The Secrets About Foreclosure Real Estate
The answer to this question is, ‘It depends?’ There are all kinds of foreclosed properties out there. Some can be quite profitable if you are prepared to invest the necessary resources to repair them, while others are simply not worth the effort.
So the short answer is, foreclosed properties are worth it, but only if you can find the right ones.
For example, an ICDAR member once bought a very old (and quite frankly dilapidated) foreclosed house in a relatively good part of Miami. He decided to renovate it and then flip it for profit. It worked and he got a lot of money from his investment.
Another case involved an ICDAR member who simply held on to certain low value properties in an underdeveloped part of town.
Three years later, the market value for those properties jumped up because of increased investment and he was able to sell the properties without even having to repair them.
However, there were also cases where we ended up investing in properties that were in declining neighborhoods or had serious problems. These houses were a net drain for many ICDAR members, and we had to let go of many of them. It was a difficult process, but these were learning experiences for most of us, and they have allowed us to make more money in the long run.
We’ve had a lot of experience buying and selling foreclosed houses, and we want to share some of our experiences with you. So if you think this approach is ideal for you then here’s what you should know.
Where to Find Foreclosed Properties?
The best way to find foreclosed or pre-foreclosed properties is to befriend the people who do the foreclosing. These are usually people work at banks and financial institutions.
You can also approach people who work at the local government and housing authorities as well as people who process most foreclosure cases.
If your local financial institutions can’t help you then the next best thing is to consult local lawyers, contractors and government workers. Some of them occasionally work with financial institutions to work out certain debts.
Finally, you should also reach out to local journalists. Most journalists who work for small, local publications have a lot of contacts, and they can tip you off on where you are most likely to find foreclosed properties.
How Do You Make Money From Foreclosed Properties?
There are several ways to grow your assets through foreclosed properties, and here’s what they are:
- Buy and Hold – The goal of this strategy is buy a property and hold it in reserve until its market value increases. For example, if the foreclosed property is located in a rapidly developing part of your city then it will likely rise in value in the coming months or years.
- Rentals – If you can’t sell a foreclosed bit of property for nice stacks of cash then the next best thing is to rent it out.
This is a particularly effective strategy for those properties located in areas without any significant growth or development.
- Rehabbing/Flipping – Some foreclosed homes cannot be sold at a profit unless you are prepared to renovate them, and this is where house flipping comes in. If you are prepared to repair or even renovate a damaged home then you could sell it well above its previous market value.
- Reselling – This strategy involves buying foreclosed properties well below their market value and then selling them at a slightly higher price to other real estate investors.
You won’t even need to do any repairs. You just need to sell them to another real estate investor who wants to flip or rehab the property.
- Pre-Foreclosure – This strategy involves approaching homeowners who are facing foreclosures, and offering to buy their properties from them. Under such circumstances, the seller usually sells the house at a very low selling price, so that he can cover his debt and find a new house as soon as possible.
This may seem callous or even exploitative, but you can make the whole situation better by giving the seller a better offer than what he expects.
Finally, it’s worth mentioning that investing in foreclosed properties is always risky, but they can also be very profitable, particularly if you can find houses that show plenty of promise.