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Make A Profit On Foreclosed Real Estate
The housing market has been in the tank for a long time now. While that's bad news for homeowners and banks, that's good news for aggressive investors who are savvy enough to snap up foreclosed real estate at a fraction of its true value, and then resell the properties for nice profits. Since I have some cash at my disposal and am unwilling to put it into the volatile stock market, I'm taking a closer look at how to take advantage of the widespread foreclosures in my area.
I've discovered that there's a lot more to buying and selling foreclosed real estate than simply swooping in with a down payment, signing the right papers, and then passing the property on to the next highest bidder. There are several additional factors to take into consideration, such as the condition of the house and lot, whether or not back taxes are owed, and other variables pertaining to the local market and neighborhood. For these reasons (and because I'm still relatively inexperienced), I'm only going to buy foreclosed real estate after I've had a chance to thoroughly research and inspect the property up for sale.
I've learned that foreclosed real estate generally falls into two categories. On the one hand, there are nice homes in good neighborhoods that need little to no repair work done. The previous owners likely fell victim to the slumping economy and the mortgage crisis, leaving them unable to keep up with their payments. While these types of properties do sell for below market value, they're still quite expensive, so the profit margin tends to be smaller.
On the other hand, there are run-down homes in poorer neighborhoods that require thousands of dollars worth of repairs to make them habitable. This type of foreclosed real estate falls in line with what most people imagine when thinking of flipping houses for a profit. These homes usually sell well below market value, but they're a risky investment because of the initial cash outlay for repair work. When handled properly, however, this kind of foreclosed real estate can yield huge returns.
Another important point I've learned about buying foreclosed real estate is that I should be prepared to hold onto a property for as long as it takes to resell it or rent it out. I have to consider the worst-case scenario and be able to pay the mortgages on all my properties for several months -- which would obviously be a significant amount of cash. It takes money to get into this game, that's for sure.
Overall, I haven't seen anything in my research that would dissuade me from trying to make a profit on foreclosed real estate. I think there's a major opportunity here and I definitely don't want to miss out!
Summary
Foreclosed real estate is one way people can make a lot of money investing. Now is the time to buy with so many people being foreclosed on and house values are pretty much at rock bottom prices. Be wary of some houses as they may need more work than others which will cost you more out of pocket than you may be anticiating. House repairs can be outrageous.
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