In 2008, all real estate investors will receive a big fat 'F' for their efforts. But that 'F' doesn't stand for failure, as it does in high school. Here, it stands for Foreclosures.

So why do real estate investors receive an 'F' for foreclosure in 2008? Because there will likely be more foreclosed homes on the market in cities across the U.S. this year than any other year in history.

Of course, if you've been reading the newspaper or watching the news on television lately, this won't come as a shock to you. After all, once you get beyond the war in Iraq, Britney Spears' latest meltdown, and the presidential campaign coverage, the most common news utterances are "subprime" and "foreclosure."

But for the prospective investor, the mere presence of foreclosed homes is not enough to ensure success with this type of investment. Savvy investors know there are three other things needed to purchase one of these properties, so they will make sure these critical ingredients are part of their "toolkit."

So what are these three essential ingredients of the investor's toolkit? In no particular order, they are (1) foreclosure listings, (2) readily available financing, and (3) procedural awareness. So let's take a closer look at these tools:

1. Foreclosure Listings

Before the investor can even evaluate a foreclosed home (much less try to purchase the home), he or she will need to know about the listing to begin with. This is where foreclosure-tracking services come into the picture. By subscribing to one of these web-based services, you can receive email notifications about homes going into foreclosure in your area.

There are two reasons it's essential to have good data about local foreclosure activity. The most obvious reason is that, as stated, you cannot move forward in the process until you know about a listing. The second reason that good data is important has to do with the competitive nature of real estate investing. After all, with all the coverage the foreclosure situation has received, you can bet there are plenty of other folks looking to buy a foreclosed home in your area (with the ultimate goal of getting a property for less than market value).

So by having constant access to foreclosures listings in your area, you will be better able to move on the properties in a timely manner. And when it comes to purchasing these homes, timing is everything.

There are quite a few foreclosure-tracking services online today. These services will monitor activity in your area and notify you about local homes going into foreclosure. Two of the most popular services are Foreclosure.com and RealtyTrac, mainly because they both combine good data with easy-to-use websites. The last time I checked, both of these services offered free trials, too. So I recommend doing a free trial of each service to see which one suits you the best.

2. Readily Available Financing

We just talked about the timing factor when buying a foreclosure property, and how you will likely be up against other investors in your area with the same financial motives as yours. This is why it's also essential that you have ready access to financing. If you attend a real estate auction to bid on a home, but you haven't yet secured financing for the property, I can practically guarantee that you'll come away empty-handed.

In fact, there really isn't much point to shopping for a foreclosed home or attending a real estate auction in your area until you have your financing lined up. That's why this is one of the three most important items in the investor's toolkit.

3. Procedural Awareness

Foreclosure procedures can be fairly complex, and they usually vary from state to state. There is no "one size fits all" process in this country. The foreclosure laws and procedures in California are probably vastly different from the procedures in Virginia, and so on across the country.

So before you plunge into this world of real estate investment, it's a good idea to do a little homework first. Start with your state's laws on this subject. The goal is not to become a foreclosure lawyer, but merely to increase awareness of how the process works. For instance, did you know there are normally several stages leading up to a final foreclosure? These stages vary from state to state, and in many ways. So you need to understand how the process works in your city, county and state.

You can learn a lot from reading books on the subject, and by checking out your state's website. But in my experience, state law documents are meant to be understood by lawyers, and not "common folks" like me. I find them to be about as understandable as Greek -- and I do not speak Greek.

So perhaps the best way to learn about applicable laws and procedures in your state is to seek out a mentor. Find somebody who has purchased a foreclosed home in your area, buy them lunch and pick their brain a little. You'll gain some great insight in the process!

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