Last week in Real Estate Riches, we talked about the benefits of investing in foreclosed homes.
I discussed the much cheaper entry prices, which you can then tack on to your increased profit.
While you now hopefully have a better understanding of the immense profit there is to be made from foreclosures, I understand if some are still scared off by the idea of taking on a foreclosure.
That’s why I’ve brought you some easy tips to get started in investing in foreclosed homes, and ensure you make your biggest profit of all time!
Now I completely understand that a lot of people out there probably cringe when they hear the word “foreclosure” and would never dream of such an investment.
The issue, I believe, is that people often associate “foreclosure” with “falling down, dilapidated, rickety shack” and other such images.
While I’m sure you could find such properties if you so desired, many foreclosed homes are in better condition and can be bought at a fraction of the price a traditional home would cost you.
It’s important to keep in mind that the only reason homes get foreclosed on is because the owners were unable to keep up with their payments.
It’s reasonable to assume that if they couldn’t keep up with payments they may not have been keeping up the property, but that doesn’t mean the place is going to be trashed.
If you missed last week’s “Real Estate Riches” article, I’d recommend giving it a quick read so you can fully appreciate the multitude of benefits awaiting you if you decide to invest in a foreclosure.
Now let’s get into the quick and easy tips you can use to assess the risk versus reward of investing in a foreclosure (and getting the most bang for your buck)!
- Price out potential renovations.
- Hopefully this is something you’d consider with any potential investment property, but it’s especially important with foreclosures since you’ll likely be limited to what you can inspect prior to the sale.
- In terms of the structure of the property, make sure the roof and foundation are sound.
- Plan what renovations you would likely do, and price them out as precisely as possible. Then add another 10% to that budget for any surprises that come up (and they will!)
- When defining your budget, determine what you’ll eventually be able to sell the property for, and don’t exceed 70% of that number with all of your costs.
- Keep in mind big ticket items.
- Big ticket items you need to consider include foundation/structural issues, roof, HVAC, electrical, and plumbing.
- Some of these things you’ll be able to assess visually, which is good considering you might not be able to get into the property. You should be able to assess things like the roof and A/C compressors visually, to a certain degree.
- For those items you can’t assess visually, you’ll need to consider the age of the property, and that maintenance by the former owners was likely lacking.
- Talk to neighbors.
- Since there’s a good chance you won’t be able to get into the property or do a full inspection before a sale happens, it’s important for you to gather as much information as possible without that. A good option is to talk to the neighbors.
- Ask them about the former owners, what they were like, if they had any pets, if they got lots of visitors, etc.
- You can also ask the neighbors about any construction or renovations that took place in the house that neighbors would know about.
- Neighbors will likely want someone to buy a foreclosure in their neighborhood, especially someone intending to fix it up, so they should be willing to talk to you about relevant information.
All in all, there are a great number of benefits to investing in a foreclosed property.
Particularly for anyone trying to get into real estate investing, buying a foreclosure can offer a much cheaper price-point for you, with the potential to sell at a much higher profit.
Using these easy tips can help you get the most bang for your buck and ensure you don’t get into a property you can’t handle.