In this recovering market, investing in foreclosed properties is one of the many real estate niches that investors found to be a good money making venture. This may seem something huge and risky for those who are not adept to the real estate industry but if others have succeeded in this endeavor, then we are very sure that you can, too!
The goal of this post is to be able to help you make money from foreclosed properties. Getting a good deal on the property you have your eyes set on can be tricky. What questions to ask, that sort of due diligence you have to go through before you finally decide on acquiring a property. In fact, there are many ways you can succeed from this venture.
Generally, one of the most common ways to make money from real estate is through rental income. Unlike purchasing brand new or non-foreclosed properties, you can get a better deal with this because foreclosed properties are usually sold below their current market values.
Here is another way you can profit: it is called buy-and-hold strategy. Since most people are very busy with their personal lives and don’t have the luxury of time to regularly check rental properties, one good option to go for is the buy-and-hold strategy. What people do is keep hold of the property and sell it when the price has appreciated. They get higher returns because the properties are usually acquired at a considerably lower market value.
You can also try the flipping strategy. Flipping means acquiring the property at a price lower than current market value and making a few repairs to increase its tag price before putting it on sale, usually within months from acquiring it. The main feature of flipping is that you don’t have to wait – you can quickly cash on the difference between market value and purchase price.
Now, let’s proceed to commissions. You can make money from real estate referrals when the bank gives you a commission after successfully referring buyers. The bank can give about 5% of the acquisition price to you as a form of commission. You have to remember that the percentage depends from bank to bank — it can range between 2 to 5%.
It’s a smart move to first know how to ask the proper questions before buying a foreclosed property. You don’t have to tire yourself too much from gathering every bit of information in every real estate website. Most of the time, the crucial pieces of information you need to ask can be answered by the agent or the bank itself.
Above all, you must know the financing options and payment terms. Of course, you would want to go for the scheme that requires the minimum amount of cash outlay, especially if you’re planning to flip it right away. Ask for the minimum down payment, interest rates, the minimum and maximum payment period, and how much you must pay on a monthly basis. You also have to include in your budget the taxes and fees that need to be settled before acquiring the foreclosed property. Another important thing to check is the title of the property – for verification purposes. In addition, you have to check if there are people currently residing in the property; you’re fortunate enough if you acquire it empty. Otherwise, it can be a potential issue, especially if the occupants are stubborn.
Striving to make money from foreclosed properties is a very fulfilling venture. Just one last note, be extra careful and know when and how to ask the right questions!