Buying real estate correctly. Post 120

Coach Mitch’s REFLECTIONS™

Real Estate MUST be bought correctly

This is always true, but it is especially important today when the market is falling. All indications are that next year’s foreclosure numbers will be far larger than this year’s record shattering numbers.

Anyone reading this blog will notice that I have consistently held that a prudent investor will ONLY be speaking to those who are WILLING to deal and who are also ABLE to deal.

Don’t waste time

Speaking to foreclosure candidates is often a very big waste of time. They are behind on their mortgage because the mortgage is too high. Therefore, while the seller is WILLING to give you a good deal, they typically cannot because they do not have the equity available to be ABLE to give you a good deal.

By spending your time and money investigating mortgage foreclosure leads, you take that time and money away from more productive areas.

Don’t waste money

Let’s be clear, getting a property for 70% to 80% of FMV is NOT a deal – IMHO. Especially in a falling market, paying that much is far too risky. Any profit will quickly be eaten up by holding costs, a clean-up, a modest fixup, marketing, dickering, lawyers, RE agents, unforeseen items, etc. Is it more clear now why I insist on never, ever, paying more than fifty cents on the dollar?

I’m not the only one preaching this

I am reading a very good book, a book that I recommend you read, “Buying Right” by John Schaub. John is a long time real estate investor, guru, speaker, and all around smart guy. He is currently a big time mentor to would be platform speakers. He charges $35000 for his speaking course, and is SRO.

I’ve just started the book, but right away I saw that I had to blog about what I think is the main point – in order to get a good real estate deal, you need to be talking to the right seller.

This book was written in 1986

Quoting from the book:  “Items which are being sold for a large profit are items which can potentially be purchased for far less than the asking price. Conversely, items which are being sold at only a small profit, or none at all, are unlikely to be purchased below the asking price.

When buying a real estate investment, the same rules apply. The seller with the largest profit is likely to make you the best deal. Before I make an offer on a property, I always find out what the seller paid for it and how long they have owned it. (Right on)

These facts will tell me who is most likely to give me the best price. The price they paid has little bearing on what they may sell it for today, but it will tell me which seller I should spend more time pursuing.”

I go even further

I have taken this wonderful insight to the next level. Coach Mitch’s “Ridiculously Simple System…”™ focuses, like a laser, on what are the most motivated of all motivated sellers, the tax delinquent. By focusing on this category of seller, the tax delinquent, we can spend more time pursuing those who are most likely to give us the best price.

Mortgage foreclosure sellers don’t lose that much

A person in mortgage foreclosure is under a great deal of pressure. After all, they are going to lose their house. However, the reality is that, usually, in a mortgage foreclosure, the seller has little to zero equity. They have overpaid for the house, put a trifling amount for a down payment, often the seller pays closing costs, little equity has built up. These days, the value of the home has declined and the owner needs thousands to bring the loan current. This is only a situation that I want my worst enemies to be in.

The bottom line is that although the situation is bad, the mortgage foreclosure seller is not losing very much money. They didn’t put out much to purchase the house and they are going to recoup that by not paying the mortgage for six months plus and living rent free.

The tax delinquent loses much more than the foreclosed person

The tax delinquent is the most motivated of sellers because tax delinquents often have the most to lose. About 35% of the properties that are tax delinquent are FREE and CLEAR! About 50% of the properties that go to tax deed auction are FREE and CLEAR! When you lose a free and clear property, you lose the entire value of that property. It’s often $20000 or more. By looking at the overbids, we see that many, many properties sell for much more than the taxes owed.

I would be pleased to share with you the many benefits of Coach Mitch’s “Ridiculously Simple System…”™ .

See Coach Mitch’s “Ridiculously Simple System…”™ for details.

Until next time,