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Why Experienced Investors Hunt For Foreclosure Properties

Sep 12, 2008
Real estate is highly profitable and for this reason it attracts investors of all types. Foreclosures are an attractive proposition to investors as they can provide incredible bargains and long term gain. Foreclosures are becoming more and more common and as such increased numbers of investors are flocking towards foreclosed properties.

If a home owner has bought a house with a home loan but can not keep up with payments then the lending institution has the legal right to take the home to repay the debt. People default on their mortgage for a variety of reasons but commonly nowadays the reasons of increased interest rates and sub-prime lending are taking their toll and more and more homes are going under the foreclosure hammer.

Many banks have no patience for the selling process. Their sole aim is to recover costs and profit is not in the forefront of their mind. This is hard to comprehend given that banks are often the most aggressive when it comes to profiting, however in the case of mortgage defaults, they can not afford to waste time. This provides excellent advantages for the investor who can snap up a quick bargain.

There are some facets of foreclosure investing that you should be familiar with before embarking on this strategy. The first is that planning and execution is vital. Visiting the local court house or joining online mortgage lists is the best way to be informed of new home defaults. You can then obtain the home owners address and phone number in order to contact them. You may like to make a low offer as you have nothing to lose. Many times they will not like your offer, but upon thinking of the alternative of the bank taking their home, it might seem attractive after all. Often if they can not find a buyer, they will lose the property soon, so you can use that to your advantage.

Giving the home owners a discount on rental is a wise idea. Often they will have nowhere to live after selling their home, so offering them to rent it back at a discounted rate is a near certainty that they will take up your offer. After all, they will be spending less but still living in their family home. This can still be profitable for you as you are buying the home cheap and it is likely that they will eventually buy another home, after which you can rent the property out at the market rental value, or sell it for profit.

Another way to profit from foreclosures is by using lease options, commonly known as rent-to-own. Get a non-refundable option consideration from the tenants moving in, and then rent to them on a 12 or 24 month lease. They have the option to purchase the house at the end of the lease for an agreed upon purchase price, minus the option consideration they paid up front. Not only do you profit monthly, you get a nice profit at closing and a family gets a home they can afford. It's win/win for all involved.
About the Author
Adem runs the real estate investing site ProfitPiggy.com where you can find detailed examples of the most popular real estate investing methods, real estate investing articles, courses, and more. Visit ProfitPiggy.com now to get started!
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