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Investing in Real Estate for flips, long term holding or just for tax benefits is nothing new. I have been doing this for 30 years. We all know you can leverage with Real Estate and earn fantastic returns along with tax benefits. The difference and what I want to talk about is investing in a special niche of Real Estate which most stay away from. This niche is Probate Real Estate Investing.

I have been Probate Investing since 1987. Let me explain the process and why it has been so lucrative but for so few. When a person passes, if they don’t have a living trust then their estate must be probated in order to pay off creditors and transfer the assets to the rightful heirs. This is a time consuming process which is very hard on the family and on average runs for 4 months plus.

Now, the real estate in an estate is usually the biggest asset and is going to be sold to settle the estate and disburse the net dollars to the heirs according to the will of the decease. Sounds simple doesn’t it but in reality this process is the most stressful and time consuming event in most people’s lives when they are the Executor of an Estate. The responsibility the Executor has is almost unbelievable especially when this person most likely has never had to do anything like this. There are time lines and requirements they must adhere to, assets to first find, then appraise, manage and finally disburse to the heirs. There is limited help from the Estate Attorney representing the family as most tasks are handled by the Attorneys Para-legal and the Executor is usually kept in the dark. I have seen this predicament a common denominator with Executors in probate.

There are two processes in Calif one may probate under. The old law is a dinosaur and basically handcuffs the Estate as far as the Real Estate to be sold is concerned from attracting only Wholesale buyers. The other process is the done under the Independent Administration of Estate Act which allows the Executor to treat the real estate to be sold like a regular home sale with a few exceptions. A much easier process and also enables retail buyers who have interest in the Probate Investing to bid. I could go on and on regarding this process but I think you can understand. States other than Calif will have a process equal to or less than Calif’s Probate process so once you understand Calif’s Probate process, it’s usually just a small adjustment for a different State. During the 90′s most estates where processed under the old probate process in my area and in my opinion it was to keep any liability off the attorneys for allowing a property to sell to cheap with a possible complaint later on form the heirs. There is really no other reason to go through the old court confirmation process when selling a home in probate other than this. In today’s Probate world, probably 50% are going through the I.A.E.A which is where we want to be but many are still being probated under the old process.

For those in the know, you can purchase probate property early in the process and control the sale. I can dictate which probate process the sale will conducted under in my offer and I’m usually the only one approaching the Estate. I’m there the week the probate file is opened at court which is before most tasks have been completed. This has produced many wholesale buys for my investors and I over the years and here is the reason why I love Probate Investing.

Executors want the probate RE off their plate. They are worried about a vacant property being vandalized, maintenance to be performed, and in many cases they have moved into the home during this process. What we bring to them is peace of mind by buying the probate real estate and taking the biggest head ache off their shoulders. Also, this is Free money and even though they are selling to me at a discount, the proceeds look mighty good to them and the heirs not to mention the biggest asset now in cash. Buying probate property with the right game plan and know how can mean $50K profits (90 days) if you know what you’re doing. Plus many don’t understand the Probate process or options so stay away. Unlike foreclosures there are no lists which tell you which properties to approach.

I also love Probate Investing because we don’t purchase blind like many foreclosures plus the properties are usually in great shape as it’s not a distress sale. For 20 years I have enjoyed probate investing and it still amazes me today that most of my fellow agents and investors shy away. I’m not complaining…

In my opinion Probate Investing is the best opportunity to purchase single family and 2-4 unit real estate at wholesale prices and flip. This can also be a great way to accumulate rental properties buying with a 15-25% equity position the day you close for long term investing.

For you Real Estate agents Probate Real Estate is a great way to increase your yearly commissions just listing and selling probates and providing help to the Executor in selling. I have kept busy from an investor and agent standpoint working probates. In fact through the 90′s I worked about 10-15 hrs per week and earned more than my real estate practice paid me working 60hrs per week.

Every now and then persons trying to make up their minds where to put their money ask me if real estate ventures are more or less profitable, compared to other businesses opportunities around.

My response is always that apart from its potential for yielding significant profits, investing in real estate often confers long terms benefits.

