New Investors Often Find Huge Success With Probate Real Estate.
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.
Foreclosure investing and probate property investing may seem exactly alike, but there is a slight difference between the two. They both allow you to buy properties at a discount to current market prices, but one kind of investing is less difficult than the other. This small difference could be the determining factor of your success or failure especially if you are new to real estate investing.
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.
Foreclosure investing requires dealing with a very unwilling seller and, potentially, a very emotional situation. This method of investing is not a recommended way to begin any real estate investing career. For that matter, even if you are a seasoned real estate investor, you should ask yourself if you can handle dealing with watching a family be put out of their home so you can make a profit.
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.
Did I mention these taxes have to be paid in an extremely short period of time after someone dies or penalties start to pile up? So, if 55% tax looked daunting wait until those penalties and interest start mounting up. By comparison, this method of investing is far easier as you are dealing with motivated sellers in nearly all cases. They are willing to listen to any reasonable offer especially if you have the ability to settle very quickly and get them their cash.
Upon initial examination, foreclosure investing seems to be just like probate real estate investing. However, I hope you were able to see that they are very different in terms of the level of effort necessary to acquire the home as an investment. Foreclosure investing requires a tremendous amount of compassion and relationship building, whereas, probate property investing requires you to sort out the best properties from all of the willing sellers, which is much easier for a new or veteran investor.
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