There is a fortune to be made in what is called "bad paper."

One of the problems associated with owning rental real estate is collecting past due rent and damages after a tenant eviction. This is a topic that many landlords do not like to discuss. Unfortunately, there are millions of residents across the United States that overspend and will not be able to pay their monthly rent. Many landlords are forced to evict the resident. Sadly, this is not the end of the story. After an eviction, the majority of the residents do not pay the money they owe and the landlord is left with obtaining a judgment against the former tenant. Does this sound familiar? What I am going to share with you in this article will forever change you view of tenants and judgments.

I would like to share with you a unique money-making strategy that I use to generate thousands of dollars in extra income from tenants and judgments. Even more exciting is the ability for landlord entrepreneurs, or anyone who wants the perfect home-based business, to make several thousand dollars in additional income each month simply by helping other landlords solve their tenant problems.

Did you know that almost every landlord in America has a least one judgment against a former tenant that has not been collected. These landlords almost always assume that their judgment is worthless since, in most cases, the former tenant has "skipped" town and the landlord has not received any money from the former tenant to pay off the judgment. Here is your opportunity to make fantastic profits: buy judgments from other landlords.

This strategy involves buying the judgment from the landlord at a discount. You purchase the judgment at a discount because you need to be compensated for the risk of buying a judgment that has already shown (to the original landlord) is unlikely to be paid off in the future. Additionally, you need to be compensated for the work you will do in the future to get the debtor (former tenant) to pay off the judgment.

You should negotiate to purchase the judgment for around five to 15 cents on the dollar. So for the judgment that made me 1000%, I was looking at a judgment with a face value of $2,000. I paid $200 or 10% of the face value. I was able to collect the judgment and made a profit of $1,800 on a $200 investment. Keep in mind, the key negotiating argument is that the judgment has already proven to be worthless to the creditor (original landlord). I do caution, however, that under no circumstances should you pay more than 40% of the face value of a judgment. To be ultra safe, you might consider only buying judgments that are attached to real estate. In this case the real estate acts as collateral.

This great opportunity gets even better. Almost every single courthouse in America has over 300,000 judgments currently on record that are available for purchase and/or collection. What’s more, I did extensive research to determine that an average of 50,000 new judgments are entered in almost every courthouse each year. To top it all off, landlord entrepreneurs can go to their local courthouse and find other landlords who are willing (excited is a better word) to sell their judgment (un-recovered money from former tenants) to you at a sizable discount. You then use your knowledge to collect the judgment and make huge profits. If you don't have any money you can also collect these judgments for others under what is known as the contingency method. I will cover the contingency method in detail in my next article.