There’s been a lot of talk about the probate niche in real estate investing lately. The reason is simple: Because the owners of these properties have passed away, the executor of the will has to oversee the liquidation of assets so the heirs can receive their inheritance. Sometimes the heirs will want to keep the property in the family, but often the surviving family members will want to quickly sell so they can receive the proceeds as soon as possible. Probates lead to very lucrative deals when using the PRE-Wholesaling Strategy.
How to Locate, Buy, and Profit by Purchasing Probate Real Estate
The key to locating probate properties that you can purchase is being first on the scene. Because probate properties are such a highly competitive niche of the real estate market, it’s important that you aggressively, systematically, and professionally market yourself to those from whom you wish to buy property.
Probate property listings are published in the newspaper. Depending upon what state you live in, these listings may be published only in certain newspapers. Once you’ve located the appropriate newspaper, the listing will provide you with essential information: the name of the personal representative or the executor of the will. In addition, the probate listing will also list the name of the deceased as well as the probate case number.
Once you’re armed with the case number, you can take a drive to your local courthouse and learn more about the specific case. Essentially what you’re doing is playing detective. At this point, you really don’t know if the deceased was even a homeowner. All you know is that they have a will in probate. The Probate Department at the courthouse will sometimes have a computerized database with the information you’re looking for; other times you’ll have to do a manual lookup.
The actual filing will tell you if a property owner had a home. Once you’ve verified that the deceased was a homeowner, you can locate the names of the heirs. While you’re there in the courthouse, you can find out how much the property is worth as well as whether it has any liens on it.
If your initial research tells you should move forward, the next step will be to make contact with the executor of the will as well as the heirs. It’s critically important that you professionally and tastefully approach the next of kin. You’re only going to get one chance to get this right, so if you mess up at this stage, you may as well ride out of town with your tail between your legs because you won’t be buying the property.
Put together a very professional letter that addresses the following points:
- Sympathize with the surviving family members or heirs on the loss of their loved one. While you’re interested in turning a profit and to you this is just another real estate transaction, you need to be mindful that the surviving family members are probably grieving the loss of their loved one.
- Offer to help them during this time of great loss.
- Explain in your letter that while the property is currently in probate, that it is permissible for the executor of the will to sell the property outside of probate.
- homeAlso mention in your letter that the probate process can take up to two years and that property maintenance expenses, property taxes, and insurance can continue to mount. This will eat into the proceeds the heirs will receive.
- homeOffer to purchase the property and explain that you are able to move quickly and close within 30 to 45 days.
Once the heirs bite at your offer to purchase the property you’ll need to look at it in order to come up with an offer. When you look at these probate properties one of the first things that will strike you is that many of them will be in need of updating. Because the owner was probably elderly, the houses tend to be older, with carpet, paint, and wiring that may not have been touched in years.
Whether your strategy is to fix and flip or buy, repair, and hold, probate real estate is an excellent way for you to turn a good profit from the property. Estimate your repair costs and make a cash offer for the property. Because the heirs are generally interested in a quick sale, you can generally negotiate a steep discount for the property, sometimes as low as 50%-70% of after repair value. We have seen even deeper discounts using our Pre-Probate Strategy, plus there’s little to no competition for the houses.
If your credit isn’t the greatest you can either use cash, hard money lenders, or partners for the cash you’ll need for purchase and repairs. Or, use the PRE-Wholesaling strategy. Do your due diligence and reassure yourself that the property makes sense as an investment and will turn a solid profit.
Probate property can be a great way to build wealth and help surviving family members to get on with their lives. You may decide you enjoy working the probate market so much that you opt to make it your exclusive market niche. Regardless of whether you exclusively tap into the lucrative probate real estate niche or you use it as an enhancement to an overall real estate investing strategy, probates are a great way to expand your options and create real wealth for yourself and your family.