Distressed Properties: Making Money with Foreclosure, Short Sale and Bank Owned Homes

Distressed properties refer to foreclosure, short saleare fortunate enough to locate foreclosure homes in
and bank owned real estate. Many investors seek outnearly perfect condition. However, most distressed
these types of properties because they can beproperties require substantial work to return the home
purchased below market value. In today's marketto livable condition.
distressed real estate can be an investor's dream.Foreclosure real estate is purchased through public
However, careful consideration should be given beforeauction. Investors must be capable of obtaining
making an offer. Otherwise, these properties couldfinancing if their bid is accepted. In some cases, the
quickly become an investor's worst nightmare.previous homeowner continues to reside in the home
Real estate experts proclaim distressed propertiesand investors must engage in eviction. If you do not
could quickly become the next hot investmentwant to deal with these types of problems, it is better
opportunity. They also warn this type of real estateto invest in bank owned properties instead.
investment will not create overnight wealth. Instead,If no acceptable bids are placed on foreclosure homes,
buying fixer-upper homes is primarily for investors whothe properties are returned to the originating mortgage
prefer slow and steady growth or those wholender. The bank eliminates the mortgage and
participate in house flipping.negotiates with creditors to remove liens. Banks also
The key to success in this real estate niche is totake care of eviction. Mortgage lenders aren't
locate properties that are located in areas wherenotorious for 'giving away the bank', so be prepared to
people want to live. With a little work and variousengage in multiple counter-offers to obtain the desired
upgrades, distressed properties can be used as rentalprice.
homes, sold as rent-to-own property, or quickly flippedA more profitable and less stressful way to purchase
for profit.bank owned properties is to seek out real estate
Investors who prefer long-term tenants should seekinvestors who purchase bank portfolios. Investors who
out distressed properties located in family communities.purchase entire portfolios are able to buy distressed
Investors who prefer short-term tenants should lookproperties at wholesale prices. They then pass along a
for foreclosure, short sale or bank owned homespercentage of savings to other investors; creating a
located in areas where people enjoy vacationing. Thewin-win situation for all parties involved.
right home located in popular vacation destinations canIt is not uncommon to purchase bank owned homes
potentially yield higher profits than long-term housingthrough private real estate investors for 60- to
rentals. Only you can decide if you prefer long- or70-cents on the dollar. Even when investors must
short-term rental properties.spend 10- to 15-percent in repairs, they still have
It is crucial to engage in due diligence prior to investingaccrued equity in the home. In order to triple or
in distressed properties. Obtain repair estimatesquadruple profit margins, real estate experts suggest
through contractors. Determine if any unpaid tax orholding the property for ten years.
creditor liens are attached to the property. MoreThere is money to be made by investing in distressed
important, make certain you can afford the mortgageproperties, but it is rarely easy or quick. By taking time
payment if unable to rent or flip the home.to make informed decisions, investing in bank owned, 
Foreclosure homes tend to be a riskier investmentforeclosure and short sale homes can eventually
than bank owned houses. On rare occasions, investorsmake investors quite wealthy.