How to Make Money Without Money In Preforeclosures
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One of the easiest ways to get your hand in the foreclosure market is to buy a home that has a first mortgage that is substantially (30% or more below market value) less than the home value and a second mortgage for some or all of the difference. You can buy or pay off the second mortgage for a discounted price in many situations, and sell the house for an easy profit with very little investment or effort.
Let’s say that you buy a home that has a $210,000 first mortgage and a $75,000 second mortgage, and the home is worth $285,000. When you go to the lien holder or bank to buy that second mortgage, you can often get it at a steeply discounted price. In cases where the second mortgage is foreclosing (not the first mortgage), if you win the bid on the second mortgage at the auction, you can still get a great deal.
For the sake of example, let’s say that you paid $7,000 for the second mortgage. That means that the homeowner now owes you $75,000, and $68,000 of that is profit for you when they refinance or sell. You can even foreclose on that mortgage if you really want to play hard ball. I personally don’t like throwing people out of houses, and I won’t do it, but if the property is vacant and the owner is nowhere to be found, I’ve got no problem “backing in” to the deal through the financing. Best part is, no other Investor even knows about these deals, because they’re still Investing the old fashioned way!
These loans are easy to sell because they can be funded by anyone. The house is worth $285,000 and you only need to prove that the $210,000 will be paid off immediately. You don’t need to know any special tricks or secrets to find a lender to do the deal, because it should be a simple, quick sale. You’ll make money for doing almost nothing at all, which is pretty cool. Even if the owner refinances the home or you help them get a loan modification, you’ll still get your $75,000 just for buying the second mortgage and becoming the bank for a minute.
There are those that you can help that truly deserve it. These are good people who faced bad events in their life through no fault of their own. However, there are also some owners out there who had no intention of paying their mortgage or perhaps even committed fraud to get their home and just want to unload their problem onto someone else. Don’t get involved with these people. They’re pretty easy to distinguish from the real homeowners, so you should watch for this when you get into preforeclosures.
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