As investors, our priority is always making the most profit possible.
In an ideal world, we’d want to stick to the mantra of “buy low, sell high!”
While that is a difficult thing to accomplish in most markets, there is one area in which you really can sneak your way into a dirt-cheap investment, and sell at massive prices.
In this arena, you can often make profit no matter what, but with this secret tip, you can add an additional 18% to 59% profit to your overall gains!
Now I know you might’ve heard me say before that while every investor would love to buy in at rock-bottom prices and then sell for sky-high profits, that’s not often realistic.
Finding that precise sweet spot is usually more chance and careful analysis than anything else.
I still stand by that assessment in general, but in this specific industry there are exceptions.
So, what industry is that?
Well you may not find it too surprising when I say real estate, considering most investors get into it for the express purpose of buying a home at a cheaper price than they’ll sell it for.
And while that has been the real estate market we’ve had ourselves in the last couple years, I’m talking about something a little more specific than that.
You’ve heard me go on and on about the benefits of real estate investing, and it is true that real estate has a special place in my heart, thanks to the longevity and return on your investment.
But for today’s purpose, we’ll be talking about a little-discussed facet of the real estate investment industry, and that is foreclosures.
If that word strikes fear in your chest and you want to stop reading right now, I completely understand.
But please, keep reading, because while I understand foreclosures often set off many investors’ risk alarm bells, I’m going to break everything down for you and show you just how profitable they can be.
I’ll even give you a list of tips for assessing the risk versus reward of foreclosures, but first let’s discuss the benefits of buying a foreclosed investment property.
This list applies to buying a foreclosed property in general, but for us as investors, we’ll be looking at foreclosed properties for the purpose of turning around and selling them or renting them out to tenants.
The first benefit we’ll discuss is, of course, the potential for a fantastic deal.
Banks are usually very motivated to get these foreclosed homes sold as quickly as possible, so they’re far more likely to negotiate everything from price and down payment, to closing costs and length of escrow, etc.
Also, when you buy a house from the previous owner who lived there, there is almost always going to be emotion involved on their part, and they’re likely to let that emotion affect the price and negotiating.
Banks have no such emotional connection to foreclosures, so buying a house from the bank will rely on only the economic factors, and negotiating should be easier.
Additional benefits include a clear title and you won’t have to take on any liens, mortgage payments, or back taxes of the previous owner.
Especially when you’re purchasing a property as an investment, not having those additional headaches to deal with can be a great bonus.
As I mentioned earlier, banks want to get foreclosures off their hands as quickly as possible, so they’ll price homes low in the hopes of receiving multiple offers.
Purchasing a foreclosure sets you up perfectly to buy low and sell or rent high, guaranteeing the greatest return on your investment.
In fact, foreclosed homes sell, on average, for 18% to 59% less than non-foreclosed properties in the same neighborhood!
Starting off at that lower entrance price means your profits will be even greater once you sell or rent the property.
Considering that 15% is generally considered a good ROI (return on investment) for real estate investing, already starting off at a much-decreased price point gets you way above those “good” returns.
The stigma that foreclosures are dilapidated and rundown and require extensive remodeling knowledge as well as a huge pile of cash to pay for renovations unfortunately deters many investors.
The reality is that while, yes, those rundown foreclosures do exist, it is possible to find stunning properties in the best neighborhood for a rock-bottom price as a foreclosure.
A foreclosed property just means the previous owners defaulted on their payments, and while that may sometimes reflect in the property itself, that’s by no means a guarantee or even the norm!
So, if you’ve been considering getting into real estate investing, maybe check out some foreclosed homes, now that you know all the great benefits!
Plus, stay tuned to the next Real Estate Riches article, in which I’ll give you all the tips and tricks to the risk-versus-reward assessment, so you’ll be able to go into foreclosures like a pro.
Once you start seeing your profits pouring in, you’ll never second-guess foreclosures again.