By Tamara Aragon – I am currently doing a series on my blog covering a little about each of the types of niches you could consider when investing in real estate. Go here to go to the beginning of this series.
Today I am going to share an overview of Probate Investing.
Probate is the court supervised legal process that includes determining the validity of your will, gathering assets (including real estate), paying debts, taxes, and the expenses of will administration, and then distributing the remaining assets to those persons entitled to them. This process commonly takes a few months to a year. Probate investing provides opportunities for discounted properties because the person who is left to handle the assets often must sell the real estate they were left with.
- Why this is a good niche to consider
- Bargain basement prices:The probate market is full of tremendous properties you can snap up for 30% to 50% below market value. Resell quickly and capture a lifetime of gains within days. It’s the ultimate buy low/sell high scenario.
- Huge inventory:There are almost 6 million estates in probate, with assets worth trillions of dollars. Every type of real estate — from houses to beach front motels — are in probate.
- Buyer’s market:Purchasing property out of an estate assures you of a highly motivated seller. Most beneficiaries are anxious to sell the house (and other unwanted assets) so that they can pay off debts attached to the estate that must all be settled before the estate can be distributed.
- All kinds of treasures:in addition to real estate you’ll find, classic cars, fine jewelry, antiques, art, toys, collectibles, and much more enter into probate every day. Millions of items. And they can sit there for years unless you rescue them.
- It’s a secret:Few people know how to find and purchase property from an estate. Even the beneficiaries don’t know how to sell. That means, you’ll be the first one on the scene because you have little or no competition from other buyer’s — plus you’re helping anxious sellers.
- What are downsides of this niche?
- Finding leads is time consuming: Most counties you have to go to the court house and read through files to get probate leads and information….this information is not available on line or from leads lists to purchase.
- The Executors can be difficult to talk with:The executor is usually a very close relative to the person that just died: wife, mother, father, sister and they are mourning their loss and can be difficult to talk with. One has to be very sensitive to the situation.
- All heirs of the will need to agree:Many times there are many heirs of a will and getting them to all agree to sell to you at the price you want may be challenging
- Good market conditions
- Property is located in a flat or declining market
- Large City where there are more options
- In a city where there is a good % of retired and elderly population
- Bad market conditions
- In an up market
- Small town
- In a city where there is a very small % of retired and elderly population
- Steps to do this Niche
- Get a newspaper and look at the legal notice section that lists the announcements of an estate. This is where the administrator, personal representative, executor is named (depending on the state you are in, the above will be one of the names for the person in charge of the estate).
- Get a file number on any probate case from the ad
- Contact govt office and find out where probates are filed in area where person lived.
- Take file number (s) and go to the county office where probates are filed.
- Go the office where probates are filed and ask, for example, “Where do I find information on case number 2454059i843”, (The case number you took from the newspaper. They will direct you where to go and who to talk to.
- Go to the file room and ask to view the file in question.
The above process is to get you to the file room and to get you talking with someone and building some type of rapport. Once you are directed to the files and know how to look through them, follow these next steps.
- You will need to look for aged files, at least 2 to 3 months old because these will be the files that have an inventory sheet that will tell you in one minute if the case has any real estate.
- Once you have a file with real estate you will need to get the contact information for the PR (PERSONAL REPRESENTATIVE), it is all in the file.
- You will next need to identify all the heirs of the estate and gather their names and addresses in case you will need to contact them in the future.
- Once you have gathered this information, you will send personal hand written letters to the PR.
- After one letter, wait 1 week and call the PR to see where they are at with the situation.
- If it is determined the seller is motivated, and if local, you will want to meet all heirs to finalize contract. If not local, mail the contract with a nice cover letter.
- Negotiate and Sign Contract
- Sell or Rent for profit
- Where to find leads