| Distressed properties are quickly becoming an | | | | must place a bid on the property through auction. At |
| investors dream, but are they profitable? According to | | | | the time of bid, investors must be prepared to cover |
| many real estate experts, the answer is a resonant | | | | the balance due on the mortgage note, along with any |
| "Yes"! -- as long as you know the secrets to success. | | | | outstanding debts attached to it. There may be |
| Experts propose distressed properties, including | | | | instances where the investor will be forced to evict |
| foreclosure and real estate owned (REO) houses, | | | | the previous homeowner. If you don't want to deal with |
| could very well be the next hot real estate market. | | | | these types of issues, you might want to consider |
| However, they warn this type of real estate | | | | investing in REO properties instead. |
| investment will not create overnight wealth. Instead, | | | | When property is returned to the bank it becomes real |
| investing in fixer-upper properties is primarily for the | | | | estate owned. The mortgage is eliminated and the |
| investor who prefers a slow and steady growth for | | | | bank negotiates with creditors to remove liens. They |
| their portfolios or those who engage in house flipping. | | | | will also take care of eviction. Banks aren't known for |
| To be successful in this arena, it's important to locate | | | | 'giving away the bank', so you can bet they will drive a |
| properties in an area that is affordable enough to | | | | hard bargain to obtain top dollar. |
| cover the mortgage payment with rental income. This | | | | Typically, it takes two or more counter-offers before a |
| income can be derived by using the property as either | | | | deal can be struck. Additionally, many banks require |
| long- or short-term. | | | | minimum bids of ninety five cents on the dollar. If the |
| Seek out properties in family communities if you are | | | | mortgage note is $100k, investors must offer at least |
| interested in renting to individuals on a long-term basis. | | | | $95k. In reality, you'll probably end up paying $97k or |
| If you'd rather work with short-term tenants, look for | | | | more to seal the deal. |
| houses that can be used as a vacation rental. The | | | | A more profitable way to invest in REO properties is |
| right home in the perfect vacation destination can | | | | to buy from private investors who purchase bank |
| potentially yield a higher return than a long-term housing | | | | portfolios in bulk. Buying in bulk allows the investor to |
| rental. Only you can decide if you prefer long or | | | | purchase properties below market value. They then |
| short-term tenants. | | | | pass a large percentage of their savings to you, |
| Engage in due diligence before investing in distressed | | | | creating a win-win for all parties involved. |
| real estate. Obtain estimates for repair work and | | | | It's reasonable to purchase REO property from a |
| renovations. Investigate if the property has any unpaid | | | | private investor and have an instant 25- to 30-percent |
| tax or creditor liens. Most importantly, make certain you | | | | equity. Even if you invest 10- to 15-percent into repairs |
| can afford the mortgage payment if you are unable to | | | | and renovations, you still walk away with profit in your |
| rent out the property. | | | | portfolio. In order to triple or quadruple your investment, |
| Investing in foreclosure properties can carry a higher | | | | experts recommend holding onto these properties for |
| risk than investing in bank owned properties. | | | | a decade or more before selling. |
| Occasionally, investors are lucky enough to discover a | | | | There is money to be made in investing in distressed |
| home that requires little repair. For the most part, | | | | properties, but it generally is not easy or quick. If you |
| foreclosures require considerable work to get the | | | | take time to make informed decisions, investing in |
| house back into livable condition. | | | | foreclosures and REO houses can eventually make |
| In order to purchase foreclosure property, investors | | | | you a very wealthy person. |