Foreclosure Deals Coach Podcast

Uncover The Truth! Debunking the Top Foreclosure Investing Myths

July 27, 2023 Chris Lawler Season 14 Episode 38
Foreclosure Deals Coach Podcast
Uncover The Truth! Debunking the Top Foreclosure Investing Myths
Show Notes Transcript

Donny discusses the myths behind foreclosure investing and sets things right in the latest episode of the Foreclosure Deals Coach podcast.  Lear about the truth behind this.

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Welcome to the Foreclosure Deals Coach Podcast. The real estate market is shifting. The time is now. The Foreclosure Deals Coach Podcast is your home for the mindset, tactics and tools needed to break through your limiting beliefs and find freedom by investing in foreclosure deals. Don't buy a house, buy a deal. You need to get into this right now. And now your host, the Foreclosure Deals coach, Donnie Corum. Hello, hello, hello and welcome back to the For Deals Coach podcast. I'm your host and foreclosure deals coach, Donny Corum, broadcasting live from our downtown Cold Springs Studios. And this is the show where every week we discussed the mindset, tactics and tools required to become a successful foreclosure investor with my five step process to find. Figure, fund, fix, and flip a foreclosure deal. Guys, it's an exciting time in the real estate market. If you wanna stay apprised of what's going on in foreclosure investing, make sure you hit that subscribe button right here on the YouTube channel. Uh, subscribe on podcast, apple Podcast, Spotify, wherever you download your content. I would love to have you each and every single week. Right here on the Foreclosure Deals Coach Podcast. Let's get into it. The title of today's awesome show is going to be the most common Foreclosure investing, and I'm gonna debunk for you because I gotta tell you, there's a lot of misinformation out there in the. Universe, the cyber verse, the internet, YouTube, about the process of investing in foreclosure. Every coaching call that I do, there's generally a misconception that's been rendered by the media or real estate professionals or wholesalers that people don't fully understand the process of investing in real estate. The problem with that is it really is what you don't. Currently know that is stopping you from foreclosure investing. You see, I I, if you really understood this process, it's kind of a no-brainer, right? You're buying a property that's distressed from a lending institution, a bank, a hedge fund, whatever, and then you're selling that property after fixing it up. At a profit. Pretty simple, right? So why doesn't everybody just hop in and do this? Well, again, it's usually what you don't know, what scares you a little bit, what you're uncertain of that is stopping you from getting in the foreclosure investing game. Before we dive into the meat potatoes of the five myths that are stopping you, let's do our quick mindset minute here. Our mindset comes from Ralph B. Perry who says that ignorance, people of freedom, because they do not know what alternatives they are. It is impossible to choose to do what one has never. Heard of. Now here's the thing. If you're a subscriber to this show, you probably already know the basics of at least real estate investing and foreclosure investing is not a big jump from there, right? But the thing about it is, if there's a lot of ignorance in the market about how the process works, how foreclosures work in general, how we make money doing foreclosure investing, and my goal on today's show is gonna be to relieve some of ignorance, but lemme give you the backstory. About that. I meet with clients and potential clients all the time. Couple meetings per week, right? And just a few weeks back, I met with a wonderful couple. And listen, I love all the people that I meet with, okay? Whether I end up signing'em up as clients or not, let me tell you, I'm a people person. I like to interact. I really love explaining what I do. For a living. But getting back to it, I met this couple, um, in person, which is something I rarely get to do, but thankfully they live here in town with me. Um, and I do require that when you invest in my program, that the husband and wife, if you're married, are involved. Right. Maybe one over the other is gonna do more of the actual process. But I like to know because I'm a family business, that, that your spouse is going to be involved in the process of getting this done. So we meet with a hus. I meet with his husband and wife team, husband's from here locally. The wife is from Jamaica. Now this, this is important, okay? Because my mom was born in Kingston, Jamaica about a, let's say, a year and a half ago now. I had the pleasure of doing kind of a Jamaican tour to. Experienced the culture with a buddy of mine. He showed me around a little bit, and then I got to play with the real estate market in Jamaica. And let me tell you, it was amazing. But now that I know this guy's wife is from Jamaica, this is like, there's like a personal connection for her. This has become personal. My mom obviously a lovely woman. She, I mean, she had me How, how, how