It sounds so simple… buy a foreclosed property at bargain basement prices… and sell or rent at a huge profit. And it is simple… if you know what you are doing! 

 

Here are five tips that the pro’s know… tips that can make the difference between a great deal and a great deal of heartache.

You can’t know too much about the market you are investing in… Sure, it takes time to learn about the area… and it’s not very exciting… and market research won’t bring in any money. But just imagine… you just bought a great looking foreclosure property at about 40% of its Fair Market Value. Oooops… nobody mentioned the chicken rendering plant that is scheduled for construction on the vacant property around the corner.

 

Why bother with a title search on a foreclosure property? After all, it will cost a couple hundred dollars and it will almost certainly come up clean… so why spend the money? Why? …because if it doesn’t come up clean, it could cost you hundreds of thousands of dollars. Look, maybe the property you just bought was in foreclosure because the owner couldn’t make the payments… or maybe this house was in foreclosure because the previous owner discovered a huge title issue and just walked away from the property and the loan. The sad truth is that the previous owner’s huge title problem did NOT go away with foreclosure… it is now YOUR huge title problem… and you may never be able to sell the property. Did I mention that no one is going to mention this at the foreclosure sale? Did I mention that the deed you received at closing will almost certainly NOT guarantee clear title?

 

Searching title is a cost of doing business… and conducting a title search after closing is like buying fire extinguishers after the fire.

 

Foreclosure properties often need cleaning and minor repairs. The real problem is that with many foreclosure properties, the home may not be “open” for your inspection and you may not be able to examine the premises before placing your bid. You may end up walking the outside and peering through dirty windows, trying to get some sense of the condition of the property… and in some cases, the previous owner may still be in the home… a very awkward (and sometimes dangerous) situation.

 

Foreclosure properties often need repairs for three reasons:

Here’s the bottom line, many experienced foreclosure investors estimate repair costs and then double that number when calculating projected costs… and are often lucky they did…

The key question here is… “What is it worth?” In residential real estate, value is, of course, determined by “Comparables” (comps)… that is, the value of the Subject Property (that’s the property you want to buy) is determined by what other properties similar to it, sold for recently, nearby.

 

There is a disease that is common to many new real estate investors… it is called, “Deal Fever”. It means that the new buyer becomes emotionally committed to buying a property… any property… to get into the game… to be a “real” investor! A buyer with an advanced case of Deal Fever will often go through the entire “Due Diligence” process… and ignore or minimize anything that does not support his (or her) desire to BUY.

 

 

It sounds so simple… buy a foreclosed property at bargain basement prices… and sell or rent at a huge profit. And it is simple… if you know what you are doing! 

 

Here are five tips that the pro’s know… tips that can make the difference between a great deal and a great deal of heartache.

You can’t know too much about the market you are investing in… Sure, it takes time to learn about the area… and it’s not very exciting… and market research won’t bring in any money. But just imagine… you just bought a great looking foreclosure property at about 40% of its Fair Market Value. Oooops… nobody mentioned the chicken rendering plant that is scheduled for construction on the vacant property around the corner.

 

Why bother with a title search on a foreclosure property? After all, it will cost a couple hundred dollars and it will almost certainly come up clean… so why spend the money? Why? …because if it doesn’t come up clean, it could cost you hundreds of thousands of dollars. Look, maybe the property you just bought was in foreclosure because the owner couldn’t make the payments… or maybe this house was in foreclosure because the previous owner discovered a huge title issue and just walked away from the property and the loan. The sad truth is that the previous owner’s huge title problem did NOT go away with foreclosure… it is now YOUR huge title problem… and you may never be able to sell the property. Did I mention that no one is going to mention this at the foreclosure sale? Did I mention that the deed you received at closing will almost certainly NOT guarantee clear title?

 

Searching title is a cost of doing business… and conducting a title search after closing is like buying fire extinguishers after the fire.

 

Foreclosure properties often need cleaning and minor repairs. The real problem is that with many foreclosure properties, the home may not be “open” for your inspection and you may not be able to examine the premises before placing your bid. You may end up walking the outside and peering through dirty windows, trying to get some sense of the condition of the property… and in some cases, the previous owner may still be in the home… a very awkward (and sometimes dangerous) situation.

 

Foreclosure properties often need repairs for three reasons:

Here’s the bottom line, many experienced foreclosure investors estimate repair costs and then double that number when calculating projected costs… and are often lucky they did…

The key question here is… “What is it worth?” In residential real estate, value is, of course, determined by “Comparables” (comps)… that is, the value of the Subject Property (that’s the property you want to buy) is determined by what other properties similar to it, sold for recently, nearby.

 

There is a disease that is common to many new real estate investors… it is called, “Deal Fever”. It means that the new buyer becomes emotionally committed to buying a property… any property… to get into the game… to be a “real” investor! A buyer with an advanced case of Deal Fever will often go through the entire “Due Diligence” process… and ignore or minimize anything that does not support his (or her) desire to BUY.