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Making the Most of Someone Else's Bad Luck: Foreclosure Investment Opportunities

Jul 14, 2008
A foreclosure on a property can be an ideal investment opportunity, if you know how to sort out the good ones from the bad. The foreclosure investment game isn't about just snapping up the first bargain that comes up at auction. To take strategic advantage of a foreclosure investment opportunity, you will need to keep a few things in mind.

It's important to consider the quality of the property in question, its location (which includes the amenities of the neighborhood), any liens on title, and more. The following tips will help guide you through the world of foreclosure investment opportunities to find the best ones for you.

More Isn't Always Better

In fact, when it comes to foreclosures, the fewer there are, the better it is. Don't invest in a property that is in a neighborhood full of other foreclosures. A high number of foreclosures in an area only serves to decrease the property values in the area, and the resale potential of a property may be challenging if you are competing against other foreclosures. If the property you are looking at is the only foreclosure in the neighborhood, or one of only a very few, your chances of a quick resale are much better.

Location is Everything

The old real estate adage 'location, location, location' really is true. It has been said that the right (or wrong) location can determine the fate of nearly every real estate investment. Location is more than just about the physical location of a property, however. Consider the area's property values, the rate that the area's properties are appreciating in value, and the area's proximity to valued amenities, such as reputable schools and convenient shopping. When purchasing any kind of real estate for resale, you need to keep in mind that you can always change the building, but you can't change its location!

Don't Be the Heavy

Usually, a foreclosure investment property is vacant when it goes up for auction, usually because the bank or other lender has already evicted the homeowners from the building. Sometimes, however, the previous homeowners are still living there until the property is resold. If you purchase a property in which the previous homeowners are still living, you'll be responsible for evicting them. And that's not something anyone wants to do. Getting evicted from your home is embarrassing at best, and the previous homeowners are not likely to be willing to leave gracefully.

The eviction process can be lengthy and expensive. It's more than just a matter of knocking on the door and saying, 'OK, I live here now. Get out.' Save yourself some hassle and some money and ensure that the investment property you are interested in is listed as vacant, and always confirm this before you take over, just to be sure.

Don't Lien on Me

When considering buying an investment property, ask to see a Warranty Deed. This document will state that the property has no other liens on it, such as building code violations or unpaid taxes. You don't want to find yourself saddled with debts you didn't incur.

Inspection, Please!

When investing in a foreclosure property, it's important to note that these types of properties are usually sold 'as is,' or, in other words, the vendor (the bank) makes no guarantees about the condition of the property. This includes the property's adherence to or failure to meet building standards or any problems with the land on which the property is located.

To prevent any unwelcome surprises in this area, always get the property inspected before you close the deal. An inspector's report will tell you if you can expect to fork out money for extensive repairs.

See into the Future

When buying a foreclosure property, as with any real estate investment, sometimes the greatest profit lies in an unlikely place. Often, it pays to look beyond first impressions of a property to see it as it could be, rather than as it is. Sometimes all it takes is $500 to give a property the facelift it needs. And the return on your investment is likely to be much more than your payout.
About the Author
Stuart Anthony Atkinson
www.offplanpropertyexchange.com New homes for sale and property investment opportunities worldwide.
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