Smart Investment - Mortgage Foreclosures Or Tax Foreclosures?

When it comes to making a smart investment in real estate, there's really only two ways to go: mortgage foreclosures, or tax foreclosures. Everything profitable is some offshoot of one of those two things. Certain aspects of both are profitable, but hands-down, the smart investment is in tax foreclosures, one of two ways. Which way you go depends on whether or not you're interested in owning property - and we're not talking liens or deeds here.

First, if you want to own property, you're not going to have much luck at the tax sale. There's too much competition, and too much risk associated with buying property you can't inspect first. Would you ever buy a home to live in you couldn't inspect? Obviously, if you want to make a smart investment, you're going to have to know what you're getting into - and it doesn't hurt if there's little to no competition for it.

It's simple: wait until after the tax sale, and then buy directly from the owners during the redemption period (where they can still get their property out of foreclosure). Most investors don't realize that this is legal - in most places - and thus, you're not going to find a lot of competition for these deeds. Owners that can pay off during this period, will, and those that can't need to do something, to avoid losing everything.

You can easily buy up these deeds for a few hundred dollars - no strings attached, with a lot of owners. With other owners, maybe of nicer properties, you can make a deal with them to give them a percentage of whatever you can make off the property. This is an amazing way to make a lot of money without having much money to start with - the definition of "smart investment."
Second, if you don't want to own property, you can still make money hand over fist from the foreclosure process - both mortgage, and tax, by going after the overages. When more is paid for a property at auction than is owed in debt, usually that money is available for the owner to collect. But frequently, the owner just assumes that he's lost everything and doesn't realize it.

Unfortunately for him, if he doesn't collect it, after a year or two it becomes legal property of the government. He will lose it permanently. Your knowledge of the location of these funds is valuable, and you can easily make a deal with this owner to collect the "found money" that you know about. Here's the best part: these funds aren't subject to money finder fee caps in most states. This means you can collect up to a 50% finder's fee - or more, depending on the complexity of collecting the money.

While maybe not a "smart investment," since it's not exactly an investment, any business that can make you six figures a year and needs about $1000 in operating capital is arguably rocket-science level intelligent.

You've got to know how to find lists of these funds, and how to find and approach these owners so that they don't try to collect without you and avoid your fee.by BMA editorial