Are You Dumb Enough to Be Rich?

A Smart Real Estate Investor's Secrets Revealed.

courtesy ARA content

the cost of living is higher than ever, there’s weakness in the job market, stocks are in a free-fall and the housing market is in a slump. Sounds like a bad time to be a real estate investor, or is it?

According to G. William Barnett II, author of “Are You Dumb Enough to Be Rich?” from AMACOM Books, exactly the opposite is true. “these are the times smart real estate investors live for. there’s more money to be made in chaos than at any other time, and no other investment strategy has created more millionaires than real estate,” he says.

In the just released second edition of his book, Barnett, who has more than a decade of experience in real estate investing, has added chapters that lay out his strategies for being successful in the current marketplace. the key, he says, is knowing how to decipher not only which markets to invest in, but which neighborhoods hold the key to wealth.

“One of the greatest frustrations I had early in my career was reading about places where great things were happening, but not having the confidence to take advantage of them,” says Barnett, who still regrets not investing in Hawaii back in the late 1990s when the crash of the Japanese stock market sent housing prices into a free fall. “Back then, I told my wife we have to invest in Hawaii. She said, ‘No, we don’t know anything about that market.’ If I had known then what I know now, boy would I be better off.”

Barnett has spent the past decade finessing an investment strategy he calls “Hot Mapping,” which is outlined in the new edition. “Basically it’s a business overlay that you can apply to any market in the U.S. to identify the areas in that market you should be investing in,” he explains.

Here’s a brief synopsis of how it works. Step one is to establish a market’s median price which you can do with the help of resources on the Internet. Next you’ll want to purchase two maps. One electronic, the other a 6-by-6-foot map that covers the town or county you want to invest in. Step three will be to break down the market from a pricing standpoint using color coding.

“Once you finish making your map, pick up the classifieds and start adding pins representing each of the homes for sale. This technique gets you to the point where you can just pick up the phone, call an agent and tell them exactly which subdivision you want to look at and how much you’re willing to pay. You’re in essence equipping the agent to do a great job for you,” says Barnett.

In “Are You Dumb Enough to Be Rich?,” Barnett offers other strategies for making a fortune in real estate, including instructions on how to find and take ownership of troubled properties before they go into foreclosure and how to move faster than your competition when it comes to getting your hands on lists of already foreclosed properties the banks and mortgage companies want to sell.

As for the housing markets Barnett likes best right now, he says number one is Las Vegas, which currently has $10 billion worth of commercial construction going on and will soon have a demand for thousands of new employees. He also likes San Diego, which due to this summer’s fires doesn’t have enough housing to meet its citizens’ needs; and Central Florida which thanks to the Disney empire will always have room for growth.

“Real estate is cyclical. Before you know it, the economy will recover and banks and mortgage companies will once again become more creative in their lending practices. then there will be another string of foreclosures, and smart investors like you will be lined up to help clean up the mess,” says Barnett.

the second edition of “Are You Dumb Enough to Be Rich?” is available for purchase at bookstores nationwide or visit www.amacombooks.org for more information.

Types of foreclosures

Judicial foreclosure
If no "power of sale" is included in the mortgage document, a state may allow a property to be sold by court order- provided that sufficient public notice is given. the mortgagee (lender) can enforce his or her right if a morgagor (borrower) defaults in any requirement of the mortagage. the mortgagee can enforce this right by accelerating the due date of any remaining monthly payments. He or she may also have an attorney file suit in court to foreclose the lien of the mortgage. If the court orders that the property be sold, a public sale is advertised and held. the property is sold to the highest bidder.

Nonjudicial foreclosure
When a power of sale is included in the mortgage document or trust deed, a mortgagor or lender's trustee has the right to sell the property without involving the court. the trustee at the county recorder's office records the notice of default. the property is advertised stating the amount due and the date of the sale (for the intention on publicizing the sale not to notify the mortgagor). the property is then sold and a notice of sale or affadavit of foreclosure is filed.