much more awesome can you get than that, right? But a super intelligent woman, she's done super well in life. But the thing about Jamaican culture that I really learned firsthand from being there is there's a certain impoverished mentality to the Jamaican culture that a lot of people never overcome. So I kind of knew that going in meeting with this couple, cause I've dealt with that with my mom for years. Again, she's done well in life for herself, but if you're raised in that type of third world country environment, it's easy to see why it's easy to. It's hard, excuse me, to break some of the habits that come from that. Right? So you, you grow up in poverty, you live in poverty. It's just kind of an issue, right? So I meet with a husband and wife. I do my entire coaching assessment and the presentation that comes with that, which I'd be happy to do for you. If you like to register for a call, we can go over that. But after I explained it, I could tell. And it wasn't really sinking in. There's a lack of belief there because if you don't, if you've not been acclimated to the wide world of real estate investing, much less foreclosure investing, it's very difficult to change that mindset and switch into, yes. Anybody who's committed to doing this can make money doing it, right. You just listening to this show right now, you're currently breaking that ignorant cycle, okay? You're attempting to get educated and I hope entertained by what I do and how I do it a little bit, but a lot of people don't get this exposure to me from the show and et cetera. So I'm gonna break in these five tips that are stopping you from doing it. But do you remember that show GI Joe? Remember the, the knowing is half the battle, right? That line that they used to use at the end of every show, they kind of did this public service announcement, right? And one of the big generals from GI Joe came on and said, knowing, and now we know and knowing is half the battle, right? You remember that? Well, the issue with you figuring out how to break through this on your own is that you don't know what you don't know. Okay, and I've got an article for you because you have to understand that by not knowing what's going on, you're stuck in that ignorant cycle for the foreseeable future. You've gotta get some degree of information, either from podcasts or YouTube, or reading a book, or et cetera. Now, I don't want you to get stuck in the information cycle, okay? Because what happens is the reality of getting stuck and just getting information is without taking action, none of it's gonna matter anyway. Okay, but what happens when you're ignorant to the process is this, I'm gonna share my screen cause I got this article from Money Wise. Let me hop in here so you guys can see this as well. Here we go. US real estate investors are currently losing money on one in seven homes. This is among the worst statistics since 2016, and they're most likely to take a hit in the cities that they mention in here. So it's a relatively short article. By Beth Ann Mocr, thank you for the article. But the thing about it is, is what it goes over is the reason people lose money in real estate investing is because they didn't buy the property right to begin with. The question the article asks is, why not wait until the market improves to sell it later on? Well, that largely depends on the type of financing that you're getting. So if you're already in a position that you're gonna take a loss, the best bet really is to cut your loss with flipping and move on to the next project, because trying to get out of a bad deal once you're into it is very difficult. In March, the typical investor. Sold their home for 45.9% more than the price they paid. Right. Now that's not profit, right? That's that's what they sold it four percentage wise. They had rehab costs and transaction costs and all that stuff in there. The. But, uh, those have shrunk down cuz in the past they were selling for up to 55% a above the asking price that they paid for it. And at the pandemic peak when things were rocking during coronavirus, they were selling for 67.9% above asking. So in March. We started to really see the hit, and this is, you know, March at really 2022, and it kinda got worse from there. As the market cycled out, people were losing money on a lot of their investments because they bought it raw. One in seven properties. On a flip, they're saying is a loss. How do you prevent yourself from being. One of these statistics, what's gonna keep you out of making the same mistake that these investors made resulting in taking a loss on the property? Although they bought it seemed like they bought the property, right? They're selling for 45% more after the cost of the rehab, after the cost of the transaction. The cost of the loan, the cost of funds, et cetera, they're losing money in one in seven cases. So we're really trying to avoid that happening. And with my clientele, I can confidently tell you that no client who is invested with a deal with me and my process has lost money in the, in the end. I guarantee a minimum profit of$25,000 on doing a deal. Most are making a great deal