If you were to believe all the infomercials or blog posts about investing in foreclosures then you may think it is a modern-day gold rush. Just like the 49ers of the 1800s that were told that mountains of gold awaited them and all they needed was a pick, shovel and a ticket to California, you too can be caught up in a similar type of overblown enthusiasm.
You should know that the big buzz on home foreclosure investment opportunities came from the over-hyped and overinflated real estate market. Home foreclosure investment was portrayed as a business opportunity where all you need to do was to a buy a home and you can sell it for profit.
Now this doesn’t mean that there isn’t money to be made on investing in home foreclosures because there is. What it does mean though is that there are lessons to be learned from the people who lost the homes that you may end up buying. The number one lesson being that there is no sure thing in the real estate market. Every investment opportunity comes with potential pitfalls.
The following is a short guide to investing in foreclosures. The guide outlines the good and the bad things so anyone who reads it can have a full picture of what they’re getting themselves into so that they can avoid the pit falls and make some real money.
Buying a Foreclosed Home
There are several ways available in buying a foreclosed home. You can approach a bank that does home financing and they will have a list of homes available for you to buy. When it comes to dealing with a bank, you will most definitely need cash to buy a foreclosed property. If you do not have the cash then you may also inquire about payment terms with credit cards and collateral. The best thing to do is to meet with your bank and talk about deals agreeable to both parties.
Another way is to look for real estate brokers that deal in foreclosed properties or search for individuals or investment groups who retail foreclosed properties for a profit. You may also put an ad in the paper advertising that you’re looking for foreclosed homes or keep an eye out for foreclosure auctions.
Buying a foreclosed home is easy as long as you have the resources and time to spare.
Scouting Distressed and Foreclosed Properties
The foreclosure crisis has been going on in the US for the better part of the decade. A decade is actually an awful long time for any home to sit empty. Keep in mind that buying a foreclosed home today is essentially buying a distressed property. It is significant that you know how far you will go when it comes to a distressed property. Fear not, there are still those rare occasions when you stumble on a house that needs just simple cleaning and minimal renovations.
Buying a foreclosed home entails a lot of looking and judging of homes that are in dire need of repairs. It is common for professionals in the real estate market to look at more than 40 homes before they will decide which one they will buy. With that being said, it is significant that you have some level of familiarity with basic home repairs to easily gauge if the property is worth buying.
Getting Your Project Ready for Market
It is rare for recently bought foreclosed homes to be ready for selling. There are a few general things that you need to do to set up your foreclosed home for market. You are lucky if you’ve bought a home that doesn’t have any major structural issues that need to be addressed. If you bought a home that has surface problems such as sheet-rock repair, painting, light electrical fixture replacement and broken doors then you need to work extra hard.
One of the things you need to keep in mind is that repairs and replacements are inevitable. If possible do some repairs first instead of outright replacement. For example, if you start at the home’s roof then determine if it is still repairable and if it’s not then replace it immediately. You do not want to start doing interior work if your roof is going to leak.
Another thing to do is to address landscaping issues. Remember that landscaping improves with time and it is better to start with this task early. Home repairs should be done from the top down. Start with the exterior and move your way to interior. Painting and flooring projects is usually the last thing to be done.
Written by Justine Davidson. I am fond of real estate especially in the South Florida area. You may see some of my great picks for Melbourne, Florida homes for sale here.
Photo source: http://www.flickr.com/photos/andrewbain/3899715321/