September Issue - 2018
Encantado Magazine - Real Estate Today by Ronn Perea
To all Real Estate Investor mentalities out there, take notice of a seemingly popular method to acquire properties in today's REI market is RIGHTS OF REDEMPTION.
What is RIGHTS OF REDEMPTION? It is only one of several niches under the umbrella of niches in the REI practices hand bag. R & R is a lawful practice in only 10 states in the union. New Mexico is one of them.
How it typically works is: XYZ property has officially been foreclosed and auctioned off. Then the investor must fiscally dissect these properties. Which houses, office buildings, apartments, bare land, etc. have enough spread left after you calculate the costs. Start from what it was auctioned off for to subtract from what the ultimate retail value is. In the case of house for example, also calculate in the cost of Rights of Redemption to original owner. Also cost of repair. Remember 100% of these properties have been neglected for some time and will need upgrades for resale. Also calculate in the cost of marketing. Unless you sell it your self, calculate 6% to hire realtors to sell it. Then there is the cost of title, another 3%. Whatever is left is the profit margin. Is there enough profit in it for you?
If so, only now starts the work. We are now talking detective work. You must be the original mortgage owner. More often enough, they have scattered to the wind. Add in difficulty if the previous owners were a married couple. Most seem not to be married any longer. You will be amazed how both will have split to opposite sides of the country. You need both signatures.
Of course not all the deals are that worst case example.
But locating your customers, you must state your case. Expect to offer any where from $500 for a Taco Hut to $50,000 for a mansion with deep equity.
You must take note that in 2018, competition for Rights of Redemption deals has increased ten fold. So be prepared to let major disappointment roll off your back if and when a competitor beats you to the deal. It will happen regularly. Why? The R & R niche is the only way an investor can acquire the deal for the cheapest and with the least out of your pocket. Note: It will be difficult to overcome this disappointment. Why? Just to get there, you will have spent countless detective man hours tracking down you sellers just to rudely be hit in the face with major disappointment to learn that someone else beat you to the punch. Sorry, that goes with the territory. Be prepared, thats all.
But when you find a seller to say yes to your offer, have your real estate lawyer standing by to prepare the docs. All you need is 24 hours. This then will give you control of the property. Either you will want to fix and flip yourself or simply sell your Redemption Rights. But note you or your buyer will still have to pay off the court to the sum of the auction and the legal fees to that company's mortgage lawyers.
Note: Within a week to a couple of months after the auction, the judge will sign the order making that auction official. From that point in New Mexico, will have 30 days up to 5pm to pay the bank or the property goes back to them as REO.
And the bank wants the property back. Do you think they want to sell it off for as cheap as you could have bought it for? Especially, when they already have in house the teams of repairmen. Especially when they have in house realtors to sell it at full price? They want to make the profits that the investors have been making.
So now, you go out and make it happen for yourself. If you have any questions, please feel free to contact me, Ronn Perea at www.abqre.com.