Many homeowners are unable to pay their mortgages. And, those who try to sell for a profit are seeing their houses sit on the real estate market for months on end. You might assume this isn’t the best time to buy, but that couldn’t be farther from the truth. If you are in good financial standing, you can use foreclosures to your advantage. You can use them to make a profit. How?
The first step in profiting with foreclosures is to buy foreclosed properties. Whether you want to buy one property or one hundred, you have a number of options. What are they?
Foreclosure auctions. Foreclosure auctions come in a number of different formats. In most cases, it depends on the state. For example, some foreclosure property auctions are held on the steps of local government office buildings. In these instances, only a few properties are auctioned. On the other hand, they can take place in large convention centers or meeting rooms. In these instances, there are usually hundreds of properties auctioned.
If you wish to purchase foreclosed properties at a foreclosure auction, you need to secure financing ahead of time. Many times, you are required to make a down payment or submit full payment in less than 24 hours. It is rare to find a lender for these situations, unless you have a spotless credit history. Lenders don’t like to hand out money just with the possibility.
Mortgage Lenders. Although not always classified as foreclosed properties, Real Estate Own (REO) properties are just like foreclosures. The financial lender has repossessed the home due to non-payment. Small lenders are likely to turn to a real estate agent. Large lenders will handle the sale themselves. They will post fliers in their offices, advertise in local newspapers, and post the listing on their website. When listed directly through the mortgage lender, you can get a good deal. You also have bargaining power. The longer a REO home sits unoccupied and paid for, the more money the lender loses.
Short sale foreclosures. Short sale foreclosure properties are soon-to-be foreclosed on. In fact, it isn’t a matter of if, but when. With these types of properties, the homeowner and lender decide that payment is impossible. Instead of taking a loss and entering into lengthy and costly foreclosure proceedings, they decide to list the home for sale. The selling price is typically less than the outstanding mortgage due. This is your best chance to profit. If the homeowners have occupied the home and made payment for a number of years, little may be left on their mortgage.
As you can see, there are a number of ways that you can buy foreclosures or soon-to-be foreclosed properties. If your intent is to make a profit, the next step will be important. Look at the properties purchased or the properties you intend to purchase.
Single-family homes can be resold for a profit. By opting for a REO sale, foreclosure short sale, or a foreclosure auction, you should automatically make a profit. This is because you paid less than the home’s value. However, you can also make improvements to the home, increasing its value, and its selling price.
Multi-family homes can also be resold for a profit, but a unique approach is to become a landlord yourself. Make needed improvements to the home to prevent complications or complaints for tenants down the road. Charge a rate that is in line with other rentals in your area. If the multi-family home is occupied with tenants, keep them. You will get paid right away! Since you paid a reduced rate, it will not take long for you to profit with paying tenants.
In short, you can profit many ways from the poor real estate market. In fact, poor isn’t the best word to describe its current state. Yes, homeowners and real estate agents are finding it difficult to sell homes, but you can still turn a profit. You just need to know how and now you do!