How to Make Money with Foreclosures
According to RealtyTrac, as of July 2016, there are around 900,000 properties all over the country that “are in some of foreclosure”. This includes properties where buyers have defaulted payment, properties that were already auctioned and properties that are bank owned.
This opens up opportunities for property-savvy individuals to invest and earn from foreclosures. However, it must be acknowledged that those who cashed in on these opportunities did careful due diligence and research so that they make the most of their investments.
Buying Foreclosed Properties
You can acquire “distressed properties” through:
– Buying from those who are in the brink of foreclosure. This is one way for you to help someone who is in financial distress and at the same time gaining a good profit. With this transaction, the seller can at least recover some of the money he has paid for the house and also preserve his credit standing.
– Buying at an auction. If the property is already foreclosed, the mortgage lender will try to recover the amount they loaned by selling the property through an auction. This ensures that they are able to get the highest amount for the house but may also mean that the winner of the bid can get the property far below its market value.
– Buying from the bank or lender. If the auction does not result in an acceptable bid for the lender, the lender will take possession of the property. However, the lender will often decide to sell it, rather than keep the property.
Funding your Foreclosure Property Investment
Investing in foreclosed properties may require you to act fast. Oftentimes, you may not have ready funding to purchase a property. If you move too slowly, someone may have already swooped in and acquired the property you had your eye on. Thus, it will be helpful if you already have a source of funding that is especially designed to for real estate investments such as hard money funding. This often provides quicker approval as compared to banks and other standard lending institutions.
Earning Money from you’re the Foreclosed Property You Acquired
The most popular way to make money from this type of real estate investment is to sell the property at a profit. Since you were able to buy the property well below its market value, even when you sell it at market value, you still make a handsome profit.
Here are also other ways to earn:
– Flipping. This is often for foreclosed properties that needs fixing. You as the investor will have the property renovated and sold for a profit.
– Converting it into a rental property. You can fix up the property and prepare it for occupancy. Then, you become the landlord by renting out the property for a steady monthly cash flow. This is ideal for properties that are “in demand” and that can easily be rented out.
– Sell as a rent-to-own property. Rather than renting the property out, you can provide an attractive offer that allows the tenant to eventually own the property. The tenants should first be able to provide a down payment and their subsequent monthly payments will go into paying the outstanding balance on the property. This offer often allows you to increase the sales price of the house and to also charge higher monthly payments (as compared to monthly rental payments).