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Hi,

I'm looking to buy my first home, but instead of just buying to buy, I want to make a profit out of the situation. I feel like my best chance here is in the pre-foreclosure market because I have enough cash to purchase the homes I am looking at (or should I be looking elsewhere?). I live in the Metro Detroit area (Macomb County), so there are plenty of fresh foreclosure listings every week.

I would ideally like to pick up a property for 50-60% FMV, fix it up, and live in it while trying to sell for a profit. If I do sell it, great, I made some extra money and gained a lot of experience. If it don't sell it... I will get the enjoyment from living in it and will get the benefit of not having to pay taxes on the profits that go into my second house when I do finally sell.

I have been scouring the foreclosure listings every week, but am kind of stuck as to what exactly I should be looking for. I've read tons of real estate investing books over the past three years, but don't have much real experience. What makes a potentially good pre-foreclosure deal?

Mortgage balance at or above FMV? (get the deal from the lender)
Mortgage balance 20% below FMV?
Mortgage balance 50% below FMV? (get the deal from the owner)
Mortgages with high interest rates? (don't care about their credit?)
Mortgages with low interest rates? (want to preserver their credit?)

If I am dealing with the lender, it seems pretty cut and dry. I have read a lot about short sales (although I still have a lot to learn) and I think I would be able to pull one off. What are the typical success rates of them? Are most banks willing to take a huge cut so they can avoid the foreclosure process? On what types of properties would I have the best chance of success?

However, if I am dealing with the owner, how do I convince them to sell me their equity for 50 cents, 30 cents, 20 cents, or even 0 cents on the dollar?

I would love it if anyone that has successfully bought pre-foreclosure properties could chime in with some advice.

Thanks!

Also, yes, my market is in a huge slump right now. I have been monitoring it, as you suggested, for the past 2 years as well and it seems like it is only getting worse.

I am waiting to see signs of an upturn. I talk to realtors in my family, watch foreclosure rates, and watch housing inventory rates. Anything else I should be looking out for to spot a turnaround?

I don't think jobs are coming back anytime in the immediate future, so I feel like I could be waiting a very long time. It would probably be smart to move to a better market, but I'm not willing to sacrifice the close proximity to most of my family.

Thanks for the replies.

I am actively looking for fixer-upper houses, browsing the "raw data" from the local MLS board every week, but I'm not finding any standout, amazing deals.

About two years ago I tried doing the whole foreclosure/preforeclosure thing, going through the "Legal News" paper, looking up outstanding mortgages on properties, and contacting the owners who were in a purchasable situation. I didn't get any responses though :-(

I also tried to get my foot in the door with some REO properties, but found that many of the banks want just as much (or more) as private sellers.

Any suggestions on which direction I should go for "hunting"? And any tips from your experiences on how to increase my chances of success?

Hi!

First of all, I am so glad to have found this forum. I have been reading real estate investment material for the past 3 years just out of interest in the topic, but have never actually made any deals so far. This seems like a great place to read practical and current real world advice.

Now onto my question... I would really appreciate any guidance you could offer.

I am 21 years old and am currently renting. I have enough cash to purchase a home outright, but would probably prefer to go with the traditional down payment and mortgage.

My current goal is to simply buy a house to live in as my primary residence, increase its value, and sell it in two years (or so) for at least some profit that can be rolled into another house. I am defining profit as money left over after all related expenses over those two years (mortgage, improvements, maintenance, taxes, insurance, heat, electricity, water, fees, etc).

I am not married, have no children, and have no animals. The size/features of the house do not matter so much to me on a personal level, I am more concerned with their resale value.

I live in Michigan, the Metro Detroit area of Macomb/Oakland county and would like to stay in this area.

The main thing holding me back from jumping in and purchasing a house is the fear of losing money. I really have no need to buy a house (and incur all of the extra expenses), just a desire to. And if I am going to do it, I want to make sure it is profitable rather than just a money pit.

Is this task possible? How easy would it be for a beginner like myself to achieve this goal? What should I be looking for? How should I be looking for great deals? How do I know if a house is a great deal and has the potential for enough profit?

Any personal advice and/or pertinent reading material that you could point me to would be great.

Thanks!