more than that right now. But the fact is that people do not lose money when they get proper guidance. And that's the importance and power of getting a coach or a mentor like myself to assist you with a deal. So we, we want to really go over these myths. We're gonna hop into that right now and discuss these seven myths, or sorry, five points that we want to avoid, that that can prevent you from losing money in a deal. And debunk some of these myths about foreclosure investing. Let's get started. The first one is understanding the foreclosure process. Before you get into real estate investing, you need to understand how houses and up in foreclosure, okay? Because if you don't get that at a high enough level, you yourself could end up in foreclosure yourself. Okay? So there are several different statuses that make up the foreclosure process. The various stages include pre foreclosure. The auction process and then the r e o or bank owned property. When you understand where your property is at in that cycle, you'll have a better understanding of the foreclosure process, and as such, you'll know where to buy it. You see, in pre foreclosure is when you tend to get the best deal. Okay. Prior to the house being taken back by the bank or going through the auction process, pre foreclosure's the best deal. These are distressed properties, people who were in foreclosure, and you're probably seeing the ads right now. We have a ton of them going on with the major real estate players here in Colorado Springs, Colorado. But they're basically saying, avoid foreclosure because it's happening all over. Right now, you're seeing a lot of avoid foreclosure advertisement to help get people out of that. That's the best time to buy. The second best time to buy is the auction. At the auction is when the lender deeds the property. Back, I'm sorry. The county treasurer or assessor, depending on how you name it in your county deeds the property back to the lender in an auction process. The starting bid for this is generally what's owed on the property. Then private investors can jump in and offer more. Than what's owed on the property to take the property back. To be honest, this is preferred by the lender, right? They're getting more than what's owed on that, so they're making a little bit of profit in that process. However, the problem when it gets to auction is you gotta attack on legal fees. Document fees, the auction fees, there's a bunch of added costs that go into that when it makes it to auction. So once again, you're hoping to get the property in pre foreclosure before that happens. Finally, the final stage is the r e O or bank owned PRO process, which is when the property has been taken back by the bank and re-listed. Now you have all the fees, you've got the loan balance. The bank expects to get back. Right. You've got any rehab that the bank has put into it. Most of the time they don't do much. We gotta add that in the legal fees for getting through the auction, the auction fees, and now they gotta pay the agent commissions on the back end to sell the property despite all these added costs buying properties. When they're already, already have been foreclosed can still be very lucrative because the bank's not generally taking a loss, but they can still have a gap between what they owed on the property or what was owed to them and what they ultimately sold the property for. Okay? So understanding where you are in the process is critical. Point number two is conducting thorough research. Listen, I gotta tell you, my first couple deals, if you listen to my very first deal, I was so eager to get a deal done. I didn't even know what the property was worth on the back end. Right. I had a theory that it was more than I paid for it, but if you operate on theory that the property's worth more than you paid for it, you're gonna get yourself in a bit of trouble here. Okay? So it's important to conduct thorough research. That research obviously includes the purchase price, but you can buy it at. But also you need to know your cost to repairs, your cost to funds, right? Any back taxes that might need to get paid if you're buying'em in a pre foreclosure process, any liens that might get to pay, get paid legal issues that might be attached, et cetera, et cetera. Now, all of this sounds very scary, but most of this research when we're talking about liens or tax issues, are handled at the title company or escrow officer level. Right. When you buy the property, it's cleaned off all the liens, the back taxes, et cetera, are part of the total purchase price, and you are given title insurance that ensures that there are no other liens on the property. But you do need to do your research, do your homework. Don't just jump into a deal. You have to know what you're getting into. Right. The third point here is evaluating the financials of property. You need to know what the maximum you can pay for it to get a profitable exit strategy. When you buy a property with my coaching program, you're guaranteed to get a$25,000 minimum return on the deal. But if you're out there doing this on your own and you haven't properly evaluated