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40% Profit When You FLIP Foreclosures?

By
Real Estate Agent with Re/Max Real Pros 01357321

There are two ways to buy foreclosures.  You can:

  • Buy foreclosed homes that are being marketed on the open market, through a Realtor, or some other source (but you are not going to get a huge discount going this route)
  • You can buy greater discounted foreclosures by going to a "trustee sale" at the courthouse steps.
    • trustee sales are performed in California and a handful of other states. This information relates to trustee sales in California.  Some states perform judicial foreclosures, some perform non-judicial (trustee sales) and some perform both.

So... if you're going to buy foreclosures on the open market... your best strategy may be to buy and hold. 

But... I'm suggesting that, perhaps there's a better strategy.

We are in a discounted market but it's possible to get deeper discounts if you know where to look.  I'm talking about foreclosure sales at a trustee sale.  I have devoted an entire blog to different aspects to consider when you Buy Foreclosed Homes.  Use this resource to learn how to make money when you invest in foreclosures and also when you buy foreclosures as your primary residence. 

Anyway this post is about making 40% profit when you buy foreclosed homes. How can that profit amount be possible?  Is it legal?  Well, I already said that we're in a wholesale market and you'll probably realize a 40% increase in the future, when the values go up (again... think California and not Antarctica) but I'm not talking about appreciation over a 10 year span of time... I'm talking about cash in your pocket now

To realize this kind of profit today and not have to wait for the market to return you'll want to buy at deep discounts and then flip those homes at, or greater than, market value for the immediate profit.  You've got to do your homework but buying at a trustee sale may be the best way to see this kind of immediate profit.  I've been tracking homes bought at the trustee sales, here in Corona California and have seen gross profits hit the 41% mark (and higher on RARE occasion).

So what are the mechanics of this and how do YOU make that kind of profit? 
I recommend that you study a specific area and stick with it.  If you know the market trends and pricing in a specific area it'll make it easy to spot a good deal, even if you haven't done the research.

You'll want to view the properties beforehand, if possible, and assess damages and cost of repairs.

You'll want to ensure that the liens will be wiped out in the foreclosure sale - make sure the foreclosing lienholder is in the first position.

Another potential pitfall could be IRS Liens... they should not "follow the property" but it could take some time to get the IRS to remove the lien which could hold up your "flip" sale.    

You need to get the current occupants to vacate the property... you may need to offer "cash for keys". I'd budget $2,500 to $3,500 but certainly start your enticement at perhaps $1,000.

You MUST know the market value for the home.  It gets crazy when the bidding starts. You need to know your stopping point.  Factor in a little extra just in case you run into snags along the way.

You Must Pay Cash (actually... cashier's checks) You'll want to make sure you have different denomonations.  If your budget is $300,000, don't show up with one check for $300,000.  What if you buy a home for $225,000? They don't make change on the courthouse steps, come prepared. 

You'll definitely want to work with a local, competent, Realtor so you can make sure you have a good assessment of the value of the home.  

I know I've over simplified it, at the interest of making this post easy to read, but when you but foreclosed home... I want you to know that you need to be ready to roll up your sleeves and work!  Initially this is not easy money, but once you have a system down it will get easier.  


If you have any questions about this post or want to contact me for help when you Buy Foreclosed Homes in Corona or Riverside, go to my website and contact me there.  


Enjoy and Go Make Some Money!

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