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Profiting From Foreclosure Flipping

Nov 26, 2007
If you have ever considered real estate investing, and in particular, foreclosure investing, you have probably come across the term foreclosure flipping. This is one of the best ways to make money in real estate. In a nutshell, foreclosure flipping involves purchasing foreclosures at a bargain price and then selling them for the valued price, thus making a decent income.

There are basically two types of foreclosure investing that are practiced today. One is investing in foreclosures in need of repair, spending time fixing them up, and then selling them for a profit. There are some potential problems with this type of foreclosure flipping, however.

First, the cost for the repairs to a property is hard to estimate when you purchase the home. You may be getting a good deal on the home, but after making the necessary repairs you might find that you do not make any money on the investment.

Second, during the time you are repairing the home you are paying for it through mortgage, insurance, and tax payments. The longer the repairs take, the longer you are paying for a home you are not using.

The other type of foreclosure flipping involves matching foreclosed properties to interested buyers, without doing any of the repairs needed on these properties. To do this you will need to find properties that have a decent amount of equity yet are in foreclosure.

You will offer the lender or the homeowner an amount of money for the home, typically quite a bit less than what it is worth, in order to end the foreclosure process before the home goes to auction. If your offer is enough to recoup any losses on the property, it is usually accepted, even if it is quite a bit less than the property is worth.

In the meantime, before you purchase the property you will find an interested buyer who wants a good deal on a new home. This allows you to purchase the property and then sell it to the buyer at a price that is lower than what the house is worth. While you will make a good profit, the new owner of the property will also get a great deal on the home. This gives them the ability to make any repairs that are needed with the extra money they would have spent buying the home.

To make this model work, you should contact the homeowners before the homes go to the foreclosure auction. There are many investors at foreclosure auctions with tons of capital available to help them purchase a property. If you are looking for a deal on a home that makes it a profitable investment, you will likely not find it at the auction, because so many wealthy investors will be bidding on the property. However, most homeowners are willing to deal if it means they can avoid going to foreclosure. If you can buy out their mortgages and release them from the financial bind they have created, they are often willing to give you a good deal on the home.

While this process is fairly simple to understand, implementing it can be a challenge, particularly for those who are new in real estate foreclosure investing. Knowing how to find the homeowners who need to avoid foreclosure is one difficulty that you will face. Also, understanding how to purchase these foreclosures and then flip them without a big financial investment is another hurdle to overcome.
About the Author
Mike Kar is a real estate investor and mentor who has been helping people succeed in real estate investing and offers an infoproduct on real estate investing even if you have bad credit, no credit and no money.
Visit http://www.propertyforeclosureprofits.com
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