Would you like to become a foreclosure millionaire? While the gurus on TV make it seem like a cake walk, the reality is that it is an extremely complex business with a lot of moving parts, a lot of details, and a lot of hard work. The payoff, however, is enormous in the long run.
Whether we are in a real estate boom or a real estate bust at this moment in time, foreclosure real estate investing is an extremely profitable business model that can yield returns on investment many times what you put in. Of course you will need to fine-tune your investing and your exit strategy, depending on whether we are in a buyer?s market, a seller?s market, a recession, or if the market is hot.
To become a foreclosure millionaire ? to make 1 million dollars net profit, investing in foreclosures is actually a very simple process, when you put the numbers into perspective. Allow me to illustrate below:
If you do your homework before investing in each foreclosure deal that you do, you can expect to make a net profit of $20,000 for each real estate deal that you do, on average.
$1,000,000 / $20,000 = 50 deals
That means that in order to make 1 million dollars net profit in your lifetime, you would have to do about 50 deals. What does it mean to ?do a deal?? It means to acquire a foreclosure property or gain a controlling interest in it, and then ?flipping? (fixing it up and reselling) it for profit.
On a $200,000 house, $20,000 equals about 10% of the value of the house. Is it possible to make more or less than 10% profit on a deal? Absolutely. This number represents an ?average?.
So, getting back to our example above, you would only need to get into and cash out of 50 deals in your lifetime in order to accumulate 1 million dollars. And you would not need to invest any of your own money into the deal if:
- You partner up with a more experienced real estate investor who has money
- You borrow money from a friend or a relative
- You acquire a hard money loan
If you could do these 50 deals ? once a week ? every week for an entire year, you would be sitting on top of 1 million dollars worth of equity waiting to be cashed out.
If you are in a slow market, simply ride out the next several weeks or months by renting out the property, until the market picks up and you are able to sell the property.
How on earth are you going to be able to handle 50 properties? There are thousands of real estate investors out there who are willing to invest cash into deals. If you can bring a deal to them and promise to do the work in exchange for splitting the profits, you should have no problem finding multiple investors to fund each of your deals. For some reason, money seems to be the biggest obstacle in people?s minds when it comes to getting started investing in real estate. Does it take money to make money in real estate? Yes, absolutely. But does it have to be your own money or your own credit? Absolutely not!
Now, to find these 50 deals, you cannot just buy the first 50 foreclosures that you find. Not every property in foreclosure is a deal worth investing in. The numbers have to make sense. The key thing is to acquire properties such that the total amount that you invest into the property (mortgage payoffs, repairs, paying money to the homeowners, getting caught up on property taxes, carrying costs, closing costs, etc.) should not exceed 90% of the fair market value of the house, so that you can make a decent 10% net profit. A good rule of thumb is to ensure that the total payoff balances of all mortgages on a property does not exceed 70% to 75% of the fair market value of the property, so that another 15% can be devoted to repairs, closing costs, realtor commissions and carrying costs. Closing costs can run up to about 2% of the sale price of the house, whereas realtor commissions can cost you 6% of the sale price. So the remaining 7% will be on reserve for any repairs and carrying costs of the house while it is up for sale. (Of course the carrying costs can and should be offset by rental income.)
Foreclosure real estate investing is a numbers game. For every 100 foreclosure leads that you research, you can expect to find only 10 prospects worth investing in. Out of those 10 prospects, you might further refine your search and find that you are only able to make offers on 5 deals. Out of those 5 deals, only 1 might actually go through. So your success rate should be about 1 deal for every 100 fully researched leads.
So, by extrapolation, that means that to do 50 deals in your lifetime, you would need to research 50 x 100 = 5,000 leads.
Out of those 5,000 leads, only 500 will be prospects worth investing in.
Out of those 500 prospects, you might only make an offer on 250 of them.
Out of those 250 foreclosures that you make an offer on, only 50 of them might go through.
Wow. When you put the numbers into perspective like this, it sure makes becoming a foreclosure millionaire a lot more attainable, doesn?t it?
To make 1 million dollars in real estate, all you have to do is:
Research 5,000 leads.
Narrow them down to the 500 best candidates.
Make on 250 of them.
Out of the 250 offers you make, a whopping 200 of them will be rejected or will fall through.
Only 50 of those offers will be accepted.
And by the time you flip all 50 houses, you should become a foreclosure millionaire!
Kick start your foreclosure investing with these 7 steps to mastering foreclosures [http://www.ForeclosureTraining.info].
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