Making Profits from Foreclosed and Preforeclosed Properties- By: Jacquelyn Marks
Investors always have the opportunity to make profits even during times of economic downturns. You really do not need to become an expert financial analyst or an economist to realize that there is good prospect of making money from foreclosed homes. This is especially true now that the economy is showing signs of recovery. It will not be long before the property market also makes a turnaround. The property bubble created by the subprime mortgages might have burst, but there is now greater room for property prices to rise again. Just like many types of investments, investing in Real Estate-Owned (REO) homes will need the time leverage in order to make profits.
Buying Directly from Owners
The subprime meltdown forced many homeowners and businesses to liquidate their properties. Meanwhile, banks and government lending institutions did not have much any choice but to foreclose properties that have defaulted or have outstanding tax liens. Consequently, many property owners had to sell their properties lower than the market price to prevent being too undervalued and foreclosed by banks. In this manner, some money can still be made.
If you are searching for best real estate deals and want to have some negotiating power, you can buy directly from owners that have pre-foreclosure properties.
Although these properties are still less inexpensive than those that are already repossessed by banks, they are also usually the ones that are in best conditions. You may also negotiate with the owner to make some repairs before turning over the deed of the house to you. Some properties that are already listed for auctions may already have been vacated for a long time and suffered some deterioration. Buying directly from owners will minimize this risk.
If you are an investor, there is a better chance that you can profit from properties that are directly bought from the owners rather than from bank auctions. In most cases, you may only need to do some minor repairs instead of significant renovations or reconstruction. In this manner, you can resell the property at relatively higher profit margin. It is also good idea to search from HUD listings but investors are usually given the least priority to buy from these government-foreclosed properties.
If you are a bargain hunter who also intend to invest in real estate, the basic goal is to buy properties at low price and sell for profit or have them rented. It sounds simple enough but it requires business skills, hard work and capital. You can start by buying just one foreclosed or pre-foreclosed home. You then need to spend on repairs and on marketing the property. You may need to also spend on advertisement or broker’s fee in order to put the property back in the market. Of course, there is also the issue of taxes. Aside from local real estate tax that you need to pay annually, you also need to pay capital gains tax once the property is sold. Hence, it is very important that you sell the property as soon as possible or when the market conditions are right.
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