There will never be another opportunity in real estate like there is right now!
So, you want to take advantage of the historic drop in property sale prices due to the glut of foreclosures? Well, before you charge head first into the new and unchartered area of foreclosures, there are a few things that you should investigate.
1. Why Are You Interested In Foreclosures?
Are you just feeding into the frenzy because you feel that you can get something at a cheaper price? Will you be buying something that you wouldn’t normally buy, just because you can get “a good deal?” This is the worst reason to buy a foreclosure. You should be buying it for the right reason; This may be an opportunity to buy a house in a desirable area that you have always wanted to move to, and get it at a great price. Or you might be interested in acquiring some rental properties. If this is the case, have you managed rental properties before? Are you ready to deal with the pain and/or expense of being a property manager? Regardless of your choice, make sure that you know what you are getting involved in, get proper guidance and do it for the right reasons.
2. Sourcing The Most Important Information That You Should NEVER Pay For
NEVER PAY FOR FORECLOSURE LISTINGS! That is the cardinal rule that professional real estate investors follow and so should you. Sites that charge a fee for foreclosure listings usually aggregate them from sources that are freely available on the Internet anyways. Furthermore, these pay sites can contain foreclosure listings that are out of date, so don’t waste your time or money.
The major brokers of foreclosure properties are banks who have their listings available for FREE out on the Internet, the hard part is finding them. Sign-up at the bottom of this article for our FREE Foreclosure Tutorial we’ll get you started by emailing you two FREE MAJOR foreclosure listing website sources. These two publicly available sources will also give you a sense of where you can find other FREE foreclosure listing sites on your own out on the Internet and will provide you more foreclosures in your area than you will know what to do with.
3. “Caveat Emptor” – Buyer Beware, Foreclosures Are Sold “as-is”
Unlike other real estate transactions, foreclosures are sold “as-is.” That means that once you make a purchase, you won’t be able to go back to the Seller for newly discovered repair items. Also, during the purchase, the Seller will most likely not provide any consideration for any damages or repair items that you discover during your inspection (you will be getting an inspection, won’t you? Of course!). Therefore, you must prepare for the worst, exercise your due diligence more than during a traditional real estate purchase and budget for unanticipated repairs, which can equal more than double the actual purchase price for some low-cost foreclosures.
4. How Will You Pay For Your Foreclosure?
If you have mountains of cash, good for you! Some people feel that this is the best way to purchase foreclosures. I prefer leveraging my money to purchase multiple foreclosures. In fact, wouldn’t it be better if you could use someone else’s money to buy several foreclosures? There are several ways that investors do this for investment properties all of the time, but we won’t go into that advanced topic here. You are most likely interested in purchasing one foreclosure as your primary residence, and traditional lenders may not be as willing to help you purchase a foreclosure and pay for the repairs that it may need. So what do you do? Don’t worry, there are still programs available to help fund your purchase and the rehab of a foreclosure as your primary residence. One, in particular, is the HUD 203K. We have found several other programs that offer help, such as down payment assistance. Do some research on the Internet and you just might be delighted at what you find.
5. What Is Your Exit Strategy?
Are you looking to buy a foreclosure as your primary residence? (i.e. are you going to live in it?) Or is your objective to acquire multiple foreclosure properties and build your real estate investment retirement portfolio? There are many different exit strategies, and you should have a backup just in case your Plan A doesn’t work. If you can’t imagine your Plan A not working out, then let me provide a scenario. Let’s say that you purchase a foreclosure as your primary residence, and, after the rehab, your sensitive nose or allergies are activated every time that you step into the property (this has happened!). If you can’t make due, then you need to implement your Plan B. This is just one scenario, and, if you don’t think that something like that can happen to you, trust me, it can. How about if every time you “turn over a stone” you discover some new repair item that pushes your pocket book beyond its limit. If you can no longer afford to feed this “green alligator,” it might be time to look at your Plan B, which could include renting the property out or selling it. In either of these cases, you had better make sure that you have enough “cushion” in your offer price to account for the unknown.
Conclusion – Live, Learn And Prosper
The purpose of this article is not to scare you, but to make you prepared for the unimaginable issues that you will inevitably encounter as you invest in foreclosure real estate. You only have to look as far as the real estate focused reality shows on Bravo and HGTV to see what I mean. You can rough it out and learn as you go, or get a bit of a head start by learning from people who are already succeeding in real estate investing. Find a real estate investor as a mentor, or take a class. This will be the best return on investment (ROI) that you will EVER receive.
We have taken all of our real estate knowledge and put it into two educational courses. The first track is a FREE Foreclosure Tutorial where you will learn “How To Buy Foreclosures” as your primary residence. The Foreclosure PRO Tutorial is an advanced, comprehensive eCourse that teaches you how to buy foreclosures like professional investors do, using little to none of your own money, and gives you access to the link vault, which is an invaluable resource of foreclosure listing sites and real estate tool website links. You will also learn how to figure out your offer price and accommodate plenty of safety margin in your deal to account for amateur mistakes and the unknown. When you sign up for the FREE version, you will begin receiving these invaluable lessons daily to your inbox, including information on how to get the PRO version.
In closing, take advantage of the opportunity that exists in today’s real estate foreclosure market. You are unlikely to ever see this again in your lifetime. Just make sure that you educate yourself prior to making the leap, because mistakes in foreclosures and real estate can be the most costly. And most importantly, take action!
Happy investing!!!
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