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.
With foreclosure investing it is very probable that you will have to interact with an unpredictable seller. In many cases, these sellers are losing their homes because other finances have gotten out of control. The sellers feel that they are being forced out of the home due to circumstances beyond their control. With a foreclosure, the seller will need to leave the home in order for the investor to help in the best way. The investor will consult with the seller about how to leave their home behind in a way that is least damaging to the seller’s credit. In many cases, by the time a distressed seller allows an investor to help, the situation is so grave that saving the seller’s credit is the best possible scenario.
Since foreclosure investing causes you to deal with potentially emotional situations, I recommend that you avoid beginning any real estate investing career with it. While some new investors enjoy the possibility of helping a family through a difficult time and saving their credit, their is no doubt foreclosure investing is not for the weak at heart. Even real estate investors who have been investing for a long time, prefer to avoid this type of investing due to the very emotionally draining aspect.
Probate real estate investing by its nature involves dealing with people who have inherited free and clear properties. They are usually willing to deal with you to get the property sold. Many times, heirs are in need of cash, so these deals can be done quickly since the heir wants their money right away.
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.
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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