Buying foreclosed homes offer one of the best investment opportunities available. With an inventory of hundreds of thousands of foreclosures on the market, homebuyers or foreclosure homes investors can find great deals for up to 50% off market value. Investors need to have several elements present in their strategy to successfully invest in foreclosures, including knowledge of the local market and patience in identifying foreclosed homes that fit their investment strategy.
In cities through the country, many neighborhoods have suffered from the foreclosure crisis. With a huge inventory of foreclosed homes available for purchase, there are plenty of foreclosures located in solid neighborhoods.
Finding Neighborhoods to Buy Foreclosures
Usually, a high number of foreclosed properties in one area scare off many potential buyers. Foreclosures investors fear the negative impact foreclosure homes have on property values. A recent study justifies this fear as data revealed that the location of foreclosure properties within 200 feet of a property diminishes property value by 1%.
From a general perspective, it makes good financial sense for foreclosures investors to locate foreclosed homes in more stable neighborhoods, especially for beginners. In good neighborhoods, expect to have plenty of competition from other foreclosed homes investors. As the housing market improves, most these homes will not last on the market more than 30 days and will likely receive multiple offers.
Foreclosed Homes that Can Pay Huge Dividends
For sharp investors, who perform the necessary due diligence, the presence of multiple foreclosed homes in stable neighborhoods could mean more profits on the back-end. Find a good neighborhood where property values have historically appreciated. Consider factors like the quality of schools, access to public transportation and proximity of shopping.
In addition, make sure the surrounding property owners maintain their homes and the neighborhood have a “good vibration.” These elements drive curb appeal and appreciation of property values.
Assemble a list of foreclosed homes in need of minor repairs. Select foreclosures that have been on the market for 45, 60 or even 90 days. Foreclosure homes sellers start to get a bit antsy and ripe for negotiating with serious foreclosures buyers to move foreclosed properties. Build your list from Fannie Mae foreclosures, REO properties, VA foreclosures and other foreclosure listings.
Determine what price you are willing to pay for the foreclosed homes. If you cannot reach a deal at “your” price, move on to the next property on the list.
We are not saying that you can invest in foreclosed homes without risk. Seasoned investors understand the risk involved when investing in real estate– foreclosed homes or non-distressed properties. However, the combination of inventory, low home values and low interest rates present an opportunity to build monthly cash flow and appreciation over the next few years by investing in foreclosed properties.