Our First Foreclosure Deal: $95,000 Profit!

John and I have been expanding our real estate investing business into foreclosure homes. This is the best deal we have done since we started:

We had a guy call us about two months ago. He was in foreclosure, and his wife didn’t know about it (and he wanted to keep it that way). He wanted us to bail him out to the tune of about $10K. He was also the personal representative of his dead grandmother’s estate.

Instead of transferring his personal residence to us (which was very over encumbered), he transferred a duplex out of the estate (which was owned free and clear). We gave him a lease option back with the understanding that he pay us rent on time and pay taxes.

Because he called us on a Friday afternoon, and his residence was going to the auction block Tuesday of the next week, we did not have time to purchase title insurance. We had an O & E done though, and all they found was about $2K in back water liens. We did the paperwork ourselves and bought the property.

Part of the seller’s agreement with us is to pay any taxes on the property. When we went to refinance the duplex, the title company did a further search and discovered that they owed back taxes since 1985, and that four separate tax lien certificates had been issued and purchased by another investor.

The total was about $20K owed. Because they had not told us about the taxes, and they failed to pay the taxes when we sent them a demand letter, they forfeited their lease option agreement with us. We paid the taxes with the refinance money, and we got to keep the property.

We refinanced at $50K and paid out $20K on liens and recovered the $10K to the seller. We kept $20K cash from the refi to make us more liquid for other deals. The property is worth about $125K, which leaves us $75K in equity.

This one is a keeper as it will give us a nice cash flow. We get $600 per month now in rent (the place is occupied), and we can probably up that to $1,200 per month with some repairs. The current rent is way under market. We pay $415 per month on the refinance. Not bad for our first foreclosure deal!

Our success on this deal was using strategies what we learned from Joe Kaiser about two months ago. Joe taught us how to find the deals, what to look for, and strategies for doing foreclosures. This is just what we needed to round out our real estate investing education.

By CREOnline Contributor

A content contributor to the original CREOnline.com.