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You Can Make 10 Times Your Money in Real Estate TodayBy
Tuesday, October 5, 2010
I bought a property in Florida with 200 feet of river frontage. It's half a mile away from the Atlantic Ocean. My total investment so far is less than $20,000.
When demand for waterfront real estate returns, I believe this property will be worth hundreds of thousands of dollars – a potential tenfold return, or more.
With a little bit of homework and a little bit of luck, you can see similar returns on your property investments. In the current real estate bust, you can find some incredible, "unfair" deals.
The future owners of my waterfront property will have incredible views over the river, both to the east and to the south. And since the land across the river is "protected," the future owners will always see nature across the river – they'll never see another house. The views are undeniably stunning.
How did I get this property so cheap?
I bought it on the courthouse steps – at a tax-deed sale. Let me explain...
One out of every four property sales is a "distressed" sale, according to Bloomberg. A Bloomberg headline last week said: "Distressed Homes Sell at a 26% Discount in U.S." More specifically...
Homes in the foreclosure process sold at an average 26 percent discount in the second quarter, as almost one-fourth of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc... The discount reflects the average sales price of homes in the foreclosure process compared with properties not in distress.
The discounts are more extreme in certain states. In California for example, the average price discount for foreclosed homes was 39%.
The numbers are even more extreme for bank-owned properties...
Bank-owned properties sold for an average discount of almost 35 percent in the second quarter, little changed from both the previous quarter and a year earlier. Such properties accounted for 15 percent of all U.S. home sales, down from almost 19 percent in the first quarter and 20 percent a year earlier, RealtyTrac data show.
You can find even better deals than foreclosures or bank-owned sales at government tax-deed sales – like where I bought this property.
With a tax-deed sale, the previous owner hasn't paid property taxes in years. So the county sells the property to the highest bidder on the courthouse steps to recoup the taxes.
The government, of course, does a horrible job of advertising its property tax sales. You can't blame it for being lazy... It just doesn't care what the final purchase price is. As long as the government gets its taxes, it doesn't care how much more it can get for the property.
Between the lack of advertising and the fact that you have to pay the full cash price typically within 24 hours, you can buy properties at great discounts.
There are two secrets to making money here: 1) Don't chase the property too high at the tax-deed auction and 2) Don't figure price appreciation into your math. Then you can do REALLY well.
For example, a good rule of thumb would be to try to buy at 40 cents on the dollar and sell at 80 cents. In short, you're buying in a "distressed" sale, then turning around and selling without distress.
If your purchase price is low enough (like 40 cents on the dollar), you don't have to hold out for top dollar when you sell... You can get rid of it. Your gain is coming from your distressed purchase price. You're just finishing off the deal by selling. In our zero-percent world, this is real money.
Contact your County Clerk of Court to find out about upcoming tax-deed sales. Do a bit of homework on a conservative value of the property you're interested in... and get to the auction.
When I first bought this property, I told my True Wealth subscribers, "By buying yesterday, I didn't do anything you can't do. I just happened to get off my duff and do it!"
And as a mentor of mine says, "Steve... who knows... there MAY be a 99% chance you won't get the property. But there will CERTAINLY be a 100% chance you won't get it if you don't show up."
For this waterfront property, I showed up. Do your homework... show up... and maybe you'll get a great deal, too.
Good investing,
Steve
Further Reading:
For another reason to check out cheap Florida beach property, take a look at Tom's recent essay... "If you ever wanted to buy your dream retirement home... or start a new career as a landlord," he writes, "you can't go wrong in Florida right now." Read more here: Wealthy Chinese Are Desperate to Buy Your Vacation Home.
If buying foreclosed or bank-owned homes sounds like too much red tape for you, Steve still has a way for you to get in on Florida real estate. "The thing is, home prices are not like stock prices," Steve writes. "Since homes are illiquid, you can get incredible deals at the bottom of a market like this." Learn how here: How to Get a 20% Discount on a Florida Mansion.
Market NotesA MUST-WATCH CHART FOR THE U.S. ECONOMY The great "financials debate" continues...
For more than a year, one of the great money debates has concerned the health of American banking. Bulls say the government will do whatever it takes to make conditions favorable for the likes of JPMorgan, Citigroup, and Bank of America... which will allow them to extend more business-boosting credit.
Bears say the whole system is still rotten to the core... and an overhang of bad debt will depress the sector for years. This will hold back any real economic rebound.
We say form your opinion and then watch the market to see who is right. Today's chart shows neither camp is on the winning side... yet. Below is the past two years of trading in the major bank stock fund, XLF. It holds a basket of the biggest and most important financial firms in America.
As you can see, XLF enjoyed a huge post-crisis rebound in early 2009 as things got "less bad" in the financial sector. This rally stalled, however... and XLF has traded in a long sideways pattern between $15 and $13.50 per share. We need XLF to bust through $15... and onto a high of $17 to feel "maximum bullish" on the health of American banking.
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