Investing in Real Estate, 7th Edition

6

PROFIT WITH FORECLOSURES

“Buy properties for pennies on the dollar,” so say the self-proclaimed gurus of the easy money foreclosure game who want you to buy their seminars, mentoring programs, courses, books, and audio CDs. “Just learn the foreclosure secrets that will bring you the riches you deserve.” Certainly, the news is filled with the sad plights of millions of people who can't (or won't) pay their mortgage loans and other debts.

But are foreclosure gurus correct? Are foreclosures really the mother lode of real estate bargains? Gold nuggets lying around for anyone to pick up with ease? Hardly. When you are propositioned with stories of easy money (foreclosures or otherwise), ponder these questions: “If a guru knows how to make so much money with so little time, effort, cash, credit, or risk, why is he telling you, me, and millions of others who will compete with him for these deals?” Does he remain ignorant of the fallacy of composition—that fundamental axiom learned by every student of Econ 101?

In the real world, earnings from foreclosures—like earnings from other property investments—will not just fall into your lap because you learn a few secrets and tricks of the trade. To profit with foreclosures— and at the same time alleviate risks—you must understand the foreclosure legal process, diligently research markets, intelligently value properties, prepare reliable cost-to-cure estimates, and develop your powers of persuasion.

It is true that today's market includes an ...