If you’ve been eagerly watching the real estate market, you must have observed the rise in foreclosure inventories. Does that mean it’s the best time for an investment? Yes, it is! 2015 is a great year to invest in foreclosures; however, we suggest you don’t dive in just yet.
Not every foreclosed property is a great deal. You can adjudge its worth only by calculating your financial input on the property and the profit / loss you are likely to make from its sale. Once you’ve found a foreclosed property where the numbers will work in your favor, that’s the right time to go ahead with the investment.
Turning a foreclosure investment into a profit is easy, provided you follow these 6 tips for successful foreclosure investing.
1) Get a Head Start
Even if you’re planning to invest in the distant future, it’s a good idea to start tracking distressed properties now. This gives you a practical idea about the workings of the foreclosure process. Go to auctions only to observe, and speak to local real estate agents to better acquaint yourself with the process.
2) Keep your Ears Wide Open
Often, the best leads are those which reach you through word of mouth. Distressed properties which have been mentioned in public records, advertisements and real estate listings will have other investors diving into the deal head first. By keeping your ears open for foreclosure news (especially in your own neighborhood), you can start preparing before other real estate investors get wind of the distressed property.
3) Plan your Strategy
Devise a cost-effective plan for purchase and renovation of the foreclosed property before you place your bid. You’ll be wasting precious time, funds and effort if your financial input outweighs your selling price.
4) Be an Opportunist
The best time to contact the homeowner of the distressed property is prior to the foreclosure sale. This is before the NOD (Notice of Default) appears in the papers. This strategy works well because there is not much competition to deal with at this stage, and the homeowner, too, will want to get rid of his debt in whatever way he can before the tedious foreclosure proceedings begin.
5) Set Bid Limits
It is easy to get carried away in an adrenaline-infused bidding war and bid higher than you had intended to. Therefore, it is essential you research the property and set a limit based on the highest price you can afford to pay, considering at least a 20% profit.
6) Focus on One Property at a Time
If you’re already an established investment professional, it is alright to spread your wings wherever you sense opportunity. However, if you’re still a beginner, focusing on one property at a time is the best way to ensure you’re thoroughly involved.
Achieving success in real estate investing is easy; it’s all about investing in the right property in the right place for the right amount and at the right time.
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