I try to create articles that will last for a while in terms of relevance, but…
Announcing a new affiliate partnership with Forclosure.com by way of this article.
Since I began thinking about real estate, I wondered how to get into foreclosures. In case you don’t know, foreclosure is a legal process by which a lender, typically a bank or mortgage company, takes ownership of a property. The unfortunate part is that it’s usually from a borrower who has failed to make their payments. If your heart is in the right place though, you can turn a nice profit and maybe even help someone through a tough situation. It’s important to note that investing in foreclosures can be risky and requires careful research. You need to have knowledge of the local real estate market, and understanding of the legal and financial implications. Here are 3 pretty effective strategies, with the second one being the most common I’ve seen.
- Buy and Flip: Investors purchase foreclosed properties at a low price, invest in renovations and improvements to increase the value, then sell for a higher price. This strategy requires a good understanding of the local real estate market, renovation costs, and the ability to accurately estimate the after-repair value (ARV) of the property. You should be adept at fixing up a property or at least have a team in place. You also need to move fast. With this strategy, the longer you hold a property the more money you lose. Again: Know the market! Location must support your asking price.
- Buy and Hold: Some investors acquire foreclosed properties with the intention of holding them as rentals. This strategy can provide steady income, and over time, the property may appreciate in value. Knowledge of how to deal with renters is key for this approach to succeed. This is where you might be able to right the scales, by renting to the existing home owner. You could even sell the property back to them indirectly. A family member with better financial standing can assume payments or take out a loan. Concentrate on the possibilities, not the obstacles.
- Wholesale Deals: Investors can find distressed properties in pre-foreclosure, negotiate a purchase price significantly below market value, and then assign the contract to another investor for a fee. This method requires strong negotiation skills and a network of potential buyers. In a situation like this a team of investors can share the risk and rewards. You could make a premium as the original purchaser, then assemble your investment group to handle the repairs. OF COURSE the group should call Dominique Rowland to represent them as a realtor 😎
Contrary to what some may believe, banks are happy to sell any foreclosed property. What might be considered a “home” to someone else is simply a ledger entry on their books, not generating loan income. From a legal standpoint the previous owner is a non-issue, but too many years in healthcare have made it so I always consider all sides of a transaction. To me it’s not a “WIN” unless everybody wins. Don’t leave things to chance. Go into every situation knowing exactly what you want, and graciously accept (don’t chase) anything beyond that. This is how you can win at anything, without giving in to greed.
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