What Are Zombie Real Estate Investors and Properties? (VIDEO)
If you have heard the term “Zombie” in real estate investing in most cases associated with mortgages lenders come back years later to foreclose in the event the homeowner least expects it according to the Local Records Office. Actually, it is a major problem in certain parts of the country and with some lenders, especially in Los Angeles County. Nonetheless, a Zombie Investor is a different animal and one I am seeing increasingly more.
Zombie Real Estate Investors Are Taking Over?
I guess this came to my mind last night as I answered a call from a wannabe investor. She asked in case a specific property was a deal because Realtor® said she could “steal” it from the homeowner for $6, 000 below the listing price. The Fair Market Value in the property was $125, 000 along with the listing price was $165, 000.
What Are Zombie Properties – Video
The seller had paid $80, 000 quite a while ago and completed a comfortable rehab of the property which may have cost up to $35, 000. If she distributed it for FMV, she could have essentially only broken even together with holding costs. The seller is certainly entitled to generate a profit but the wannabe investor was being seduced by the agent to adopt the deal. Again, nothing completely wrong with salesmanship, but my question to the investor was, “How will you shell out the dough, and what is your end goal with it?
Renting vs. Investing
She thought she would rent it for $1, 500 monthly which was reasonable. The next call was to tell us that she didn’t have enough money to buy it so she would use hard money. At 13% a month, the price of the money would be $1, 550/month in just interest payments or $50 over her rental income. This doesn’t take into consideration taxes, insurance, and repair expenses. This actually is a method that national gurus teach to ensure that after losing money for a long time, the investor may be in a position to sell at a higher price after rehabbing the home damage from the tenants but you would have to feed a money pit for a long time.
As I expressed my concern about her strategy along with the high price, she went into the “Zombie Rising Mode” of how she has been trying to find a deal for a year and has been unable to do so. She has had a few “mentors” including one who, following what she paid her, told her to perform nothing yet as the marketplace didn’t right. That’s a new twist on getting help from your real estate guru!
She had turned into a Zombie real estate investor staggering around wanting to make anything and everything work, constantly failing with no possibility of success on the horizon and being killed off again and again by bright shiny objects.
Zombie Real Estate Investors Don’t Listen to Advice
She went on and on regarding the courses she had taken as well as the ones she was considering. I call these the latest “Bright Shiny Object” (BSO) or perhaps the slow bleeding of fresh investors because these courses are well advertised and marketed, but provide no support to the purchaser. What you have to think about on any course is, “How’s that on your side? “, if the answer isn’t “great”.
In summary, it may be best to obtain fundamentals of wholesaling under your belt rather than starting with exotic methods that may not yield enough results before your head breaks. With wholesaling you should be able to make a steady cash flow and be able to pick and choose the best possible deals to keep for renting or for rehab projects. Otherwise, the wholesalers locally will be the ones creating wealth for you.