The Free and Clear System
of Investing in Real Estate
To succeed in real estate investing, you must always purchase properties under market value. One of the best ways to do this is through the foreclosure market. Obviously, in the case of a foreclosure, the foreclosing entity just wants to get things done quickly to get its money out of the deal and move on. That makes foreclosures one of the very attractive market niches within the general real estate market. Tax sales represent an attractive market niche within foreclosures, allowing you to work with a government entity that only needs to recover the taxes owed, not the balance of an entire mortgage. The Free and Clear System is a market niche within the tax sales market.
With full implementation of the “Free and Clear System” to buying tax liens, your greatest competitive advantage is your ability to buy below market value and then market the properties you purchase quickly and inexpensively and profitably.
On the other hand, the factors that make it possible to acquire this property for pennies on the dollar make it difficult for the former owner to get rid of it. If you follow the Free and Clear system, however, you will be able to sell quickly and easily what the previous owner could not sell at all. The details of how to do that are there for you to read in the section of this Web site labeled “Selling." The selling is the is the foundation of the system, which is a three step process:
1. You buy a parcel of land substantially below its current value.
2. You immediately resell (or flip) that parcel at full market value for a profit.
3. You repeat the process again and again.
To implement this system, you simply buy tax-delinquent parcels that are so inexpensive that real estate agents won’t sell them (the commission is not worth the effort). These most often will be unimproved land, i.e., land with no structures built on it. You can find such parcels in city lots, retirement communities, recreational subdivisions, paper subdivisions (those platted but not developed yet) and rural lots and acreage. Because of the low market value of these types of parcels, the sales commissions are so low that agents don’t want to bother.
How does this provide you a marketing advantage? Often people own these parcels with no particular desire or plans to build on them. For example, Ed and Lucille may have purchased a lot at a recreational development on a lake or golf course with the plans of building a small weekend getaway house there. They may have bought directly from the builder in a controlled marketing situation with a video presentation then a one-on-one encounter with a trained sales person. Then after their purchase, life interferes with their plans: Ed gets downsized and the only employment he can find is 1000 miles away – too far for this to be a convenient weekend get-away any more. Or they divorce and have no desire to own this parcel jointly, or one of them dies, or they encounter financial problems and cannot afford to build.
If they don’t develop their lot relatively quickly, they will forget all the positive feelings they associated with it. Then the tax notices come from the county demanding $187 for this year’s property tax. They have already emotionally disengaged themselves from this land, and the tax notices are just an annoyance; they see no reason to pay the taxes, so now several years have passed and the taxes accumulate. Meanwhile, as much as they would love to get rid of the property, they don’t know how. They cannot reduplicate the marketing campaign that the seller put on to get them to buy in the first place. Real estate agents don’t want to help them. So they resign themselves to letting the property go to county auction.
Obviously, this sample scenario is only one example. Perhaps they inherited the building lot, or it was thrown in on some business deal. Regardless, if the owner no longer wants the property, as a low value parcel of unimproved land, they find it difficult if not impossible to sell.
What these people don’t know is that with the advent of Internet auction sites, unimproved land has become the easiest and least expensive kind of real estate to sell. Even in a flat market, it can be sold in just a few weeks. This is a market that in some ways resembles yard sales, another niche market created a few decades ago to allow people to sell unwanted junk. The difference is that eBay and Bid4Assets are superior market systems with more depth and breadth. This larger market offers you, the seller, more targeted buyers and the power of auction fever, where people will pay more just to get what they want. This revolutionizes the second step of the Free and Clear System, flipping the property quickly, because now you can do it online with a superior marketplace.