Strict foreclosure
Notice of foreclosure is given to the mortgagor. the lender then prepares and files papers in the court to establish a time period during which the balance of the mortgagor's debt must be paid in full. If the payment is not made within this period, the court waives the borrower's equitable and statutory rights and full legal title is given to the lender.

FYI
Courtesy thefreedictionary.com

Statutory redemption is the right of a mortgagor to regain ownership of property after foreclosure. Statutory redemption gives a mortgagor a certain period of time, usually one year, to pay the amount that the property was sold for at the foreclosure sale. If the mortgagor pays all of the foreclosure sale price before the end of one year after the foreclosure sale, or within the statutory redemption period, the mortgagor can keep the property.

Equitable redemption is the right of a defaulting mortgagor to reclaim property by paying all past due mortgage payments anytime prior to foreclosure. Statutory redemption, by contrast, begins at the point of foreclosure and requires that the defaulting mortgagor pay the full foreclosure sale price. Equitable redemption is a common-law concept, which means it exists as law in the form of judicial opinions. All state courts have recognized a mortgagor's right to equitable redemption.

Foreclosure Investment
courtesy wikipedia.org

Introduction to the foreclosure market
In real estate, foreclosure is the termination of the [equity] of redemption of a mortgagor or the grantee in the property covered by the mortgage. Foreclosure investment has become more important recently in response to skyrocketing real estate costs. the average person nowadays needs to investigate all avenues to purchase real estate at a 'reasonable' cost. By investigating the foreclosure market, the investor can get a better grasp of the real estate investment arena. Depending on the type of foreclosure proceeding, the sale may be administered by the courts (Judicial Foreclosure) or by an appointed trustee (Statutory Foreclosure). Proceeds from the sale are used to satisfy the claims of the mortgagee primarily, with any excess going to the mortgagor. Anyone may bid on properties sold at a foreclosure sale. As a practical matter, however, most properties are acquired by the lender, often for the amount owed on the foreclosed loan.

When interest rates rise, home owners with variable interest rates often become over extended, providing opportunities for foreclosure investment professionals to obtain investment properties at depressed prices. the most common reason for foreclosure is dissolution of a marriage. the next most common reason for is a failed business venture. Foreclosure investing can provide favorable returns. However, there is an awful lot to know in order to avoid the problems that can occur; thus, it is not recommended for beginners to the market.

Stages of foreclosure
the foreclosure process begins when a financially distressed homeowner fails to make a loan payment and is served with a summons from his or her creditors. After service, papers will be filed with the county clerk's office and be made a matter of public record (in some areas the place where deeds and mortgages are registered may go by a different name, such as the office of the land registrar). This notice is usually known as Lis Pendens, which is Latin for "pending legal action." At this point, any attempts by the homeowner to borrow from public credit sources will be met with a negative response. On completion of the publication process, the foreclosure action will be permitted to proceed and the owners have a limited amount of time to pay up, sell, or make other deals with creditors. If none of these actions are taken, a forclosure sale will take place. If no one bids the amount owed, the property reverts to the lender and becomes an REO (real estate owned) property held in inventory by the lender. Experienced foreclosure investors may work in all of these various stages, but the possibility of making a transaction with the homeowner is no longer possible after the property is an REO.

Why investing in foreclosures can be difficult
Often, the home owner in foreclosure is in a financially difficult situation, and in addition to the calls from creditors, the home owner may also be inundated with calls from other investors, mortgage brokers and real estate agents. It can be difficult to find a home owner who is willing to work with you, and who is in a situation where you can help. In addition, rejection can run high as foreclosures are stopped, doors are slammed, and telephones are hung-up on you.

Steps to take to get started in foreclosure investing
One of the key components of getting started is education, making sure that the information studied is state specific. Depending on residence, much of the national content may not apply in a particular state or may be illegal. After understanding the specific state's foreclosure process the next step is to find a foreclosure data provider who can supply the latest foreclosures as they start in the state. While foreclosure information for the most part is public record, working with a foreclosure data provider can save a lot of time. With a fresh list of foreclosures, the next step is to contact home owners in foreclosure and begin working with them directly to stop the foreclosure proceedings.