Part I

Say you are in a small town in the south. In fact, let’s say you are in Arkansas. And in Arkansas they have a lot of pre-foreclosures with small equities, like $3,000.00-$4,000.00 equity. Is there anything there worth fishing?

It depends. This answer may seem vague, but you need to look for several different angles.

We need to think of this the same way we think of military location, because this is also true in military towns. Think about it. You know they finance them pretty much 100% when they buy them. Sometimes they gain a little value and the militaries got to go and they don't have much equity in them and they really don't want the hassles. So it is very common in areas, like San Diego or even Jacksonville, where they have a lot of military. Think about wherever there are bases or even army bases.

With that being said, what I would look for are the following things.

Number one, you want a good low monthly payment.

I don't want a payment that is even close to what I can collect on rent. What you will have to obtain is at least $100.00 a month cash flow even on the lower-end houses (which is what you have in Arkansas). Why so little? At least $100.00 a month cash flow because cash flow is not profit. And before I go any further with this, I need to reiterate something that is very important.

You cannot forget this point-that is not your money!

Keep in mind, that money might be in your bank account but that is not your money because the monthly cash flow is going to be demanded back by that property sooner or later. So, if you do buy these kinds of deals, you need to leave that monthly cash flow alone and let it provide for the time when your property is going to demand it back.

The second criterion is you want the property in excellent condition. You just cannot buy a property with $5,000.00 worth of equity in it, and spend $3,000.00 on it; that just doesn't make any sense now, does it?

Are you with me so far? In part II we will take a look at the third and fourth criterion to decide if this is the best choice for us.