When the South Florida housing market entered into a nosedive last year, Harry Andrade saw an opportunity. Other investors were trying to quickly jettison their properties, but Andrade took a totally different tack — he began looking for bargains on rental properties that could generate a positive cash flow.
“It’s a much better strategy simply because it’s a buyer’s market today and not a seller’s market,” he said.
About 90 days later Andrade had purchased his first foreclosure property 20 percent below market value and secured a tenant whose rental payments more than covered his monthly carrying costs for the property.
“It felt great. … I made about $1,500 in an hour on this one,” he said, noting that he’s already found another property that looks like it could turn into a similar deal.
The Miami native began his search for properties by signing up for RealtyTrac, which helped him locate homeowners in foreclosure who were motivated to sell and had some equity in their homes. Although he had never purchased a foreclosure before, he said he has been involved in real estate since he was 18 and recognized that foreclosures represent a good opportunity to buy below-market real estate — especially in a slumping market.
“When things are bad, times are good for some people,” Andrade said. “It all depends on how you look at it.”
Andrade was careful to point out that he approaches foreclosure investing as a way to help owners who are in distress — and that type of approach is crucial to his success.
“Because it’s people in need and you can help them out in return, for a profit. So rather than them losing everything, help them make something,” he said, noting that investors are less likely to succeed when they ignore the needs of the homeowner. “If you go out and try to help others first, just make it a win-win for everyone, I think you’ll be fine.”
The property that Andrade purchased is a condominium. Although he was not originally planning to purchase a condo, he noticed the property had about $70,000 in equity — based on the value and loan data provided on RealtyTrac. That convinced him to take a look at the property, which in turn convinced him to try to make contact with the homeowner to see if he could work out a mutually beneficial deal.
He started by sending a letter to the homeowner. The homeowner contacted him in response to the letter and they set up an in-person meeting.
“I met with her and we discussed what we were doing,” he said. “We just talked about getting her into a better situation than what she was currently in.”
Once he and the owner came to an agreement about the terms of a purchase, Andrade enlisted the help of a local real estate broker to complete all the proper paperwork and close the deal. Within a month of purchasing the property he found a tenant, and he’s continuing to search RealtyTrac for more foreclosures that he can turn into rentals.
“I want to do 10 more between now and the end of next year,” he said. “There’s a lot of money to be made in this business. A lot. And all it takes is the first step, which is getting the proper information and taking action.”