There are five basic tools required for successful foreclosure investing.

1. A notebook (I like the subject notebooks, wire bound on the side)
2. A pen kept in your car (maybe two, cars seem to eat pens)
3. A calculator (Nothing too fancy, just to do simple figures without making mistakes)
4. A Thomas Guide (This is the best way for finding locations and directions)
5. A mind willing to change behaviors and to learn new things.
The first three are fairly self-explanatory, you aren't going to be able to remember everything you see and everywhere you've been, so you'll need to make notes to refer to later, the calculator will help when you are running numbers on a property.

Let's start with an exercise in behavior. Take your Thomas Guide and follow the routes you take to go to work, go to the bank and go to the grocery store. How many neighborhoods do you drive by that you never actually drive through? How many streets with how many houses are there that you haven't seen in the last six months or last year? For the next week, leave for work 15 minutes early, pick one of those neighborhoods and drive through as many of the streets as possible at a fairly slow pace. LOOK at the houses, what condition are they in, how are they maintained, what kind of cars are in the driveways, do a lot of people park on the street? Any houses that are listed for sale and have flyers in front, you should stop, take a flyer and take note of the condition and appeal of the home. Then, after work, do the same thing in the same neighborhood on your way home. Need to buy groceries? Drive through a local neighborhood on the way. Same thing on the way back.

If you always take different routes and see different neighborhoods, you will begin to see properties that don't fit in with the neighborhood. It might be the lawn isn't mowed or perhaps it's not maintained the same as the others, maybe there are too many cars parked in front or sometimes the house just looks empty. The point of the exercise is to train your eye and your mind to always look for property that doesn't quite fit with the surrounding homes. You take a flyer from the listed homes to start to build an idea of what homes might sell for in that area. Each day, switch to a different neighborhood, you'll see differences between neighborhoods and individual properties will start to stand out more when they don't fit the neighborhood. As you become more practiced, look at the style of building in each neighborhood. Does the style and quality of construction conform with the other neighborhoods you've seen? Even if all neighborhoods are maintained virtually the same, quality of construction can vary widely between adjacent neighborhoods. The ability to drive into a neighborhood you don't know and fairly quickly determine housing quality in relationship to surrounding neighborhoods along with establishing an individual property's quality to it's neighborhood is essential for successful investing. This will be discussed more in following chapters, but for now, start using tool # 5, your Mind.

What else can a Thomas Guide show you? Things look very different when you look at a detailed map versus driving in the same area. Look at streets and areas you know well. Identify the neighborhoods and how they change throughout the area. Major streets divide neighborhoods, neighborhoods usually get more desirable as they get closer to amenities (parks, open space, golf courses), they usually get less desirable as they get closer to impacts (freeways, commercial areas, high density residential). Look at your area on the map, and then drive your area looking at the housing. Does it hold true? Sometimes it's just a little less maintenance, perhaps there are more rental properties than in other areas, but you will find that prices will also be lower for impacted properties. Properties nearer amenities will usually be highly maintained and sell for neighborhood top dollar.

If you've gotten this far, the two biggest problems of "I don't have the time and I don't have the money" have been addressed. 1. You can begin to learn about property and it's values by taking just a little extra time each day when you are going to be driving anyway. 2. You shouldn't have spent more than $35.00, most of that for the Thomas guide. Continue with driving different neighborhoods, expand into new neighborhoods and remember, you can't see what's there if you're driving 45 mph.

You've got a house, now the question is "What to do with it"? The best first step is to evaluate the neighborhood. If the neighborhood has shingle roofs, vinyl floors and basic amenities in the homes, you don't need a tile roof, ceramic tile and gold plated fixtures. The objective when doing a quick cost-effective rehab is conformity with the neighborhood. Carpet, paint and some landscape are almost always a requirement to freshen the appearance of the property, after that, your rehab should focus on getting the most improvement for your investment dollar.
Structural Rehab- I strongly advise against a new investor purchasing properties needing structural rehab. If there are sagging floors, cracked foundations, fire damage, un permitted structural changes, water or dry rot damage, stay away from the property. While these kinds of property can be purchased very often way below market value, the rehab cost to bring them back can make your investment a non-profit effort. The difficulty in evaluating cost of repairs means this type of property should be left to more experienced investors and contractors.

