With so many infomercials, internet ads and television ads touting the virtues of foreclosure investing, it’s easy to see why a new investor would be drawn in. New investors be ware though. While foreclosure investing is quite lucrative, you must deal with a very difficult seller. Often times the seller is very emotional and unwilling to let go of their property. On the other hand, another method called probate real estate investing is just as lucrative and eliminates the emotionally draining aspect that foreclosure investing carries.
If you have not ever heard of investing in probate properties, you might think that it is just like investing in foreclosed homes. While both investing methods allow you to purchase properties at substantial discounts to market value, it is the process of acquiring the properties that is very different. This slight difference in the two methods can be the deciding factor in your success or failure as a new investor.
In the case of foreclosure investing, you are likely going to deal with a very unwilling seller. In this sad situation, these folks are losing their homes due to financial distress in their lives; they do not want to leave their homes and probably feel as though they are being forced out. In most cases, the homeowner is required to leave the property behind so that the foreclosure investor can help them most effectively. The homeowner is guided through losing their home in a way which will ease the impact to their credit. Sometimes the financial situation has deteriorated so badly by the time an investor reaches a homeowner in default, saving their credit is the best they can do.
As you can see, foreclosure investing involves assisting an unwilling and, often times, emotionally charged situation. If you are not a compassionate person, you should consider avoiding foreclosure investing. Even veteran real estate investors shudder at the thought of making a profit at the expense of putting a family out of their home. It’s emotionally draining on both sides.
With probate real estate investing, you have a very willing seller. In all cases, you are dealing with someone who inherited a property. The house represents free money or a windfall to them. Since, they did not work for 30 years to pay off the home. This new heir just wants whatever money they can get and they want it FAST.
It is a fortunate matter for you that you are involved with a person who is cash strapped. The heirs see the probate property as a means of paying off debts and death taxes that is locked away from their reach. Did you realize that death taxes can be substantial; as much as 55% of the estate value? Estates that were not set up properly to avoid such a huge tax slap have heirs scrambling at the homeowner’s death. Heirs have a vested interested in handling things very quickly.
In case you did not know it, death taxes must be paid in a fairly short amount of time after the homeowner dies. When death taxes go unpaid, interest and penalties can pile up at a furious pace. Since the heirs do not want to see their inheritance go to service a tax bill, they are very willing to deal with you. They are cash hungry and you can help them.
While it may have seemed that foreclosure investing is the same as probate real estate investing, the two vary greatly when it comes to getting the property as an investment. Foreclosure investing draws you into an emotionally charged environment where the outcome is unpredictable. On the other hand, probate property investing involves picking the best properties from a line of ready and willing sellers and that’s a whole lot easier for a beginner or a long-time investor.
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