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Multiplying Profits
Investor plans to triple his money with first-time foreclosure purchase
Glenn Downs has been investing in real estate for years, but he never considered a foreclosure
purchase until his son landed a job at RealtyTrac.
Downs signed up for RealtyTrac’s online foreclosure database and soon discovered that the
primary lesson he’s learned from investing in the mainstream real estate market also applies
to the foreclosure market: patience and persistence pay off.
"Anyone who’s new at this, they get all excited. They think they have to close the first
deal," he said. "Just be patient and let the deal come to you."
The first measure of patience and persistence came when Downs was searching for properties
and making offers to homeowners in default.
"I had my real estate friend make three different offers on properties that I found
on your website (RealtyTrac)," he said. "They didn’t pan out. The people didn’t
accept them."
But then he found an owner in default who wanted to sell — just two weeks before her property
was scheduled for public auction. That meant he and his realtor had to act fast to close the
deal. They submitted an offer, which was accepted by the homeowner, then executed a quick
closing through a local title company.
"We had two weeks and that’s how fast we went through it," he said.
The payoff for Downs’ patience and persistence? He purchased the Anderson, Calif., property
about 35 percent below full market value. And he helped a financially distressed homeowner
avoid foreclosure and net a substantial amount of cash from the transaction. Downs also allowed
the owner to remain in the property free of charge for several months to help her get back on
her feet.
But that’s not the end of the story.
The property Downs purchased comprises three units sitting on six acres of property, but
it is zoned as one parcel by the county. Downs plans to divide the property into three parcels
and sell them separately to maximize his profits. Such a division must be approved by local
government, an approval process that also requires a healthy dose of patience and persistence.
"For someone just starting out with distressed properties, I would not suggest this,"
he said, noting that he’s spent thousands of dollars in fees since he purchased the property
13 months ago. "I’m not sure that I would buy a complicated piece of property like this
again."
Downs said that even if he’s not allowed to split up the property and resell it as three
separate parcels — a worst-case scenario — he’ll still double his money. He’ll at least
triple his investment if he is able to sell the property as three parcels.
"I knew going in that it was going to be a long process," he said. "But the
end result is going to be worth it."
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