Foreclosures are on the rise in the United States. The decline in the real estate market presents a golden opportunity for investors to find great deals everywhere. You can make a million dollars investing in foreclosures, even in this market, if you follow the plan that I have outlined below. But do understand that you will not become a millionaire overnight. It could take you twelve months or twelve years. But if you are persistent and willing to learn from your successes as well as your mistakes, then you can and will reach your goal.

Before I enumerate the steps of the plan, just realize that all you have to do to make a million dollars is flip 50 properties at a net profit of $20,000 each.

50 x $20,000 = $1,000,000.

Now it's up to you. Can you do 50 deals in one year? That's one deal a week for a year, plus two weeks of vacation! (Mind you, you will not necessarily cash out on those deals in that year. But you can most surely get into 50 deals in one year. Or can you do one deal a month? That's 12 deals a year x 4 years = 48 deals... Just a little over 4 years to acquire your properties. You could be a millionaire within 5 years then. If you can only do 1 deal every two months, give yourself about 10 years... You get the idea!

1. Subscribe to a foreclosure listing service. Don't waste time researching deals manually by visiting the courthouse, reading the legal notices section of the Internet. If you want to become a millionaire in this lifetime, you need to outsource your resource. It's the principle of time versus money. You could save money but you will lose time. Wouldn't you rather spend some money in order to save time, so that you can make more money in return?

2. Get to know your local market. Depending on the part of the country you live in, this could be the county you live in or a series of adjacent counties. But the important thing is to not overwhelm yourself with too large of a geographic area, since you will be doing a lot of heavy traveling in this area, as I will be explaining shortly.. You need to know where all of the residential neighborhoods are in your area, what is the median home price of houses in each subdivision, what type and quality of houses they are. You don't need to "memorize" this, but it is good to get familiarized with the area, because that is where you will be hunting down foreclosures, and if you are already familiar with the area, it will make researching deals that much more efficient.

3. From your foreclosure list, pick the ones that are going up for auction in the next four weeks. If no auction date has been set yet, you can pick the ones that have been newly filed within the last week or two weeks. This sublist you just compiled is called your leads. Now, it is from this pool of leads that you are going to do at least one foreclosure deal.

4. You may or may not be familiar with the funneling rule of sales marketing, the 100:10:3:1 rule. For every 100 foreclosure leads, only 10 prospects will be worth pursuing. From that pool of 10 prospective foreclosures, you will end up only making an offer on 3 deals. From among those 3 deals, only one might be accepted. So it is important to keep this in mind as you search for deals. That means, that in order to make a million dollars, you can expect to do one deal for every 100 leads you research. Therefore, since you need to do 50 deals, that means you will be looking at 50,000 foreclosure leads over your lifetime. Now, depending on what part of the country you live in, you may or may not have 100 leads to look at within four weeks out and one or two weeks back. On the other hand, you might have way too many. The important thing is to prioritize leads by geographic region and by distance from your own house, and by nearness of the upcoming foreclosure auction for each house.

5. Now how do you get through this funneling process? From that list of leads, here is all you must do to find the 10 prospects form the 100 leads: Using the data from your foreclosure listing, determine the as-is fair market value (FMV) of each of the 100 leads and also determine what is the present balance of all of the mortgages on the property. Once you get these two pieces of information, simply divide the total mortgage balance by the FMV of the property. If the answer is 0.7 or less, it goes in your prospects pile. If it is 0.71 or more, it goes into the rejects pile. What you are doing here is looking for deals which have a 70% loan-to-value (LTV) or less, or if you prefer to think of it the other way, you are looking for houses that have at least 30% equity with respect to the FMV of the house in question. Why 30%? In most cases, this is minimum margin needed to make at least $20,000 net profit on a house.

6. Now that you have your prospects. Were you able to find at least 10? Don't worry if the number of prospects was less than 10 or more than 10. The laws of statistics still apply. Now what you must do is do your property analysis to further qualify these 10 prospects: Get on MapQuest, Yahoo Maps, or Google Maps, and map out the driving directions to each of the 10 houses and drive by each house! Here is what you will be doing at each house:
   1. Park the car on a street corner and look at the house. Look at the adjacent houses. Look at the neighborhood. Is it a neighborhood worth investing in? In other words, would you be able to find reliable renters or qualified buyers to buy that house in as short a timeframe as possible?

   2. Is the house vacant / abandoned or is someone still living there?

   3. What do you think the as-is FMV of the property is, compared to the other houses on the block? Does it look like it needs repairs? You should always set aside two to three thousand dollars in your budget for paint, carpeting, and kitchen appliances for each house.

   4. If the house is still worth investing in after your visual assessment and it is a vacant house, then it is a keeper. If not, then it goes in your trash pile.

   5. From the above exercise, you may have only a handful of houses left out of your pool of prospects, or you might even have none. But that's okay if all 10 houses turn out to be not worth investing in. This is a numbers game, and you'll just have to try again with another batch of foreclosures either now or next week.

   6. From the remaining few houses, you need to locate the homeowner. There are a number of ways to do this: You can send postcards to the houses and see if they come back with forwarding addresses, or you can do a free people search on the Internet, or you can subscribe to a people finder service to helps locate anyone.

7. Do some additional homework: Can you make $20,000 profit on this house? Subtract the FMV minus the mortgage balances minus a reasonable cost for minimal improvements like paint, kitchen, and carpeting ($3 to $5K is a good low-end range. That is why it is important to know the age of the house, and the square footage of the house, from your research). From this number, subtract your closing costs. If you are using both a buying and a selling realtor, the costs will be at least 8%. If you are selling to a buying agent, it will be closer to 5%. If you are doing strictly seller-to-buyer, it may be 3% to 4%. Also subtract your carrying costs. How long do you think you would have to keep the property before you could sell it? Use a mortgage calculator to determine the monthly payments you would have to make on this house each month until it gets sold. Subtract the total of all mortgage payments from your running total so far. THAT number is your net profit. If you aren't making at least $20,000 from this deal, then you need to either find a house with an even lower LTV such as 65%, or you need to buy the property and rent it out until the house appreciates in value enough for you to generate the equity necessary to make $20,000 profit. This could be months or years depending on your market.

8. Once you find the homeowner, call him or her on the phone, or if they live nearby, you can even go knock on their door. Tell them you saw that the house was abandoned and ask them if they are open to selling their house. If they say yes, they become one of your 3 finalists. From here, you need to learn the art of negotiation, Once you and the homeowner come to an agreement on the terms of the sale, you will need to do some additional homework, like a title search to ensure that you are aware of all encumbrances on the deal, get financing, and get the paperwork ready to do a deal. You might do a deal with all 3 finalists, or you might only do one sale, or you might not even do a single one and you will have to go back and find another 100 leads to research.

9. There are a number of ways to acquire financing, such as a hard-money loan or partnering up with a private investor. You could do owner-financing too, but you would want to pay the total amount past due as your down payment. And you can do the real estate property transfer yourself using a quit claim deed or you can hire a real estate attorney to do the closing properly for you.

10. Congratulations! Now that you have done a deal, you need to get right to work on your exit strategy. You do have an exit strategy don't you? More than likely it is one of four things: Fix it up and flip it. Fix it up and rent it out. Tear it down and rebuild it. Or reassign the contract.

It's really that simple. Repeat these ten steps 49 more times, and you will net a cool one million dollars.

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