Making Money with Abandoned Properties

“We have more possibilities available in each moment than we realize.” – Thich Nhat Hanh

When I began my career as a real estate investor in 1985, I stumbled across a tremendous opportunity that most people still don’t know about to this day. Yet it has given my family and me a lifestyle we never dared dream we’d have.

I’m talking about investing in abandoned properties – a highly lucrative, yet little-known, segment of the market.

Abandoned properties are just that – abandoned. No one lives or works there anymore. Weeds may be collecting, taxes may be accruing, and leaks may be spreading. But, in many cases, the owner has already divorced himself emotionally from the property. And that means you could get an excellent under-market deal.

Where do you find these properties? Just look around. You probably pass right by them on a daily basis – and you could be passing up hundreds of thousands of dollars in profits! These properties have been abandoned for any number of reasons. Perhaps because of a divorce, an illness, a death in the family, or a job relocation.

A case in point…

A $58,000 Profit Right Across the Street

I remember a young lady who attended one of my two-day training classes. On the first day of class, we covered many unconventional profit opportunities – including abandoned properties. The next day, she told us that when she got home from class, she put her key in the lock … but instead of going inside, for no apparent reason, she stopped and turned around. Across the street was an abandoned house.

She had seen that house every time she walked out her front door, and had never paid any attention to it. The windows were broken, the grass was high, and the yard was cluttered with trash.

But now, because of what she’d learned in my class, she knew what to do. Over the next three months, she purchased the property, fixed it up, marketed it, and made a profit of $58,000!

Why Abandoned Properties?

When you work with abandoned properties, you can use the best financing in the world – seller financing. There are several reasons why we prefer this to conventional financing.

Rarely will a seller ask to see your credit report. If you have credit problems, it usually will not become an issue. (By the way, the young lady I just told you about had no credit, no money, and no job when she made that first abandoned-property deal.) Many times, the seller will be open to creative strategies that will help him get rid of his problem property. After all, what does he have to lose? The property isn’t generating any rental income. It’s just sitting there costing him money.

The seller probably has a mortgage on the property that he has to pay every month. More than likely, he’d like to rent it out or sell it, but he doesn’t have the time (or maybe the money) to get it in good shape. In the meantime, another month goes by, and he has to make yet another mortgage payment. He also has to keep ponying up money for taxes and insurance. Not only that, but because the property is vacant and subject to vandalism, he has to keep shelling out cash to keep it from completely disintegrating.

Needless to say, since it’s such an eyesore, everyone in the neighborhood has probably been complaining about it. In fact, the Department of Building and Safety might already have gotten involved.

This can all add up to a huge, money-sucking headache for the seller. As you can imagine, he is almost certainly very motivated to get rid of it!

How Do You Find Abandoned Properties?

The more affluent an area is, the fewer abandoned properties you’ll find. But you don’t have to go into the worst parts of town. You can find plenty of abandoned properties in lower-middle class areas, many of them on the upswing.

Keep your eyes open for broken or boarded-up windows… overgrown grass and shrubs… trash, handbills, and newspapers accumulating on the lawn and porch… and other signs that a property may be looking for a new owner: You!

Make sure you have a pen and a pad of paper with you at all times. Take different routes to and from your normal destinations, and write down the addresses of any properties that look promising. You might have to leave home a little earlier in the morning to do this, but it will be worth it if the time you spend brings you just one abandoned property deal every few months.

Turning a Home Run Into a Grand Slam

Some years ago, I was taking my aunt to a doctor’s appointment when I came upon a property that showed all the classic signs of abandonment. I wrote down the address, and called my title company as soon as I got a chance. I gave them the address, and they gave me the name of the owner and his mailing address. I made him an offer… and bought the property for $82,000. Then, to minimize my out-of-pocket cash outlay and maximize my profits, I fixed up the property by taking advantage of something few people know about: the government’s Rental Rehab Program.

This program provides loans at interest rates far below the prevailing rate. It also allows qualifying tenants to significantly reduce the amount of rent they have to pay by going on the Section 8 Government Subsidy Program as soon as the rehab is complete. The average wait for the Section 8 Program at the time was six to eight years – making this a win-win deal for everyone involved.

I kept the property for several years, putting positive cash flow in my pocket every month. I eventually sold it… and made nearly a six-figure profit.

The Best Financing in the World

Because that property needed so much work, it would have been almost impossible for me to get a conventional bank loan to finance it, and I wasn’t in a position to pay all cash. So, what was the solution? The seller of the property financed the entire deal.

Here’s the point: Abandoned properties are one of the best-kept money-making secrets in our industry. They are good candidates for many government loans and grants that can supercharge your profits. Plus, their owners are usually very motivated to sell – meaning you can often get them significantly under market value, and even arrange for seller financing.

Learn how to master this very lucrative real estate niche, and, eventually… you may want to abandon your job!

[Ed. Note: Reggie Brooks is a former telecommunications employee who made more money on his first abandoned-property deal than he made in a full year at his job. Soon thereafter, he “abandoned” his job, and for the last 20 years has been investing in real estate full-time. To learn more about his techniques for profiting in this lucrative area, listen to Reggie live TONIGHT on a teleseminar with Justin Ford. Spaces are limited.]