Using real estate comps to figure out your offer price is one of the many ways to save when purchasing an investment property. However, if your budget is tighter than someone else’s, then you should consider taking a look at real estate foreclosures. A huge savings can be made by working with foreclosure properties.
What are foreclosures? Basically, when someone borrows money to buy a property from the bank (or some other type of lender), that person is obligated to make payments (usually, a fixed amount monthly). When this person fails to make these payments, the lender takes back the property. The bank or lender in turn tries to sell off the property to others. Otherwise, it is an asset not earning its keep. Since most real estate foreclosures have been empty or neglected prior to being sold, their prices are usually below market value because they need some fixing up.
Foreclosed properties are normally in need of much repair because no money has been spent on their upkeep. If the previous owner cannot pay his mortgage, then you can assume that money was tight and house maintenance is not one of his top concerns. Unfortunately, it is also possible that the person who owned the home is quite resentful of losing it. As such, it’s not surprising to see damage deliberately inflicted on the property. They feel that if they cannot keep the property, then no one else should benefit from it. Some owners go out of their way to deface the property.
These damaged items or issues within a foreclosure can actually be a benefit to you as an investor. You see, the damage done by previous disgruntled owners is hardly ever structural. The damage generally is cosmetic. And yet, it greatly devalues the house, making it a great purchase for you.
Working with local foreclosures tends to work better for beginning investors. Get in touch with a reliable realtor in your area and state your desire to acquire real estate foreclosures right from the start. Their expertise in this type of property is something that will be of great value to you.