deal for one of my clients. As I dug deeper, keeping a sharp eye out for danger signs, it became fairly evident that this property wasn't likely to yield a great profit. Tenants were going to have to be removed, which is an expensive process and wasn't going to be easy. Unless you know from personal experience or have learned about tenant removal through courses run by industry experts, few anticipate how difficult a process this can be. I told my client to walk away.

Due diligence is a very important step in acquiring a foreclosed property. Other clients of mine were so excited to find a single-family home in a desirable area of Canton for short money that they wanted to buy the property immediately. They were afraid they were going to lose it if they didn't act quickly. I cautioned them against jumping in too quickly without doing their due diligence. Reluctantly, they went through the process of having the home inspected. What we uncovered were rodents - lots of them. Easy to fix? One might think so, but in this particular case, all of the floors would have had to be ripped up and replaced. Sure, my clients were disappointed not to get the property, but it was the right decision to walk away.

There are so many components involved when buying foreclosed property. It is a much more complicated process than buying a regular piece of real estate, but it can be much more profitable. You have to be careful since so much is unknown and time is short. It is important to get your data early. Contacting the homeowner can be not only a tricky, but a sensitive situation. What works and what doesn't? When you finally find the perfect deal, you have to know how to make it work for all parties involved, including the bank or investor. Many people go into a deal unprepared and find out that they can't carry the property. How do you know if the numbers work? A lot of strategy is involved when making investments. As Kenny Rogers says, "You have to know when to hold them and know when to fold them." So, when do you flip a property and how? What are the tax implications? These are just some of so many questions one has to ask when getting started in foreclosures.

* Next 37 17 investors only!

Having good business sense is crucial. Knowing the right people to talk to also makes a big difference. Although there is so much involved in foreclosure investing, it can and has been done profitably. I've done it. If you'd like to learn more about how to see a deal through to the end, I invite you to join us on July 23rd for a full day seminar on Opening the Door to Profit and learn first hand how I opened the door.

David Offut is the principal of Exit Realty Plus in Brockton. You can reach David at 508-942-4110 or visit his website at askdavid.net.