Buying Real Estate for Pennies On The Dollar

In this article I will show you how you can buy property for pennies on the dollar. I will first explain why the real estate market has fallen so dramatically. This will help you to understand why we can find these amazing deals in today's market.

How I learned my Lesson

Well it has finally happened. The bubble has burst and there is blood on the streets. I can remember the entire ride. I guess about six years ago or so I was renting a house in Van Nuys California looking to buy my first house. I remember looking in the recycler news paper for (FSBO) for sale by owner ads. I saw houses listed for 180k - 190k in my neighborhood. At the time those prices seemed ridiculous. Especially for a 1200sq' house in a barely decent part of town. After much floundering I decided to hold off. What a mistake that was. Three years later those same houses were selling for 500k and I missed the boat. Lesson learned.

Why the bubble burst

What happened to the Real Estate market was really inevitable. You see investors on wall street were basically looking for high interest returns on their invested money. They were able to get these high returns by buying mortgage backed securities from various lenders. Because they were paying so well for these securities the lenders couldn't make new loans fast enough to sell to the investors. In order to create more loans to sell they had to make it easy to qualify for these loans. So now you have individuals with poor credit buying houses with little or no money down. Throughout most of the country the value of real estate was rising so fast that there was never a problem with these individuals not making payments. If they were short on cash they would just refinance. Take out enough cash from their equity to buy some nice things and make payments for another 6 months. Well, this went on for about 3 years. Everybody was happy. The investors were getting a great return on their investments. The lenders were making new loans charging points on new refinances. The consumers were using their equity to buy BMW's and Rolex watches. A win/win/win right? Wrong!!!

What happens when you lend someone with poor credit 400k and they run out of equity? A mortgage crisis that's what. The value of real estate began to decline and the actual value of property began to be realized. Now people that truly could not afford to make their payments could no longer refinance and get cash to pay the bank. So the bank forecloses. The problem was that it wasn't just one family in trouble. We're talking about millions of homes and hundreds of billions of dollars. That's a problem.

Banks are in Big Trouble

So many people are in trouble with their loans that the banks cannot even keep up with all of the foreclosures right now. You seen banks are not in the business of holding property. They are in the business of lending money. Every additional piece of property that a bank holds is that much less money that they have to lend out. This means a great opportunity for people that are motivated and want to be rich. I'm guessing that means you. There are insane deals to be made right now. Banks are selling properties for pennies on the dollar.

Finding Deals

A great way to find these deals is simply to go to a Real Estate office and tell them that you are looking for bank owned properties to buy. They should have a list for you that is several pages long with addresses and prices right on the list. You can also Google "bank owned properties" or "REO" online and look through specific banks websites to see what they have available. Next you want to pick some of the properties that are in your price range. Copy the addresses. Then visit a website such as www.zillow.com . Put in the property address and you can check on comparable sales in the area. This will give you an idea of what the property is actually worth. When you find a property that is worth a minimum of 3 times the list price you can make an offer. Make sure that you visit the property with a contractor to see how much fix up the property will need before you actually close on your deal. You don't want to get stuck with too much rehab work as this will kill your deal.

At this point you can either hold the property with a renter or attempt to flip the property for a quick re-sale. My advice in the market would be to hold and rent it out.

This is just one technique. There are many more ways to make a ton of money in this market. I hope this article has helped and given you some ideas for wealth.