the. Financials as clearly one in seven people who are losing money on their flip have done, then you're going to be in trouble in the long term. Don't do this. Do your homework. Evaluate the financials. Bullet point number four is absolutely my favorite, and you're gonna understand why in just a moment, but you can mitigate your risk. By getting professional help. You see, foreclosure investing can be complex and mistakes when you lose money on a deal are costly. So when you get a professional to help you through it, where would we find such a pro? Where might we find somebody who would walk you through your first deal? Right. Well, of course a real estate coach right now, real estate agents can also do this, but you wanna make sure that you're working with an agent that actually has experience in doing foreclosures. Okay? There's a lot of agents who got into the market in the past three years when the foreclosure market. Was extremely scarce. Not a lot of people made it to foreclosure. Now it wasn't none, but it was surprisingly low because the market was so hot. You really want to bring in a professional coach when you're working with foreclosure investment, all the pitfalls that could be. Follow you doing this on your own. I can help you to eliminate. You see, I have done over 300 transactions, right? 47 flips in one year, and a thousand plus deals as an agent before I got into coaching full time. As a result, I have seen pretty much everything you're going to encounter twice. Sometimes a lot more. Getting professional help in this area will simply prevent you getting into hot water. So if you're not gonna get coaching, rely on your agent as long as they have experience in the process. But my advice is obviously get coaching. Get somebody who can walk you through it, if not me, find somebody else who can help you through this, who's done this before and can ensure that you're not one of these one in seven people that are losing money on their deals. That's not the objective, right? You got into foreclosure investing to make money, not to lose it. Am I right? Obviously professional help's. Gonna help out with that. Finally, we get to. The post bullet point number five, creating an effective exit strategy. Now, most of my clients, the exit strategy they're working off of is to flip the property for a profit. That's my recommendation for your first deal because it's gonna put some money in your pocket. It's gonna get you a hook on this real estate investing thing that we do, and it's gonna give you the funds that you need to go into your next deal with less leverage. Right, and more education. So you're gonna be in a better spot on every single deal that you do. That's just the benefit of doing this. Your access strategy is almost always flip with my clients. Now, other other clients wanna do buy and hold. They want to keep it as a rental, right? Others want to turn it into an Airbnb or et cetera. Access strategies do vary, but the primary exit strategy of my coaching students is to do a fix and flip. So you've gotta make sure that your numbers. Lying up with that fix and flip exit strategy because if they don't, you could find yourself losing money on a deal. Once again, guys, that's not the objective. You're really hoping to make money on the deal. With that, let's hop into our deal analysis of the week. Here we are working on a property for one of my clients. On 70 32 McEwen. This is a property located in the Stetson Hills neighborhood of Colorado Springs, Colorado, so a newer, nicer, more modern area. We got this deal using TV ads, which we get a lot of our deals from. I'm gonna hop this open here so you can take a look. Here we go. I love this effect when we get started here. So let's just reload the matter. Port tour the property is a three bedroom, two and a half bath, built in in 1994. As you can see here, it needs some work. Carpet is shot. Good. It's original right, and it's a goofy color. But all in all, this house is not in terrible shape, right? Let's head into the kitchen. We can walk through this here. And isn't this technology cool and this neat that I can, I can just hop you in a property, we can do this 3D tour thing. I, I'm actually loving this and I, I, I just, I love the technology attached to this. Here's the kitchen. It's got the original cabinets in it for mic countertops. Nothing terribly bad. Right. But the reality is that it needs to be updated. And that's what we do. We're gonna buy this house, we're gonna paint it up, we're gonna carpet it, we're gonna put in, uh, probably paint the cabinets cause they're not in terrible shape, right? A couple other things that we need to do on the task list, but ultimately this is a pretty easy remodel for my client. They pick this property up. For 350,000. We're gonna hop into deal check as we do, and do a quick analysis on this property to verify that this is actually a solid deal. We do this exact analysis process with every deal that we do because we're not leaving anything. The chance, guys, our objective here is to make sure that you can't miss, this is not gambling, right? There's a little bit of speculation