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How To Make Money From Foreclosed Properties

Money From Foreclosed PropertiesOne of the many niche in real estate is investing in foreclosed properties. The many advatages of acquiring foreclosed properties has attracted several real estate investors into venturing into this niche. In this article, I’ll show you the many ways you can make money from foreclosed properties as well as additional guidelines and questions to ask before acquiring that property.

Rental Income

The most common and obvious way to make money from foreclosed properties is through rental income. The best part about it is these foreclosed properties normally sell below current market values. Therefore, you can usually get better returns from this than from acquiring brand new or non-foreclosed properties.

Buy-and-Hold

Some investors who don’t have the time to consistently monitor rental properties choose the buy-and-hold strategy. This involves keeping the foreclosed property and waiting for the price to appreciate substantially before selling. Higher returns are realized here, especially when the property is acquired at a much lower value.

Flipping

On the other end of the buy-and-hold spectrum is the flipping strategy. Unlike the buy-and-hold where owners are willing to wait, in flipping, time is the key factor and selling as quickly as possible is the key to making lots of money. Flippers quickly realize profit through the price gap between the acquisition and current market price.

Commissions

Sometimes, banks give out commissions to people who successfully refer buyers that eventually purchase foreclosed properties from the bank. Depending on the bank, it can sometimes range between 2-5% of acquisition price.

Investing in foreclosed properties can really be a rewarding endeavor, but make sure to ask these essential questions first before acquiring the property:

What would be the payment terms? First and foremost, you must ask the agent or the bank what payment options they can offer and how flexible they can get. Ask for the minimum downpayment, interest rates, minimum and maximum payment period, and the monthly amortization.

Are there people currently residing in the property? If there are, have they signed an agreement to leave the property once acquired by a new owner already? This is a potential red flag for the property, especially if the people currently occupying are stubborn and persistent.

Can I have a copy of the title? You can ask to view the true copy of the title or have a photocopy for future reference. This is very important as it is through here that you can verify if the property indeed has a clean title without any annotated mortgages, encumbrances, and claims. The least that you want is having to battle the ownership of the property with someone else.

What are the taxes and fees involved in buying the property? In buying properties, you must not think of only the selling price but also the taxes and fees involved in transferring the title from its previous owner to you. This sometimes involve a significant amount of cash outlay so be prepared and incorporate it in your budget.

What other info about the property that I haven’t asked yet can you give? Maybe there are other pertinent details and factors that you might have forgotten to ask. Be sure to ask everything, after all the information you get is free.

There you have it. I hope this can help you in scoring out a good deal out of all the foreclosed properties you are eyeing.

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