I am purchasing my first Multi-family property this year. I currently live in NYC where properties are far too expensive. However i have a few investor friends who i know purchase strictly foreclosures or pre-foreclosure homes. Can somebody give me a few pointers or steps on how the foreclosure/pre-foreclosure path works when trying to purchase properties at a deep discount?
Foreclosures are usually purchased in online auctions conducted at the county level. They are typically all cash affairs where you have to pay in full the next business day, with a 5% deposit paid the day of the sale from pre-deposited funds (in my state of Florida).
PRe-foreclosures can mean a lot of things... but generally trying to reach people before their house goes to auction. The typical angle goes something like this: “I can keep your house from being foreclosed on, plus get you money back out of your house and close within 30 days.... would that be of interest to you?” You sign a contract to buy their property and then assign it to a qualified investor who will pay you a finder’s fee in the form of an assignment contract. I typically pay around $10,000 on a good wholesale deal to the wholesaler. Alternatively you can sell the house yourself, or keep it if you have the funds to afford it. It’s usually hard up people who take advantage of those offers...so you are often dealing with sad situations....divorce, death of a spouse, etc.
I find I usually get properties about 30-40% below market buying on the foreclosure market, but with the caveat that you don’t get to inspect them at all, so you are taking a pretty big risk on condition (other than what you can see from the outside typically).
I would recommend trying to connect with wholesalers in your area and get on their email list. They will email,their list when they get a new property under contract.
Thank you for taking the time to help Randy. This was much help!