Abandoned Properties
– One Of The Best Kept Money-Making Secrets
By Reggie
Brooks
When I began
my career as a real estate investor in 1985, I stumbled across a little known
area of real estate that had the potential to make us a ton of money. This was
an area of the market that went unnoticed by most people. This was the area of
abandoned properties.
How To Profit
From Abandoned Properties
You might pass
these properties on a daily basis, but just never paid much attention to them.
You could be passing up hundreds of thousands of dollars in profits! These are
properties that the owner has walked away from for whatever reason. It could be
a divorce situation, an illness, a death in the family, a job relocation, or any
number of other reasons. Do we care why? Absolutely not! Don’t waste your energy
trying to figure out why sellers do what sellers do.
A $58,000
Profit Right Across The Street
I remember a
young lady in one of my 2 day classes. In the first day of class, we taught a
whole day of unconventional ways to find profitable deals. One of those methods
was how to find and profit from abandoned properties. The next day, the young
lady came to class and told us an interesting story about an abandoned house
right across the street from her house. She said that when she got home from the
first day of class, she put her key in her front door to go inside. Suddenly,
for no apparent reason, she stopped and immediately turned around. Across the
street was an abandoned house. She had unconsciously seen the abandoned house
every time she walked out of her front door, but until now she just never paid
any attention to it. The windows were broken out, the grass was high, there was
trash in the yard, and on and on.
After the
class was over, the young lady stayed in touch with me. I had asked her to keep
me informed as to the progress of her deal. It took her around three months, but
in those 3 months she successfully purchased the property, fixed up the
property, marketed the property, and made a profit of $58,000! By the way, she
had no money, no credit, and no job, but she was still able to make this kind of
profit.
Why Abandoned
Properties?
When you work
with abandons, you have an excellent opportunity to use the best financing in
the world – seller financing. There are several reasons why we prefer seller
financing over conventional financing.
Rarely will a
seller ask to see your credit report. If you have credit problems, it usually
will not become an issue. Many times the seller is completely open to many
creative strategies that will help to eliminate their abandoned property
problem. After all, what does the seller have to loose? His abandoned property
is just sitting there not making any money.
The seller may
have a mortgage to pay on it every month, because he wants to keep his credit
clean. More than likely, he’d like to rent it or sell it but he feels that he’d
have to spend a lot of money to fix the property up before he could market the
property. In the meantime, another month goes by and another mortgage has to be
paid. The taxes and insurance will also have to be paid. Money will still have
to be spent on maintenance and upkeep. The repairs might become extensive, since
the property is vacant and subject to vandalism. The neighbors are probably
complaining about the eye sore. The Department of Building and Safety might have
become involved. This can all add up to the seller having to spend a sizable
chunk of cash every month, which can also represent a sizable headache for the
seller. You guessed it. The seller is probably very motivated!
How Do We Find
Abandoned Properties?
Here’s one of
the easiest ways to find abandoned properties. The first thing to understand is
that the more affluent the area is, the fewer the abandons you’ll find. The less
affluent the area, usually the more abandons you’ll find. I encourage you to
find an area somewhere in between the two extremes. If you keep your eyes open,
you’ll find properties that might have the windows broken out, they might be
boarded up, you might see the grass and shrubs overgrown, you might see trash,
handbills, newspapers and other signs that this property might be a good
candidate for a profitable abandoned property.
Keep a pen and
a pad of paper with you at all times. I teach my students to take different
routes to and from their normal destinations and write down the addresses of any
properties that might be abandon property prospects. This might require that you
leave home a little earlier than usual, but it is certainly worth it if it
brings you just one abandoned property deal.
Using A Little
Known Government Program With An Abandoned Property
Several years
ago, I was taking my aunt to an appointment with a dialysis center when I came
across an abandoned four unit building. This property showed all the classic
signs of abandonment: boarded up windows, tall grass, trash, etc… I wrote the
address down and called my title company as soon as I got a chance. I gave them
the address, and they gave me the owner of the property and the mailing address.
I wrote an offer and bought the property for $82,000. We fixed the property up
using a little known government program called the Rental Rehab Program to
maximize our profits. This program provided a 3 to 5% loan when the prevailing
interest rates were 12% The program also allowed any qualifying tenants to
drastically reduce the amount of their out of pocket monthly rent by going on
the Section 8 Government Subsidy Program after the rehab was complete. The
average wait for the Section 8 Program at the time was 6 to 8 years. This was
truly a win-win deal for everyone involved. We kept the property for a number of
years, putting a positive cash flow in our pockets every month. We eventually
sold the property and made a lot of money.
The Best
Financing In The World
With the
property needing as much work as it did, it would have been almost impossible to
get a conventional bank loan to finance it and, at the time I was in no position
to pay all cash. So, what is the solution? As I mentioned before, seller
financing is the best financing in the world. The seller of the property
financed the entire deal for us.
Here’s the
point: Abandoned properties are one of the best kept money-making secrets in our
industry. They are very good candidates for many of the government loans and
grants that can super charge your profits. Tap into this area of real estate and
watch your profits soar.
Questions? Contact
us at 704-777-REIA
