A Technique for Investing in Real Estate Foreclosures

Yesterday, we took a look at the alarming rate at which foreclosures are rising in America. (Up 45 percent from the same time last year.) We discussed the fundamental market conditions causing this rise in foreclosures, including the lack of equity, decreasing affordability, and the looming ARM (adjustable rate mortgage) meltdown that is leading us to a foreclosure bloodbath. Today, I would like to talk briefly about the investment opportunities these foreclosures are going to provide – including my favorite technique for making as much as $40,000 in a single month … without ever having to do a single rehab.

In case you are interested in taking advantage of the rising number of foreclosure opportunities, I’m also going to share with you what I’ve found to be one of the most important lessons I’ve learned through all of my years of real estate investing …

I call it “Ted’s Wal-Mart approach.”

What does Wal-Mart do? They buy low and sell low. So how about buying real estate before the auction on the courthouse steps at a wholesale price? Let’s say 70 percent of value – a $150,000 value for only $105,000.

Stop! This is the big lesson! Many people will say you should paint, clean, landscape, carpet, blah, blah, and sell the property for big bucks. But I say, “Fast bucks not the last bucks.”

I’d wholesale the house to a guy with a pick-up truck and Levi’s, strong hands and paint on his shirt … and make a quick $10,000. The new buyer would own this house at $105,000 plus $10,000 ($115,000) – and he has a profit potential of $35,000. I don’t know about you, but $10,000 pays a lot of bills around my house.

Using this formula, I haven’t fixed a property in 20 years. Sure, I like making big money on deals – but I learned it’s easier to buy low and sell low. I also have done as many as four deals in a month and made $10,000 and much more on each one.

I hope you’re getting the idea: The foreclosure real estate market is a great business. In the last 20 years, I’ve watched the count of real estate foreclosures grow from 200,000 annually to over 400,000. You only need a deal once in a while. I have students who have made $150,000 on one deal. In Denver, Colorado, one savvy investor purchased 90 units and paid to rehab/renovate. He sold for a $1,000,000 profit. That’s probably not you this year – but certainly you could do a deal where you make an extra $10,000 to $15,000 and buy your wife new furniture or take the family to Disney and show them the time of their lives.

(Ed. Note: Best-selling author Ted Thomas is a Florida-based investor, publisher, and real estate foreclosure and tax lien authority. He has written 27 home-study courses and writes for legal newspapers and national magazines.

Ted will be giving an exclusive talk on the foreclosure real estate market for Early To Rise readers in early April. Click here if you’re interested in being included in his teleconference presentation.)