Beginning Cosmetic Rehab - You've evaluated the area and know what the house SHOULD look like, now how do you get it there? If you start on the outside first pruning back overgrown trees, cutting shrubbery back and getting any lawn back to a normal height, that's the first step. Watering on a regular basis after your trim back will allow plants and trees to start to grow in an attractive fashion. You start with vegetation first, because you can control the speed of interior projects, but you can't make plants grow any faster. A freshly painted exterior on a home greatly improves its curb appeal. Since you have the existing plants cut back, now is a good time to proceed with exterior paint. Again, keep in mind you are looking for conformity with the area, colors should be in the same range as other area homes.

Inside Cosmetic Rehab - There are three basic inside area types - kitchen, bath and living. Kitchen is the most expensive to rehab, bath is the second most expensive rehab and living areas are fairly inexpensive to rehab.
Starting with basic living areas, pull the carpet from each room, roll it and store it in the center of the living room. You can leave the padding. It's much easier to paint without carpet, the living room is usually the largest room and closest to the front door. The new carpet installers will haul it off when they install the new carpet. Window coverings, electrical outlet covers, switch plates, light fixtures, doorknobs and hinges can all be pulled. Please keep in mind the power should be turned off at the breaker box anytime you are working around electrical fixtures and outlets. Mark all the doors on the top edge (no one ever sees the top) identifying which room they belong to and put them all in one room. You should be able to see every imperfection in the walls at this point, now is the time to patch, clean and prep for painting. Mask off doorframes, cabinets and window frames. When you've completed the prep, start the painting. Sprayers are the fastest method of applying paint, since the house is gutted, over spray isn't a major problem except around your masked areas. Ventilation is important though, so you'll want open windows wherever you're working. Living room first, then bedrooms, hall area last. Re-inspect each room 1-2 hours after painting to make sure everything is covered and even, retouch any problem areas.

Time to get an accurate count of outlets, switches, hinges, knobs and light fixtures. Go through the whole house counting everything you removed or will remove. Every light switch and cover plate should be replaced along with all outlets and plates. Every living area light fixture (don't forget bulbs) should be replaced, determine whether kitchen and bath light fixtures need replacement or are serviceable. Every door will need new hinges and a knob. Do you have to change everything? Maximizing returns is about impression. Used hardware will be discolored, scratched, have paint on it and not match throughout the house. A new knob (with striker plate) and hinges, a new light fixture, new switch, outlets and paint should cost less than $60.00 per room. For a standard 3 bedroom home that's $300.00 for the living type areas. Everything will match, be brand new and make the home much more desirable.

Doorframes, windowsills, cabinets and doors are usually going to be semi-gloss enamel paint. Since you are now done with interior wall paint, lay doors (in the door room) on the floor, 3 or 4 at a time. Prop one end up about six to twelve inches and you can spray one side and the two edges people see. Keep over spray off the walls. When they are dry, flip them over and do the other side. Brush or use a small roller for doorjambs and cabinets. Install light fixtures and outlets while paint dries, as doors dry, take them back to the room where they belong. After doors and jambs are completely dry, they can be re-hung and hardware installed. There's no need to rush, you can complete painting and installation as you rehab the bathrooms.

Bathrooms need individual attention. In many cases, fixtures have been upgraded through the years, so a full gut and rehab isn't necessary. Use your judgment. It's easier to paint and replace flooring if the toilet and any sink cabinet are removed. Re-install with new plumbing and seals and you will have a fresh bathroom with no water leaks or built up corrosion. New handle sets and/or spouts will sometimes be enough so you don't have to replace everything. Cabinet handles and hinges should all be replaced. Flooring and paint should be the same if there are multiple baths, often there will be different fixture styles in each, that's fine as long as everything matches in each.

At this point, you need to clean all the windows in the house, inside and outside. Pick up anything remaining in the rooms and take it to the kitchen or remove it from the property.

Kitchens are important. Clean and paint is the first step if you are keeping the existing cabinets. If existing cabinetry can be salvaged by intense cleaning and/or refurbishing, that will be your biggest cost savings. Cabinet handles and hinges should be replaced unless the existing ones are in extremely good condition. Counter-tops (if ugly or damaged) can usually be changed fairly easily; professional installation is worth it for a finished appearance. Flooring should be installed after any necessary cabinetwork, whether it's cleaning, refurbishment or replacement. The sink should be free of stains and corrosion; the plumbing underneath should be the same, if it's not, change it out. Clean and put down shelf paper in all the drawer and cabinet interiors. Make sure the lighting is adequate, if not, change fixtures or have additional fixtures professionally installed. If the oven or stove needs replacing, there are stores that sell used appliances; these can be a good deal.