By Kevin Norton

Getting involved in the foreclosure market can reap great rewards, as long as you take the time you need for study, research and observation. The more you know in any business - especially foreclosures - the more success you'll enjoy.

Getting Started - Agility is Key
I first got involved in real estate in 1986 as an agent. During my first year in the industry, I noticed many investors buying multi-family properties. I wanted "in" - I didn't want to be a tenant paying a landlord's mortgage anymore.

The following year, I bought my first property - a two-bedroom condo with a minimal down payment. As seasoned investors know, the real estate market took a dive after the late 80s, when properties were highly leveraged and prices were grossly inflated. Foreclosure rates were at an all-time high, with many investors and banks failing in the process.

In response to this market change, I decided to start working with REO or bank-owned properties. I built a good relationship with the heads of a local bank, obtained their list of bank-owned property, and bought one multi-family per year from 1991-93 with little or no money down. Competition eventually heated up for these listings and deals were harder to achieve.

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Once again, I had to change my way of thinking as an investor and take a new course of action. I had to beat the competition by finding the deals before the properties ended up on the bank-owned lists. I began going to foreclosure auctions to watch and learn, to get to know the market and the people involved in it.

My First Auction
I finally pulled the trigger in 1994 and bought my first foreclosure at auction - a two-bedroom condo in a complex where I currently owned some units. The owner had sunk into heavy credit card debt. On the day of the auction, she was there and she let people in to see her unit.

I met her and we spoke for a few minutes. She appeared to be friendly and not too distressed, considering the circumstances. That short conversation assured me that if I was to be the high bidder and buy the property, I would be dealing with a pleasant tenant. The auctioneer then read the legal notices and the bidding began. In the end, I was the highest bidder.

I worked out an agreement with the owner where she could stay in the unit as long as she paid me rent while I performed some repairs and upgrades to the condo. In the meantime, she would be looking for new housing as I was marketing the unit for sale.

Within a couple of months, she found an apartment and I sold the condo for a $20,000 profit. I believe the combination of her great attitude during the foreclosure process and my willingness to help her out as the new owner were important factors in creating a win-win situation for both of us.

Due to this success, I have been buying ever since, completing 30 foreclosure sales. Money to fund the purchases has come from leveraging the equity I have in existing properties and my credit - I once visited my bank and plunked down five credit cards to get several cash advances, much to my bankers' dismay!.

Success Strategies for Newcomers
If you are considering entering the foreclosure market, it's critical to do your homework and decide if you have what it takes. The first decision is whether you want to buy at auction, which I prefer, or through pre-foreclosure by using resources like Foreclosuresmass.com.

Here are some things to consider before pulling the trigger as an investor:

• Have compassion and patience with distressed homeowners. They are in a difficult, sometimes devastating situation, and you'll have greater success if you show sensitivity.
• Visit auctions before you're ready to bid, to see how they work and who attends.
• Concentrate on a specific geographic area. I tend to stay within a 20 mile radius of my home in Quincy, because I can focus on the market conditions and get to know the realtors. It also helps after purchasing a property if you are close by during renovations or if you are serving as a landlord.
• Get to know the various zoning laws and market conditions in the market you're working. Conditions and restrictions change from town to town and sometimes even within towns.
• Build relationships with realtors who will work with you and potentially feed you deals. These connections can be profitable for you and them.
• Don't be afraid to leverage your credit and equity. It can be a practical way to fund your investments.
• Find out as much as you can about the condition of a property before buying. This can be challenging, but try to talk to the owners beforehand. Neighbors of the property can also be an excellent, honest source of information.
• Learn if the property is occupied. Unoccupied properties are best. If it's occupied, find out if it's by a tenant or an owner. This will affect what happens after you buy.
• Have a goal with each property. I tend to sell the single-family homes and condos and to keep the multi-unit properties. Figure out what works for you.

Kevin Norton of Norton Realty has his Massachusetts Real Estate Broker's license and a Massachusetts Auctioneer's license. He can be reached at (781) 677-3106 or c6nort@aol.com .

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