September 13, 2014

The Fundamentals of Foreclosure Investing – Three Keys to Success

Posted on Dec 01, 2010 by in Ideas and Tips, Real Estate 101

foreclosure investing

To begin a rewarding career in , study it from every possible angle.

Buying bank-owned homes as part of a foreclosure investing plan differs somewhat from buying your primary residence from the usual marketplace. Investors who pursue the tactic regularly develop skills and knowledge as they go, but having a solid grasp of the fundamentals of the foreclosure marketplace can provide even the most rank rookie a leg up on the competition.

Foreclosure Investing: Neighborhoods and Location

The old saw regarding home location holds true in various ways for foreclosure investing, too. Location is a major determinant of the price of home. The same features, sets and condition can cost more by a factor of two or three, depending on the region or even on a specific sub region and neighborhood.

If you are intending a quick flip in a depressed location, you should probably reconsider your plan. Healthy price tags on homes in the vicinity, coupled with a vibrant selling environment, might suggest that a foreclosure investor has the potential to make tidy profits on the sale of a single house.

Investing in a luxury home foreclosure can often be quite lucrative, but you risk holding the property for prolonged periods. Foreclosure homes in more modest neighborhoods can usually be turned over quicker, thus providing funds for another investment project. Multiple projects executed in a timely back-to-back manner have the potential to net what you could from a single home resale without tying up the higher amounts of capital at any given moment.

Foreclosure Investing: Comparable Market Value

Carefully study the local market values of comparable homes, as well as the value of similar homes with upgraded features. With these figures in your head, you might realize the wisdom of choosing to pursue an opportunity in one neighborhood rather than another, based on the relative market values over against the potential sales price here versus there. Sometimes just a quarter of a mile can represent a much higher price tag and far more desirable location for your future buyer.

The luxury home market renders location particularly poignant. High priced homes in a downscale neighborhood will likely be a tougher sell in a weak market. If the home requires extensive improvements to carry it towards resale condition, the costs detract from the current market value. In turn, that impacts your suitable maximum bid. Don’t expect to get top dollar for a spruced up pig in a declining neighborhood.

Foreclosure Investing: Repairs and Improvements

Successful foreclosure investors cap their bids at levels that fully consider the costs to make essential repairs, and calculate the rate of return on non-essential improvements targeted to boost the home’s potential sales price or decrease the term during which one holds the property and bears such costs as interest, taxes, insurance and utilities.

To begin a rewarding career in foreclosure investing, study it from every possible angle. Read; attend seminars, interview realtors and real estate agents. Seek out the radio and television shows that feature real estate topics.

Develop a firm grasp of financing techniques. Be prepared to make mistakes, and learn from them, but, if you have completed your homework, mistakes should be few and less costly, and success should follow more quickly.

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One Response to “The Fundamentals of Foreclosure Investing – Three Keys to Success”

  1. Marsue says:

    This piece was cogent, wewillr-tten, and pithy.


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