Real Estate Foreclosure Investing and How To Get Started
With the credit crunch still creating waves upon the world economy, foreclosed properties are a common sight. Even though foreclosures tend to strike a depressing image, investors may find themselves in jovial celebration.
What Exactly are Foreclosures?
Foreclosures occur when the home owner has fallen so far behind on mortgage payments that it leaves the bank or lender with no other alternative than to try and sell the house to recoup some of their own money. While most banks are reluctant to begin foreclosure proceedings, if the home owner is making no attempt to catch up those delinquent payments then the lender will notify of their intention to begin foreclosure proceedings.
Why Invest in Foreclosed Properties?
When a lender begins foreclosure proceedings, they aim at recovering the amount of money that is outstanding against the property. This can often mean the property is being sold for a much lower price than the real value of the property. Wise investors could find themselves purchasing properties at only a fraction of their true value with just a little research. Buying an investment property below true market price can mean an instant increase in the amount of available equity you have.
There are three possible opportunities to buy foreclosed property. What you choose actually depends on who you want to deal with. Each one has its own advantages and disadvantages.
Buying Property During Pre-Foreclosure Process.
The first opportunity is buying property during pre-foreclosure. Pre-foreclosed properties are properties that have not yet left the hands of the owner. Once you buy this property, you also inherit the debt associated with the property. Oftentimes this is where you can buy the property at its cheapest. Just be sure that you include the debt in your price computations. Also, be wary of situations where the owner is not fully honest with the debts associated with the property. There can be multiple lenders to the associated debt.
Court Actions
The second option is to try and buy property during the court auction after the property has already been foreclosed. The primary disadvantage to buying during auction is that there may be other investors bidding as well, which could drive the price much higher than you intended to pay.
Purchase After Acquisition
The third option is buying after the lender has acquired the property and taken full ownership. Banks aren't in business to buy property. They make their profits by charging interest on money they lend out to people, so its in their interests to sell any property they've acquired. In many cases, they'll happily negotiate with you on the purchase price of the property. This can be one of the simplest ways to purchase real estate at a reasonable price.
Whatever option y ou choose, you should always inspect the property and the associated property and loan documents yourself. This is especially true when you are dealing with the original property owner directly.
In some circles, real estate foreclosure investing is considered one of the most lucrative investments given the low price (sometimes even less than wholesale). This claim is supported further by the current global crisis and its effects on property values. In some parts of the United States, property values can go as low as a few hundred dollars. Many foreign investors have already taken notice of these properties and are going into a buying frenzy.
A wise investor will realize the potential value of buying a foreclosed home at a discounted price to its real market value, especially in light of the recent reduction in real estate values. This can represent a double-benefit to a clever investors portfolio. Not only are you gaining extra equity in the form of higher market value than the original cost, but its also possible to keep your purchase costs low enough so that any rental income derived from the property will easily cover all the associated costs of the mortgage and operating costs of maintaining an investment property. - 23159
What Exactly are Foreclosures?
Foreclosures occur when the home owner has fallen so far behind on mortgage payments that it leaves the bank or lender with no other alternative than to try and sell the house to recoup some of their own money. While most banks are reluctant to begin foreclosure proceedings, if the home owner is making no attempt to catch up those delinquent payments then the lender will notify of their intention to begin foreclosure proceedings.
Why Invest in Foreclosed Properties?
When a lender begins foreclosure proceedings, they aim at recovering the amount of money that is outstanding against the property. This can often mean the property is being sold for a much lower price than the real value of the property. Wise investors could find themselves purchasing properties at only a fraction of their true value with just a little research. Buying an investment property below true market price can mean an instant increase in the amount of available equity you have.
There are three possible opportunities to buy foreclosed property. What you choose actually depends on who you want to deal with. Each one has its own advantages and disadvantages.
Buying Property During Pre-Foreclosure Process.
The first opportunity is buying property during pre-foreclosure. Pre-foreclosed properties are properties that have not yet left the hands of the owner. Once you buy this property, you also inherit the debt associated with the property. Oftentimes this is where you can buy the property at its cheapest. Just be sure that you include the debt in your price computations. Also, be wary of situations where the owner is not fully honest with the debts associated with the property. There can be multiple lenders to the associated debt.
Court Actions
The second option is to try and buy property during the court auction after the property has already been foreclosed. The primary disadvantage to buying during auction is that there may be other investors bidding as well, which could drive the price much higher than you intended to pay.
Purchase After Acquisition
The third option is buying after the lender has acquired the property and taken full ownership. Banks aren't in business to buy property. They make their profits by charging interest on money they lend out to people, so its in their interests to sell any property they've acquired. In many cases, they'll happily negotiate with you on the purchase price of the property. This can be one of the simplest ways to purchase real estate at a reasonable price.
Whatever option y ou choose, you should always inspect the property and the associated property and loan documents yourself. This is especially true when you are dealing with the original property owner directly.
In some circles, real estate foreclosure investing is considered one of the most lucrative investments given the low price (sometimes even less than wholesale). This claim is supported further by the current global crisis and its effects on property values. In some parts of the United States, property values can go as low as a few hundred dollars. Many foreign investors have already taken notice of these properties and are going into a buying frenzy.
A wise investor will realize the potential value of buying a foreclosed home at a discounted price to its real market value, especially in light of the recent reduction in real estate values. This can represent a double-benefit to a clever investors portfolio. Not only are you gaining extra equity in the form of higher market value than the original cost, but its also possible to keep your purchase costs low enough so that any rental income derived from the property will easily cover all the associated costs of the mortgage and operating costs of maintaining an investment property. - 23159
About the Author:
Scared to start with wholesale real estate investing? This is wrong. Ask Gary Z. Bryant. Find more about Real Estate Investing and Real Estate Foreclosure Investing In Las Vegas
posted by X - Men @ 4:08 AM
1 Comments
1 Comments:
As long as your property will provide you with positive cash flow on a consistent basis, you won't be rocked by market fluctuations, including rapid depreciation of real estate values.
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