When the agent asked us what we were prequalified for, this was our response (and will be yours). We told the agent that we were real estate investors. If the property met our parameters, we had the financial resources, along with our money partners, to buy the property.

We set up an appointment with the agent and the seller. We made the foreclosure options presentation. At the end of our presentation, the seller said he would like to sell us his property. We offered the seller no money down and agreed to take over payments on the loan and make up the $3,000 in back payments. The seller accepted our offer. The seller would pay his agent the real estate commission.

We did not have to qualify for a new loan. We did not have to qualify to take over the sellers VA loan. We did not have to come up with a down payment. We made an offer that worked for us. We let the seller decide whether to accept our offer. We and you may not have accepted our offer. Why the seller accepted our offer was the sellers business.

Then Get a Buyer We now had a property available to flip. Only by making an offer can you start the process of flipping a property. We flipped the property for $139,000 within two weeks to a retail buyer who was going to live in the property. Why did we flip the property for so cheap a price? Our strategy is Quick Cash. Could we have waited and perhaps gotten a higher price? Yes, but our Quick Cash strategy embraces the principle A bird in the hand is worth two in the bush.

The buyer was going to assume the VA loan on the property. The buyer was actually a veteran. He was going to use his VA eligibility to assume the loan. The buyer was very happy to get a good deal. The seller was happy because he was out from under the foreclosure with no deficiency judgment hanging over his head. We were happy because we had made $7,000.

Our Profit

Sales Price Purchase Price Back Payments Profit

$139,000 $129,000 $ 3,000 $ 7,000

Example 2

Buy the Foreclosure First We found a three-bedroom, two-bathroom, single-family home with a pool. The property was in foreclosure. The lender had sent the first formal notice of default letter. The sellers were in a panic.

The retail value of the property was $210,000. The first mortgage on the property had a remaining balance of $155,000. The sellers were $9,000 behind in their payments. The sellers equity position was $46,000.

We offered the sellers $10,000 for their equity in the form of a promissory note secured by a second trust deed on the property. The promissory note was a straight note for three years. This means there were no payments until the final balloon payment of principal and interest at the end of the three years.

We also agreed to pay the $9,000 in back payments and reinstate the loan. The total cash out of our pocket was $9,000. Remember, the $10,000 we offered the sellers for their equity was a promissory note and not cash. We were not worried about this promissory note because we were going to flip the property.

Then Get a Buyer We flipped the property for $185,000. The buyer was a real estate investor who was planning on renting the property. The buyer assumed the first mortgage of $155,000 from the lender and our second mortgage of $10,000 to the sellers.

We were now off the hook to pay the sellers. Because the $10,000 second mortgage had no payments, the real estate investor would be able to have a positive cash flow.

How did we make out on this deal? We invested $9,000 cash and received our money back plus an $11,000 profit. The sellers avoided foreclosure and had $10,000 plus interest coming their way three years down the road. The investor was happy because she got a good deal.

Sellers Equity Position

First Mortgage Back Payments Sellers Equity

Retail Value

$210,000 $155,000 $ 9,000 $ 46,000

Our Profit

Retail Value First Mortgage Second Mortgage Back Payments Profit

$185,000 $155,000 $ 10,000 $ 9,000 $ 11,000

Some of you are thinking, Why didnt you guys hold on to the property like the investor you flipped the property to, rent it out, and have a positive cash flow? That is good thinking if you are using the long-term wealth-building strategy. We have a Quick Cash strategy, so landlording is not on our agenda.

Buy the Foreclosure First Early on in our real estate investing career, we tied up a three-bedroom, three-bathroom, single-family home with a pool. The seller was in pre-foreclosure. We negotiated a deal with the seller and bought their equity. We then spent $8,000 fixing up the property.

We are presenting this example to coach you on what not to do. This was not one of our finest hours. We were still in the more traditional mind-set of trying to make everyone in the deal happy. By the time this deal blew up, no one was happy.

Then Get a Buyer We found retail buyers who said they were in love with the house.To make the deal work,we agreed to repaint (again!) the inside of the house, which we had just repainted, the colors the buyers wanted.

We also agreed to run a natural gas line to the utility room so the buyers could use their gas dryer. Finally, we had a tree removed from the pool area because the buyers were concerned that the roots were going to crack the bottom of the pool.

Can you guess what happened? The buyers came down with a disease all retail buyers get during the course of a real estate transaction. Some buyers get a mild case of the disease. Some buyers get a severe case of the disease. Unfortunately for us, these particular buyers came down with a terminal case of the disease.

Example 3