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3 Foreclosure Deals = Over $100,000 in Profits!

by Gordon Thomas   

Let me start by saying that I paid $3,400 for a "class" in real estate investing that turned out to be nothing more than a 30-minute per week phone call covering the very basics. Thankfully, the trainer mentioned several websites for self-study. CRE Online has been worth well MORE than my initial costs. Thank you for your complete guidance.

My "maturation" began in January 2004. My wife and I bought a house at foreclosure for $68,000 with conventional lending. (You know, 20% down, etc.) After Repair Value (ARV) = $104,000. Expected repairs of $15,000. (Financed that, too, with home equity.)

Five months of doing all repairs myself--I mean walls knocked out, electric switches moved, floor joists and rims replaced, insulation installed, tubs/toilets replaced . . (I'm stopping there as I shiver from the wretched memories.), and I cleared a puny $13,000 after all costs. (And by means of temporary insanity, I found joy in the "triumph.")

The next house was pre-foreclosure purchased at $69,500 with 10% down. (The lender was "gracious" enough to allow 10% in sweat equity.) ARV: $96,500. The first day with a sign in the yard, an eventual lease option buyer stops. Next day, a signed contract with $2,700 as lease consideration at $675/month and $210/month cash flow.

They are still leasing (21 months), but intend to buy within next few months on VA funding for $87,500 (Oh, yeah. Another brilliant move on my part. I gave them a $100/month credit for on-time rents the first twelve months, then reduced it to $75/month, 'cuz I'm a meanie).

Anyway, a $30,000 payday is on the horizon (with only $18,000 taxable on long-term capital basis including lease consideration)!

I've operated at this level of "business evolution" for a little over a year. Our home equity has paid for our LLC ventures to the balance of $45,000 until five months ago. The company sold one of two simultaneously-bought bank REOs (with a lease in place) to an investor to decrease that balance.

The slate was wiped clean when our most recent foreclosure purchase was burned to the ground ten days after we recorded the deed. The prior lender did not extricate the prior owner, so we served him notice to vacate or be charged with criminal trespassing after, coincidentally, ten days passed.

Fortunately, all insurance was in place. After all investigations of property and paper trail, we received a full settlement of $133,000 and came out ahead on the deal about $50,500. Three weeks later the land was sold for another net of $13,750. Quite a windfall, and yet a bit dissatisfying since an arson pattern was found and the guilty party could never be arrested!

We realized a blessing and that has made me redouble my studies, specifically in regards to the aspect of financing. I have been burning up the pages of CRE Online to learn strategies to keep our money in our pockets and to defer gains as able. Two years after starting in this business, there is STILL so much to learn.

After being logged into this website for twelve hours over the past two days, look what I can do! We have an upset bid that will prayerfully go final tomorrow (May 1, 2006--May Day, no way!). It's a single-family house, all brick at $79,000 with $1,000 in repairs and landscaping that is worth $123,000.

I'll check local title company/attorney for knowledge of any hard money lenders. I already have a group offering to do 100% financing, but competition is good, right? I'll want minimal closing costs and repairs rolled into loan. $86,100 would be 70% loan to value (LTV)--a very favorable position for the lender, and I walk with maybe $3,000 in hand and another $37,000 potential income.

Oh, yeah! An intangible: A contractor wants to buy/lease a sign easement at the corner of the lot for the 20+ $160,000 homes going in behind the property! I wonder what that might cost and what those homes will do to the property value? I'm smiling, of course.

Please, don't give up on your dreams and arm yourselves for success by ingesting the wealth of knowledge provided by CRE Online. (I'm off to reabsorb information about discounted loans now.) God bless everyone and all your endeavors!

 
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