Trust Deed Investors Must Clean Up Foreclosed Property

If you are going to invest in trust deeds, and you are seeking more than 7% in yield, you will almost certainly have to foreclose on some property from time to time. The reason why is because the least risky borrowers are not going to pay 10% to 14% interest; therefore most of the loans that you will make will be made to sub-prime borrowers. Foreclosures happen.

If you ever do foreclose on a property, be sure to remember this very important rule. A foreclosed property will never sell or lease until it is renovated.

When a borrower is losing his property in foreclosure, he almost always allows the property to fall into disrepair. After all, why would he maintain a property that he is poised to lose? Why not use the money to bring his payments current or to pay his personal bills? Therefore almost all foreclosures need a substantial amount of work.

Don't neglect this work! Over the past 30 years Blackburne & Brown has tried to sell several hundred foreclosures. Time after time we have watched foreclosures sit vacant and unsold for years and years ... until we renovated them. And within 90 days of renovation, these properties almost always leased or sold.

So remember this rule: A foreclosed property will never sell or lease until it is renovated. A wise hard money broker will therefore, immediately upon foreclosure, assess his investors for about 18% of the value of the foreclosed property and start the renovation process immediately. If a foreclosed property is immediately renovated, it should sell or lease within just a few months.

So don't freak out if a loan in which you are invested goes into foreclosure. Just push-push-push your hard money broker to immediately start the renovation process.

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