Shuttling buyers from house to house as a real estate agent wasn’t cutting it as a career for Michelle Mangione, so she decided to return to her first love: distressed property investing.
“I always liked to buy houses and fix them up, but I really didn’t take it seriously until about three years ago,” said the Fallbrook,
Not long after her career-changing epiphany, Mangione subscribed to online property data provider RealtyTrac so she’d have a source for finding notice of default and notice of sale properties in her area and across the country. She’s been using the service ever since.
“How else would I find them (distressed properties)? I like how RealtyTrac gives me lots of access. I don’t have to order certain areas. I have access to all cities in all states,” she said.
Mangione has flipped all the properties she’s purchased except one — her current home. She said she bought the property less than three years ago for about $600,000, and a property down the street is now listed for $2.6 million.
“I went to look at it and I fell in love with it,” she said of her residence. “It is a gorgeous house, but it needed a lot of work. But that’s the nature of the business.
“It was pre-foreclosure and was headed for the auction. We did a short sale on the second (mortgage),” she continued, explaining that she was able to leverage that purchase of the second mortgage into buying the property from the defaulted homeowner.
She continues to make improvements to her home when she has time between flipping other properties, which is still profitable even though the real estate market has changed since she bought her first distressed property.
“The first one I made $150,000 in one day,” she said. “We bought it and then sold it the next day. They ended up tearing it down and rebuilding.”
As home price appreciation begins to slow, Mangione believes investors like her will need to hold properties longer and put more extensive work into them before reselling.
“Now you have to add a unit or add square footage or something,” she said. “The market has changed where you can’t just expect equity to go up overnight.”
But there are many good investment opportunities still available. Mangione said she made $50,000 off a recent flip in Perris, Calif., and she hopes to walk away with similar profits from a deal she’s negotiating now in Apple Valley, Calif.
Mangione uses RealtyTrac to locate properties in pre-foreclosure: where the owner has defaulted on mortgage payments but still has a chance to prevent a public foreclosure auction by paying off the defaulted amount or selling the property for enough to satisfy the foreclosing lender. She sends up to three letters to each defaulted owner, expressing her interest in the property.
“I hand write every one. It’s important for me,” she said, noting that some investors prefer automated mailings. “The owners get back to me. I just wait for the phone call.”
The process of contacting owners, negotiating with them and closing the deal requires patience, persistence and careful listening for what owners want, according to Mangione. But she believes almost anyone can do it if she can.
“I really didn’t know anything about foreclosures (when I started investing). You really just learn as you go,” she said, adding that new investors need to have some money to get started and shouldn’t quit their regular jobs until they’re doing well with investing.
“Be consistent. Keep sending your letters out. Get as much knowledge as possible. Read.”