The real estate market will always experience its fair share of ups and downs. What you can control while you try to play this game to make profits is what you invest in and where you invest.
Residential property is considered as one of the best investments because no matter what the market scenario is and whether it is a period of recession or not, people will always be on the lookout for places to live in. But how do you ensure that you do not spend a sky rocketing amount on your input in this investment?
Foreclosed Properties
If you are on the lookout for a good bargain in the residential property market, the best thing that you can do is browse various foreclosed properties.
Foreclosed properties are those properties which the owners have lost out on for not being able to make their mortgage payments. Thus, when the mortgage payments stop coming in, the ownership of the home no longer rests with the mortgage payer.
Foreclosed properties are put up for sale at public auctions so that the lender can recover the amount he lent to the home owner. Only in rare cases does pending mortgage amount exceed that of the property, but, quite often the price of the property is way below its market price because the pending loan amount is that low.
Thus, when you learn that a particular foreclosed property is being put up for sale at a public auction that is the opportunity you must grab to make an investment in real estate.
What Advantage Do You Have Investing in Foreclosed Properties over Other Real Estate Properties?
- Foreclosed properties mostly sell at a rate that is much cheaper than the marker value. Thus, your input amount is low.
- Since foreclosed properties are sold at a public auction, you have control over how much you wish to pay for it and place your bid accordingly.
- When the property becomes yours, you have the choice to live in it or sell it for its market value or rent it at the market price and thus make a profit.
What lures most real estate investors to foreclosed properties is the higher level of profit that they can gain from the investment.
How to Invest in Foreclosed Properties?
1. The very first step that you must take before you make any kind of investment is conducting a thorough study. This involves:
- Making yourself aware of foreclosure laws in your state
- Studying the trends of the real estate market
- Looking at the best locations to invest in
- Familiarizing yourself with the legal aspects and procedures of buying foreclosed properties.
2. Once you find yourself a good home that you feel is worth investing it, consider its:
- Condition
- Market Value v/s Sale Value
- Proximity to geographical areas of interest
- Selling it off or renting it out after purchase
3. You need to perform a thorough inspection of the house so that you can decide your bidding price and you will also gain the knowledge of how much (minimum and maximum) it’s worth. Decide your minimum and maximum bids beforehand so that you are not overwhelmed to place a bid at the auction that you cannot afford to pay.
If everything goes as planned, you will be the proud owner of a foreclosed property.
How to Make a Profit on Foreclosures?
Once the foreclosed property it yours, you now own this “real estate” property. No longer will it have the status of a foreclosed property, but it is now yours and you may use it in any way you wish to. So how do you make a profit?
1. Foreclosed properties may need a bit of repair and maintenance work so that it is in a good condition for use. When you conduct repair and maintenance works, make sure you do only what is absolutely necessary. Do not overspend on glorifying the home because you do not know who your prospective buyer will be. Try to keep repair and maintenance costs low because the higher these costs, the more will be your input on your investment.
2. Renting out your property is a better choice because it assures a fixed income on a monthly basis for the rent you receive for your property. Also, when you rent, the ownership of the property is still yours.
3. Once you make up your input amount from the rent you receive, you may continue to rent it out, or you may sell it for a higher chunk of profit when the real estate market conditions are favorable for a sale.
And that’s how you crack a profitable deal in the real estate market with foreclosed properties. It’s simple; it surely is effective and also is the best way to start off in the field of real estate.
