How to invest efficiently in real estate has been a complicated question in every one’s mind since ages. It requires financial intelligence and a thorough analysis of market conditions. Those who want to get their hands into real estate need to be well versed with the facts and figures of the market they are investing in.
According to real estate expert Jeff Adams, for the beginners one way of getting started in real estate investing is to look out for foreclosed properties in their locality.
Properties Under Foreclosure
A property which is put up for auction by the money lender because the owner of the property could not pay the mortgage is called a foreclosed property. The ownership of a foreclosed property no longer remains with the owner, it passes on to the money lender, a bank in most cases.
If the mortgage payer fails to pay the amount as per the predetermined payment schedule, then a default notice is issued against the owner which may last from few weeks to few months. After that period, if the owner is still not able to pay the mortgage money then the property will be confiscated by the lender and put for auction in public to recover the remaining mortgage money.
The selling price of foreclosed property is almost always low as only some amount of mortgage remains to be paid. It rarely happens that the mortgage amount exceeds the cost of property.
Merits & De-merits of buying Foreclosed Properties
MERITS
- Foreclosed properties are always put for auction at a considerably lower price than their market value. Hence the returns on this type of investment are higher.
- It is like a dream come true for the beginners who are searching for a home to live in as they can get a considerably larger house than what they imagined and that too at a reasonable cost.
- You have the upper hand in deciding the rate at which you want to bid for the property since it is a public auction. So choose your bids with due consideration.
- After possessing the foreclosed property you can either generate a fixed monthly income by renting it, or make a one-time profit by selling it for a higher rate.
- It will be a completely different story if you generate a full-fledged income by converting your newly owned property into a business hub.
- Most often, foreclosed properties are homes where people are currently living and hence they will rarely be in a dilapidated condition. Apart from some minor repair and sprucing up, you may not require to spend much on a foreclosed property.
DE-MERITS:-
- The money lender will also add the fees of legal procedures to the cost of the house.
- Unlike in other real estate investments, you will legally not be allowed to survey the property before buying. So you may have to rely more on your intuition in this case, as physical inspection of the property is not possible.
- A property bought in foreclosure will be handed over in as it is condition without any renovation. You, as the new owner of the property will have to incur that extra cost of renovation.
5 Tips to Successfully Buy Property Under Foreclosure
“Buying a foreclosed property is a bit nutty. It takes a chunk of your wits,” says Jeff Adams.
- Get legal approval from the court house to purchase a foreclosed property as it is mandatory in most cases.
- Educate yourself with all state laws regarding foreclosure procedures. There are always loopholes in the system. Sometimes the home owner may manage to pay for the mortgage in the middle of foreclosure procedures and you might lose out on the deal at the end moment. It would be a clear wastage of time and money.
- Closely monitor the foreclosure procedure, as to when the property will be vacated and when the possession will be handed over to you.
- Do a little bit of homework in order to know the present market condition. Pay special attention to prices of properties in the neighboring areas of the intended property. Consider the cost of repairs and renovations that are left solely on you and then compare the prices of all such foreclosure properties on your list, before deciding which one would yield maximum profits to you.
- While going for auction you need to carry some minimum amount of paycheck with you to show that you are genuinely interested in purchase. The successful bidder in the auction will sign it and pay to the lender while the losing bidders will redeposit it into their accounts.
Expert Tip: To be a successful bidder, bid early and grab the opportunity when other bidders might be just getting a feel of the event, waiting for a perfect deal. This could be your advantage.
So, while most of the people don’t step into risky areas due to fear of failure, you can just sail away smoothly with your treasure with these exclusive tips to buy foreclosed properties by Jeff Adams.
