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5 Reasons Why Probates are A Great Niche to Invest In

Sharon Vornholt
4 min read
5 Reasons Why Probates are A Great Niche to Invest In

Probates can be a great niche to work in. Here are 5 reasons I love probate investing:

1. The heirs are almost always motivated sellers.

People that have inherited a property can be some of the most motivated sellers of all. They rarely want to keep the property. Typically they just want one thing; the cash that is sitting in the property. Once they decide to sell, they move quickly.

I have found these properties usually fall in to one of two categories. Some are nice properties that will be listed on the MLS. The second group, are properties that are in need of a lot of repairs and updates. These are the ones that the heirs will be most motivated to sell to an investor.

One thing to keep in mind is that even the properties that are initially listed, may or may not sell. Heirs often have an unrealistic idea of what they can get for the property. It’s not unusual for me to get a call after the property has been listed for 6 or 8 months. If they aren’t willing to sell at the price I can offer at that time, I always ask if I can keep them on my list; if I can be their “plan B” if the house doesn’t sell. Not one person has ever said no, and I have actually bought a number of houses after they have been listed 15-18 months without selling so you want to keep these folks on your list.

Related:Determining Exactly What the Seller Wants: A Probate Case Study

2. You are often able to get deep discounts on probate properties.

Folks will be willing to accept a deep discount for a number of reasons. Here are just a few:

  • The house needs a lot of work, and they either can’t afford to do the work or they just don’t want to do it.
  • There may be a mortgage on the property. Even if the total amount of the mortgage isn’t a lot, often they simply can’t afford a second mortgage payment. It’s not unusual for the property to have a lot of equity even if there is a mortgage or HELOC (home equity line of credit).
  • One of more of the heirs has an immediate financial need and wants quick cash to solve their problem.

There are so many reasons they will happily sell the property “as is” for a deep discount, but the bottom line for them is that they just want to be done with the estate, put that cash in their pocket and move on with their life.

3. Probates are perfect for “drip” direct mail campaigns.

These folks don’t usually have a time constraint like you would have with a foreclosure, and they all start the process of working on the estate on different time tables. Some executors will be Johnny on the spot and get started soon after the person is deceased. But I have found that often they don’t even begin until a year or more has passed. It is just too painful or too overwhelming for the families.

You can set up your direct mail campaigns so that you have sequential mailings that go out over time. I usually send about 5 mail pieces (one a month), check the database to see if any have sold and start the process over again. I will check again at the one year mark to see the status of the properties. You will probably be surprised at the number of houses that are still not sold. I bought one just last week that had been sitting for more than a year. Now that the family has “decided” to sell, they are quickly finishing the cleanout.

Related: Probate Investing and Your Mindset

4. You can greatly increase the odds that you will get the deal just by simply asking the executor or PR this one question:

“What can I do to help this process along; to make this process easier for you”?

Simply by asking this one question and providing them with a solution will often seal the deal. Most of the time they will tell you that cleaning out the house has been the hard part for them. This job is extremely difficult for most people. If you have ever done it, you know what I’m talking about especially if this was a close relative like their mom or dad. Their possessions represent their life; they were their “treasures”. Having to dispose of all of these things by having a yard sale or donating them can be “gut wrenching”.

If you can finish this job for them once the family has taken everything they want, they will be so appreciative.

5. There is less competition in the niche of probates.

The information needed for probates is easy to get in my area, but I know that isn’t the case in some areas. Here’s the thing; you can turn that into an advantage for you.

Most people are lazy; they simply won’t put forth the effort to go to the courthouse or do some of the other things necessary to work in this niche. Turn this into an advantage for you.

Find out what the process is in your area then figure out how you can outsource this job. Find someone that wants to learn the business, or a person that is looking for part-time work that wants to work on “their schedule”. Think about it this way; if you can get even one deal each quarter and make $5000-$10,000 on each one of those deals, wouldn’t that still be very lucrative for you?

I have found that real estate investing is a lot like other businesses; it’s pretty simple but it’s not always easy. If you are the guy or gal that is a “1%‘er”; that person that always does the thing that others won’t do, you will have success that those other people will never have.

I would love to hear about your challenges and successes with probate investing.

Photo: benchilada

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.