Probate Investing
Investing in Real Estate for flips, long term holding or just for tax benefits is nothing new. I have been doing this for 35 years. We all know you can leverage with Real Estate and earn fantastic returns along with tax benefits. The difference and what I want to talk about is investing in a special niche of Real Estate which most stay away from. This real estate niche is Probate Investing.
I have been Probate Investing since 1987. Let me explain the process and why it has been so lucrative but for so few. When a person passes, if they don't have a living trust then their estate must be probated in order to pay off creditors and transfer the assets to the rightful heirs. This is a time consuming process which is very hard on the family and on average runs for 7 months plus.
Now, the real estate in an estate is usually the biggest asset and is going to be sold to settle the estate and disburse the net dollars to the heirs according to the will of the decease. Sounds simple doesn't it but in reality this process is the most stressful and time consuming event in most people's lives when they are the Executor of an Estate. The responsibility the Executor has is almost unbelievable especially when this person most likely has never had to do anything like this. There are time lines and requirements they must adhere to, assets to first find, then appraise, manage and finally disburse to the heirs. There is limited help from the Estate Attorney representing the family as most tasks are handled by the Attorneys Para-legal and the Executor is usually kept in the dark. I have seen this predicament a common denominator with Executors in probate Investing.
There are two processes in Calif one may probate under. The old law is a dinosaur and basically handcuffs the Estate as far as the Real Estate to be sold is concerned from attracting only Wholesale buyers. The other process is the done under the Independent Administration of Estate Act which allows the Executor to treat the real estate to be sold like a regular home sale with a few exceptions. A much easier process and also enables retail buyers who have interest in Probate Investing to bid. I could go on and on regarding this process but I think you can understand. States other than Calif will have a process equal to or less than Calif's Probate process so once you understand Calif's Probate process, it's usually just a small adjustment for a different State. During the 90's most estates where processed under the old probate process in my area and in my opinion it was to keep any liability off the attorneys for allowing a property to sell to cheap with a possible complaint later on form the heirs. There is really no other reason to go thru the old court confirmation process when selling a home in probate other than this. In today's Probate world, probably 50% are going thru the I.A.E.A which is where we want to be but many are still being probated under the old process.
For those in the know, you can purchase probate property early in the process and control the sale. I can dictate which probate process the sale will conducted under in my offer and I'm usually the only one approaching the Estate. I'm there the week the probate file is opened at court which is before most tasks have been completed. This has produced many wholesale buys for my investors and I over the years and here is the reason why I love Probate Investing. I have also earned thousands as a Probate Agent helping families sell retail. This has really added to my overal real estate income over the years.
Executors want the probate real estate off their plate. They are worried about a vacant property being vandalized, maintence to be performed, and in many cases they have moved into the home during this process. What we bring to them is peace of mind by buying the probate real estate and taking the biggest head ache off their shoulders. Also, this is Free money and even though they are selling to me at a discount, the proceeds look mighty good to them and the heirs not to mention the biggest asset now in cash. Buying probate property with the right game plan and knowhow can mean $50K flip profits (90 days) if you know what you're doing. Plus many don't understand the Probate process or options so stay away. Unlike foreclosures there are no lists which tell you which properties to approach. For a Probate Agent this can be a six figure earning opportunity per year.
I also love Probate Investing because we don't purchase blind like many foreclosures plus the properties are usually in great shape as it's not a distress sale. For 22 years I have enjoyed probate investing and it still amazes me today the majority of my fellow agents and investors shy away. I'm not complaining...
In my opinion Probate Investing is the best opportunity to purchase single family and 2-4 unit real estate at wholesale prices and flip. This can also be a great way to accumulate rental properties buying with a 15-25% equity position the day you close for long term investing. Probate Agents can represent investors and end user buyers for Probate Homes and become top producers.
For you Real Estate agents Probate Real Estate is a great way to increase your yearly commissions just listing and selling probates and providing help to the Executor in selling. I have kept busy from an investor and agent standpoint working probates. In fact through the 90's I worked about 10-15 hrs per week and earned more than my real estate practice paid me working 60hrs per week. Now in 2009 I have added the retail side (listings and sales) since I have a team to spread the work load and wealth.
Anyone interested in Probate Investing should research this real estate niche. www.probate-realestate.com
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