Investing In Foreclosures

Investing in foreclosures

There is money to be made in the real estate market by investing in foreclosures. When you choose the right property from the list of distress homes the profits can be very good. This is why so many people are getting into real estate investing. Real estate investing should be considered a business. When you run a business there are risks involved. You can keep these risks to a minimum when you know the laws.

There are many laws governing how a distressed home can be purchases. The laws will vary from state to state. Just because it is legal in one state does not make it legal in another. In some states the owner has the right to reclaim their property in a certain amount of time. This is a risk the buyer takes when investing in foreclosures. Learning the laws for your area is simply a matter of calling the local clerk's office. The people in the office can tell you what guidelines need to be followed when investing in a distressed property. Although they are not allowed to give legal advice, they can let you know procedures which must be followed. Failing to follow these steps could cost you the property.

Finance companies are allowed to foreclose on a property when the owner misses their payments. Once the loan is declared to be in default the finance company will normally step in and repossess the property. This property is then sold to the highest bidder at a sheriff's sale. Most of these distressed properties will sell for two thirds of the appraised value. You can find some great bargains at a sheriff's sale.

Once you find the property you wish to purchase and successfully bid on it, the next step is deciding what to do with it. You can flip the home. This means you put it back on the market after a few repairs. You can also keep it as a rental property. Whether you want to become a landlord or not is entirely up to you. You will be responsible for the maintenance and upkeep of the property. You will also have to pay the insurance and taxes.

You will find foreclosures listed as REO's with some of the banks. REO means real estate owned. There are some finance companies who will work with you to sell the property before it reaches the sheriff's sale. The banks do not make money on a vacant property. They do not like to keep an inventory of properties on the books.

Many investors feel that a 10% return on a property is good. Others feel that investing in foreclosures will net a larger profit of 30% to 50%. In many cases this is true. You will have to determine what the property can produce to determine if it is a good investment. Buying distressed homes in a distressed area can cost more money than it is worth. You do not want to buy a home in an area where the last home on the market took a year to sell. There would be very little profit from a property like that.

As you become more experienced investing in foreclosures, you will learn what is a good property and what is a bad one. You will get to know the market and realize what is a good area. You can increase your profits by choosing a marketing niche when buying. This may mean only buying homes you can sell to seniors. You may choose to only buy multi-family properties. Only you can decide what to do when you are investing in foreclosures.

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