Profitable (and Ethical) Foreclosure Investing

Many long time real estate investors and especially new investors are looking to cash in on the rising foreclosure market, more specifically, pre-foreclosures. But where do you start? Here is my advice to people getting started with pre-foreclosure investing.

Offer to help the homeowner keep their house. And do it for free. That's right - FREE.

Now you may be wondering how you could possible make money helping people for free. You want to be an investor. You want to get a purchase contract and flip the house and make five figures right away. I do too. The problem is most people in foreclosure do not want to sell their house.

Then one day I sat down and really thought about it. I've read many books on marketing and the overwhelming theme was to sell people what they want, not what they need. Most homeowners in default don't want to sell, they want to stay!

So how can I help these homeowners? How often does a person get foreclosed on in their lifetime? Not many, right? So when it happens, they don't know what to do. They do not know what their options are. What I do now is help them learn what options are available to them. I offer them actual advice based on their personal situation.

They just got behind on their payments, they don't know what to do, they are getting (or are about to get) bombarded with mail and phone calls from mortgage brokers, real estate agents, lawyers and investors who all claim to offer the best solution for their situation. They are confused and often scared. Sometimes the solution for them is simply to call their lender and ask for a workout arrangement. If that is the case, I'll tell them that and let them know what to do and not charge them anything.

When people are in a tough situation and you offer them real advice, they appreciate it and you build trust with them. Then when they eventually do have to sell, you're the first one they call because they like and trust you. And they do usually have to sell at some point by the way, so of course I continue keep in contact with them so I am always within reach.

When I speak with a homeowner, I am only trying to gather the basic information I need to determine what their situation is and what options may be available. Then I just go from there.