5 Tips for Buying Foreclosed Properties
Many savvy real estate investors know how to make a lot of money by buying foreclosed properties (or purchasing any type of distressed property from a motivated seller). These houses can often be bought for lower prices, which leaves more room for profitability. A foreclosed property can be renovated and then used as a rental unit or be flipped for a faster return on investment (ROI). Here are a few tips from PropertyLark for buying foreclosed properties:
1. Make Beneficial Connections
Building the right relationships can really help you as a real estate investor. Make connections with banks, mortgage lenders and tax collectors in the areas where you want to buy. You may be able to learn about properties in the pre-foreclosure process or gain access to more listings of already-foreclosed homes. Connect with real estate agents who deal with a lot of distressed and foreclosed properties. You can always keep your eyes and ears open for great investment opportunities. Connecting with the right people and businesses can also provide excellent benefits.
2. Have Your Financing in Order
Of course, cash is always king as a real estate investor. It will provide you with more leverage when making offers, while usually helping you secure a lower price and faster closing. If not paying all-cash, then have your financing in order. Be pre-approved for your mortgage loan or have your other funding sources (private investment or funding partners) all lined up. Be ready to make quick offers and aim for faster closings when buying distressed properties.
3. Plan Your Offer Strategy
The purchase price you are willing to offer can make or break any real estate investment deal. Things can move fast in the foreclosure market and when dealing with distressed sellers. There is almost always other competition out there ready to make offers. Run the property analytics and compare the local comps to set your offer price. Be ready to up your price if the house is getting multiple offers. Do what you can to make your offer as attractive as possible without overpaying. Don’t get caught up in a bidding war. Set your ceiling and stay within budget. If it doesn’t work out, be ready to move to the next opportunity.
4. Be Prepared for Renovations
Most foreclosed properties, short sales and other houses coming from a financially distressed seller will need some work. Factor in renovation costs when determining your overall spending budget. Be prepared for the time and effort it will take to turn a distressed property into something that can make you money as a rental or flip.
5. Don’t Panic
As we mentioned, things can move quickly in the distressed properties market. You may see a lot of good houses at low prices. This can cause indecision and panic could also set in if your first offers don’t get accepted. Just remember to stick with your plan, stay within your budget and only pursue the investment opportunities that make financial sense. Remove emotions from the process as much as you can. These are business decisions, and that’s the mindset you have to have as a real estate investor dealing with foreclosed properties and distressed sellers.
For more help with all your real estate investing goals, follow the PropertyLark Buyers Blog or join our home buying network to access additional investment resources.