Whether you’re a new investor who’s looking to get started with a small amount of capital or you’re a seasoned investor interested in turning a profit despite a slow housing market, there are many benefits associated with investing in foreclosed homes. Below are five tips for making your foreclosure investments profitable and successful.
#1 – Contact a Real Estate Agent
While you can certainly find foreclosed homes on your own, working with an established agent is almost always the best policy. Some of the information you find on the internet can be outdated or just plain incorrect, and some of the best properties may not even be listed on the internet at all. Real estate agents have access to all the latest updates and can help you find the best possible deals in your market of choice. In fact, the most highly successful real estate investors out there are those who regularly work with agents to help them find properties.
#2 – Act Quickly
If you find a foreclosed property that you want to buy, act fast. The agency will specify a closing date, and if you don’t close on that property by that date, you will face penalties of anywhere from $25 to $200 every single day. It’s important to move quickly, but make sure that you have all of the pertinent information about the property and don’t simply buy on a whim to avoid these fees.
#3 – Get Multiple Contractor Bids
When you buy a foreclosed property, you’ll almost always need to make repairs before you can put the home on the market and turn a profit. Even if you work with a local contractor you trust, it’s a fantastic idea to get bids from two or three other contractors. In a slow market, especially, a difference of a few thousand dollars can really add to your profits. Estimating the cost of repairs can help you determine whether a property is even worth your time.
#4 – Use an Attorney Rather than a Titling Agent
When you buy a foreclosed property, you will need to purchase title insurance for your own protection. If you’re working with a real estate agent, he or she should offer it to you at closing. Many investors find that it is well worth the extra $50 or so to purchase their titling insurance through an attorney, instead. This way, should an unexpected situation arise, you already have an attorney who can help you resolve it. Since time is of the essence, that extra $50 can save you hundreds in the long run.
#5 – Have an Exit Strategy
No matter what sort of property you are investing in, it’s always ideal to have an exit strategy. If the market ends up going south, you need a way to get out of the investment in a way that won’t result in a significant loss. With foreclosures, you need to consider the current market trends and conditions, the expenses you’re likely to accumulate, and even the time that the property might spend on the market once you put it up for sale.
Investing in foreclosed properties can be extraordinarily profitable, but only when you understand the intricacies of the process. Working with a licensed real estate agent is always the best course of action, but it’s up to you to make sure you understand both national and local housing trends to get the most out of your investments.