The probate real estate investing strategy is a delicate maneuver. Heirs have just lost a loved one and are emotional. However, they need closure; most are anxious and motivated to sell. Many look at the property as found money. They want a fast sale with no contingencies, fix-up, or cash out of their pocket. To get the deal, all you need to do is give them a headache-free cash closing.
Out of state heirs
Competition is low
A continual supply of probate properties
Properties with high equity values & no liens
More than 80% of probate properties are sold, and it's usually used to pay for the deceased's debt when the heirs inherit real estate, many times, they're not in a position to take responsibility for it or don't want to be long distance-landlords.
Expenses eat into their inheritance each day as they hold onto the property. There are estate and probate taxes to pay, attorney fees, contents and furnishings to disperse, repairs needed, insurance, and mortgages; it all adds up and quickly becomes one big headache.
Plus, the current economy and depreciation have forced many heirs to sell probate properties rather than holding on to them.
Fast and without contingencies will win you the contract. Do not offer creative alternatives in any way; instead, talk about a cash closing. All the heirs want is cash and for the property to be gone. It's essential to have already your funding lined up.
Many probate real estate investment properties are in good condition because up until their death; the owner was living in the house. But you'll find that the actual money makers in probate real estate investing are the properties that are filled with years of hoarded stuff and neglect. Besides real estate, many times there are other things for sale like cars, boats, antiques, collectibles, furniture, art, + more.
Probate properties aren't made public, they don't have signs and are not advertised, nor are they on the MLS. And very few investors know where or how to find these probate real estate investing deals.
County public records are the first place the notice of death and the Trustee's name will appear. Almost every county has its public records available online. You can search the court records, get the Trustee's name and the property address. Then cross-reference the property on the county's property appraiser's to get the info about the property and mortgage. It's a large amount of work.
Local legal newspapers, also available online. The Trustee, Executor, or personal representative's first duty is to give notice in a legal newspaper. It's a notice to the creditors, also called an estate notice, and will provide the Trustee's name and contact address. But by the time some of these announcements become published, the property has already been sold.
These two methods are time-consuming and not altogether efficient.
Use investment software that automatically complies the probate leads into a report and cross-references it with comparable sales, trustee names, and contact information. The software also sends direct mail with pre-written letters, or you can upload your own.
Send a letter to the Trustee, including a business card, and use a handwritten script on the envelope. It's essential to address the letter like this: Mary Smith Trustee will ensure that your letter gets opened. It doesn't matter which color for the envelope you choose; keep it neutral and professional. And do not put a return address or the name of your company on the outside of the envelope.
Also, make it short and sweet; keep it real. Introduce yourself and state you are there to help and eliminate headaches. Your specialty is probate real estate investing and that you want to buy the property in as-is-condition, empty, or full to the ceiling and that you will do it fast so that they can settle the estate.
Call the Trustee. It's essential to make contact as soon as the probate property becomes listed in public records. However, probate is a delicate matter, and the Trustee needs respect and kindness. It is a difficult situation they are experiencing, and you must show them that you are there to help.
Build relationships with probate attorneys, send them a letter saying you're an experienced investor. Also, tell them that you just closed another great probate real estate investing deal and that you're looking for more. Please don't use the same letter you sent to the Trustee; instead, dress it up and make it professional.
Inspect and know the value of the property. Get comps because, almost always, you'll buy in as-is condition.
Some probate real estate is ugly and smelly but usually needs trash out, with a little cleaning and improvement before renting or placing back on the market. Donate the house contents, get a tax write-off, and the charity will usually box and carry it all away. + You're recycling and keeping it out of our landfills.
When an individual dies, and there isn't a will bequeathing their property, then the estate referred to as intestate. When this happens, it becomes mandatory for the court to step in and administer the property's sale.
Avoid these probate properties because of the drawn-out, lengthy court process. To keep your profit margins high and your marketing costs low, apply the 80/20 rule here and skim the cream. Concentrate on the currently available properties without jumping through time-sucking hoops and court approval.
As you become familiar with probate investing, you'll understand the importance of asset protection strategies and recognize the necessity for pass-through entities that will let your heirs avoid the probate process and taxation.
Besides making a profit, you'll also find that one of the most gratifying moments in probate real estate investing is when you help the heirs finally find closure.