on the future value of the property, the A R V. But just a little bit. If we're doing our homework properly, you should know your numbers very well when you start. And as your coach, I'm gonna see to it that that's the case. So again, purchase prices, 350,000. We hop in here to check out the sales comps here to see what stuff in the neighborhood is selling for. Here's 1.11 miles away, right? So we're talking about five, 600 feet. Away from this property. Nearly identical square footage. Sold for 4 45. Another one a half a mile away. Sold for four 60, right? And we see another one here. I'm just going off the ones that I checked here cuz this is deal check. So we check the ones that we want to put in in the flip here. Another one for 4 35, yet another one for 4 75. Okay, so a little bit of math on this deal. Tells us that this property should sell for the A R V I put in here a 445,000 deal check came up with. 4 39 based on the price per square foot. I think we're trending a little bit higher than what deal check read this at, but between my analysis and deal check, we're pretty close. Right? So what do the profit numbers look like on this deal? Well, let's take a look at that. If we put in the remodeling budget, and I definitely shoot high on this because I shoot high on all of them. That's the nature of it is I want to overestimate so we can beat that number. But if we put in a remodeled budget about 25,000, you know, 25 to 30, we do a cost overrun of 10% to leave us a bit of a buffer. But assuming our numbers are accurate, and I think they are, cause we've done our homework properly here. We should be netting if we look at the profit projection spreadsheet after four months of working on this, about$33,000. These are worst case of numbers, worst case scenario numbers based on the highest cost of remodel. Cause I think I'm a pretty high index. It really just needs. Paint flooring and some cabinet updates. Maybe some appliances. So I feel like we can get it done cheaper than that. We have a pretty accurate assessment where we're gonna sell it at, but in the end, the profit mar debt through four months is just over$30,000 on the property, which is a good deal ahead of the$25,000 that we offer as part of my coaching product. So the bottom line guys, is this is definitely a solid deal. Kudos to the student who's under contract on this deal right now. When you see these, I generally have already put a student into this, so they're on the way in this case, we're on our way through. Underwriting should be closing in a couple of weeks or so on the property. Construction bids are being lined up for the remodeled budget and the end result is a profitable deal with a nice spread on the back end for a very. Able and excited client, and this could be you. Okay? It's just a question of you taking that step, not relying on the ignorance in the market, not relying on what you don't know right now. Avoiding the foreclosure miss, that would stop you from doing a deal taking action and actually getting a deal done. We find deals like this all the time through my TV ads. Through Privy, what we use daily to locate deals through our website and a bunch of other sources, we can certainly help you to source your deal. That's a big part of what I do as part of the coaching. All right, so exciting times, right, that the market is shifting a little bit to the upper side, so we're finding more opportunity on properties that need just a little bit of work to get them back in no shape, and we do the work on the property, get a client into the property, and then selling a profit. You walk out with 25 grand, it's super easy. You can do it too. Don't rely on ignorance. Take action and get started doing your first deal. That's really our show for today, guys, if you would be so kind as subscribe to this, wherever you happen to download your content, whether it's Apple Podcast, you're hearing me on now, or you're watching me here on YouTube, please hit that subscribe button, keep updating on what's happened to the foreclosure market, and if you are ready to rock. Join the Facebook and schedule an assessment call with me, your Foreclosure Deals coach, where we'll decide if foreclosure deals coaching is right for you. For now, I would love to see you in the group. Please join up. Please subscribe. Thank you so much for your time. That's our show for today. This is Donnie Korum, your fore foreclosure deals coach. Thanking you yet again for tuning in each and every single week to the Foreclosure Deals Coach Podcast and reminding you now and always. Don't buy a house. Bye. Thank you for tuning in to the Foreclosure Deals Coach Podcast. If you like what you heard here today, remember, new episodes are uploaded weekly. Subscribe wherever you listen to your podcast. Do you want more of the foreclosure deals? Coach, are you ready to learn the mindset, tactics and tools required to be a successful real estate investor? If so, click the link below to. Schedule a one-on-one coaching Call today with Donny Korum, the Foreclosure Deals coach to determine if coaching is right for you. And remember, don't buy a house, buy a deal.