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How to Profit Off Foreclosures

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How to Profit Off Foreclosures

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How to Profit Off Foreclosures

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This is Day to Day. I'm Madeleine Brand.


I'm Alex Chadwick. Bad news again today for the housing market. Sales of new, single family homes all across the country fell nearly two percent last month.

BRAND: The news isn't all bad. The median price of a new house actually rose from month-to-month, and we learned earlier this week that sales of existing homes were also up.

CHADWICK: Which just goes to show that it is tricky, these housing numbers, and it's why a lot of investors team up and they form these real estate clubs to figure out what is going on. There are hundreds of them. Day to Day's Alex Cohen spent some time with one of them here, in Southern California.

Unidentified Man: And they were bidding like there was no bust.

Unidentified Woman # 1: I heard there was no deal.

Unidentified Man: I don't know if the sales went through.

ALEX COHEN: It is a Tuesday night at a hotel in Culver City, California and a group of eager real estate investors are huddled around Phyllis Rockower.

Unidentified woman # 2: They aren't even going to appraise it, it they overbid, they aren't even going to appraise it.

COHEN: Rockower is the president and founder of the Real Estate Investor's Club of Los Angeles. Phyllis looks like an older, blonder version of Betty Boop. She is petite with eyes like saucers and bright red lipstick and it is plan to see, she loves wheeling and dealing.

Ms. PHYLLIS ROCKOWER (President and Founder, Real Estate Club of Los Angeles): It is fun, when you get a deal accepted. Then it is a really good deal. It is exciting. It is exhilarating. It is a lot of fun and then when you sell it, and you finally get it sold, you get the check and it's unbelievable check. I mean, getting checks of 100,000 dollars. It's fun. It is definitely fun.

COHEN: Phyllis has been having fun for more than 20 years now. It all began when she was living in Long Island.

Ms. ROCKOWER: We bought a house in 1979 for 82,000 by 1986 the house had been appreciating to over 400, and I said, oh my God, if only I had only had more houses.

COHEN: Phyllis sold that house, moved to Florida and invested those profits in real estate. Since then she has bought and sold hundreds of properties throughout the U.S. She won't disclose exactly how much she's made over the years, but insists she's done very well for herself.

Ms. ROCKOWER: You can do this. There is nobody who can't do this. You don't need money. You don't need credit. You just need knowledge.

COHEN: To buy and sell properties, you do need some money, but more than anything, Phyllis says, real estate investing is about getting all the right numbers and adding them up.

Ms. ROCKOWER: Real estate is about math. You have to know the math, and it's got to fit into the formulas. If it doesn't fit into the formulas, don't do it.

COHEN: For example, she says, there is a formula to figure out a property's true market value and that is a tricky one to sort out in today's world, where a lot of properties on the market are fixer uppers and home prices are fluctuating.

Ms. ROCKOWER: And so things are dropping, so if you are going to spend a couple of months rehabbing the property. In three months it's going to be worth less than it is today. So your market value is not today's market value. It is what is the market value going to be when I am ready to put it back on the market?

COHEN: Where you good at math when you were a little girl?

Ms. ROCKOWER: No, no I am not good at math. No I'm not, but this is pretty simple, it's pretty simple.

COHEN: It is not simple for everyone, which is why Phyllis has become a guru of sorts to members of this club. 35-year-old Lynette Jones (ph) has bought properties in South Carolina and in Southern California. She says she runs all her deals by Phyllis, first.

Ms. LYNETTE JONES (Property Owner): Phyllis is pretty straightforward. Sometimes I call her, hardcore, but she basically would say, you know, when I would have a real-estate situation, I'll say, Phyllis I got this great deal. She has a prospect that you actually send to her. And she's like, oh, that deal stinks, the loan stinks, you know, it is a terrible interest rate. Ah, don't waste your time. So, basically she is straightforward. You've got to have tough skin to deal with Phyllis.

COHEN: Lynette is in an Iraq War veteran, so Phyllis advises her free of charge. Other investors pay fees for her mentorship and her seminars, about 250 dollars a year. But Phyllis will give away a few words of wisdom for free. Always inspect your property with your own two eyes before buying, she says. Don't buy foreclosed properties for auctions, she warns. Buyers get carried away with bidding and often pay way more than they should.

Ms. ROCKOWER: I'll tell you an interesting thing that I told somebody to do. You go to the auctioneer after the auction and find out what didn't sell and then make them an offer. And you know what I was always taught? If you aren't embarrassed making the offer, it is too high.

COHEN: And she advises, a patient investor is a wise investor.

Ms. ROCKOWER: I own properties in other states, but I own nothing in California right now. I'm waiting. I am sitting there - Wells Fargo loves me, cause I am sitting there with all the money waiting. This time I am really going to make a lot of money.

COHEN: Phyllis says, with all the troubles in the U.S. economy right now, she thinks the economy will hit bottom soon, and she will be ready to start buying properties here in California by the end of the year. Alex Cohen, NPR News.

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