I discuss five such advantages below:

1. You Can Refurbish (to Enhance the Value of) Real Estate
After you buy a stock, you hold it for a period of time and hopefully sell it for a profit. The success of the stock depends on company management and their corporate success, which is out of your control.

Unlike other conventional investment instruments, like stocks, for instance, whose rate of returns, depend on third parties (e.g. company management), real estate investments are directly under your control.

Even though you will not be able to control changes that may occur in demographic and economic aspects, or impact of nature induced changes, there are many other aspects that you can control, to boost the returns on your investment in it.

Examples include aspects relating to adding repairs, or improvements/enhancements to the physical property and tenants you allow to live in it.

If you do it right, the value of your investment will grow, resulting in increased wealth for you.

2. Real Estate Investing, When Done Right, is Proven to be Profitable Even During a Recession (like the one we’re in right now)
It has on several occasions, been used to effect a bail out, from financial setbacks, such as those that many have experienced during the economic downturn happening in Nigeria today.

A considerable number of clients have confided in me that due to the present economic situation, they are not sure of profitable channels to invest their money. Some of them are done with bonds and treasury bills, but are in dire need of a new investment.

We had extensive discussions, and based on my expertise as a real estate consultant, I recommended landed property investment, as the most suitable and secure alternative channel of investment.

This is because, even if all businesses crumble, land will always appreciate greatly. Then to drive my point home, I ended by sharing the following apt quote, by a former American president:

“Real estate can’t be lost, nor carried away, managed with reasonable care, it’s about the safest investment in the world” – Franklin Roosevelt.
Not surprisingly, the client chose to take my advice – and signed up: it was the obvious, common sense thing to do!

3. Real Estate Investments Are Immune to Inflation
In other words, investing your money in ownership of viable real estate can protect you from the harsh effects that inflation usually has on other conventional investments.

This is because the value of real estate generally tends to rise in positive correlation with inflationary pressures. This is why property values and rental rates go up with rising inflation.

The nature of real estate, therefore affords owners the unique advantage of being able to adjust the rates they offer, to match inflation.

Monthly rents for example can be raised to compensate for inflation – thus providing a cushion effect against inflation induced losses that other monetary investments suffer.

4. Real Estate is Uniquely for Being Universally Acceptable as Collateral, Towards Securing Funding from Banks
Today, real estate in form of either building or lands, with proper titles (i.e. Certificate of Occupancy – aka “C of O”) is the most recognized and accepted form of collateral in Nigeria – and some other parts of the world.

It has the unique feature of being able to protect the interests of both the borrower and the bank (that’s doing the lending), so that funds can be released i.e. after due verification, and terms and conditions are agreed.

This is one of the key advantages a private C of O has over the global C of O, because the former (i.e. private C of O) is what will be needed by the intending borrower, in the event of any future financial dealings with bank in Nigeria.

5. Real Estate Investing Allows Use of Other People’s Money
In other words, you can do it even if you do not have enough money. You just need to know how.

This is possible because real estate is physical property or what is called a hard asset. That is an attribute that makes it attractive to financiers i.e. people with money to invest.

This is why many times real estate products are bought with debt – unlike conventional investment products like stocks which are NOT tangible, and therefore perceived as being more risky to invest in.

So real estate investment can be done using cash or mortgage financing. In the latter case, payments can be so arranged to allow payment of low initial sums, provided by you or a willing third party.

Those payments will be happening on landed property which will continue increasing in value throughout the duration of such payments – and indeed beyond. That further inspires confidence in the minds of those financing the acquisition, that their investment is safe.

Little wonder that real estate investing has continued to prosper for so long!

[A WORD OF CAUTION] The listed benefits notwithstanding, I still tell prospective investors that due diligence is a crucial requirement for succeeding.

Whether you do everything yourself or use industry professionals like me, it is imperative that you exercise caution and arm yourself with relevant information and education.

This is something I advice my clients to do all the time, so they can make good decisions in investing.

The importance of the above cannot be overstated, especially in Lagos where quite a number of individuals, have had their fingers badly burnt, because they failed to take the needed precautions.

My purpose is to help clients avoid having such horrible experiences, by bringing my years of experience in this field to bear in serving them.