Stalk and Capture Profitable Foreclosures: Five Ideas

Foreclosure hot spots are springing up throughout the nation. For some investors, they're as valuable as oil wells. Making money on foreclosures, or buying them as affordable housing, is easier in 2008, but a big part of the challenge is finding them before others stake their own claims.

More than a million American homes are now in foreclosure, the highest rate ever recorded. Nearly three million homeowners have missed at least one payment, and nearly 10 percent of all mortgage loans are in jeopardy. If foreclosures grow as expected in June, it will mark 30 consecutive months of year-over-year increases. Buying foreclosures can be lucrative, but first you have to locate them.

1. Get to homeowners fast. If you walk into a room filled with 100 people, the chances are good that one of them is facing foreclosure. In a city of one million people, thousands of homeowners are looking for a solution. Publicize yourself in every possible way, because exposure is key.
2. Join a foreclosure investment group. Credit is hard to come by these days, and while you wrangle with traditional banks to get the financing you need to buy a home from pre-foreclosure, precious time is lost. If you pay somewhat higher interest rates and closing costs, you can get a "hard loan" from a lender who specializes in fast loans. After you profit from the foreclosure, pay off the loan, or refinance to a more manageable conventional mortgage.
3. Do constant research. Public notices of foreclosures can be found at courthouses and in newspapers, or you can subscribe to foreclosure tracking services. Most of the information on Internet foreclosure sites is stale, so try to befriend real estate lawyers or someone at the courthouse to give you a head's up when properties enter foreclosure. Ask everyone you meet if they know someone facing foreclosure. The search for opportunity is a statistical numbers game-the more you look and dig, the better will be your chances of finding one.
4. Hard loans for hard cash. Many private organizations specialize in finding and acquiring foreclosures, and some offer paid memberships. They do the legwork and then notify members who then decide whether or not to invest in the found inventory. Some cover the entire U.S., which gives you the advantage of exposure to the most homes in the hottest markets.
5. Self-promotion.If you find a viable pre-foreclosure property, act without delay, or a dozen other investors will beat you to the punch. Talk to the homeowner in person to establish a dialogue, and encourage him to communicate with his lender so that you can find out the specifics of the mortgage in question.

Work hard to find foreclosures, and then look before you leap. Surround yourself with expert counsel from attorneys and appraisers. That kind of help will increase your chance of success while minimizing your potential liability or loss.