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There are many investment opportunities that can come your way during your career as a real estate investor. Waiting for the right moment to buy investment property can secure you a great deal that yields returns for many years. The recent housing bust over the last 5 or 6 years has left a buyer's market for procuring investment properties. Many homes that were very valuable have been lost by the original homeowner and acquired by banks or mortgage lenders. These foreclosures can be a real steal as an investor, but not every property will be up to par when it comes to renting it out quickly. Many investors wonder are foreclosed properties good investments.
Advantages of Foreclosed Properties
A home that is vacated due to foreclosure was likely surrendered to the bank or mortgage lender for less than the actual value of the home. It is common in foreclosures for a property to lose 30% to 40% of the previous year's assessed value. Since banks end up taking the biggest loss, they are eager to get these properties back on the market before home values continue to decrease. Finding these properties and buying them can give you excellent returns for your real estate investment business.
Many properties are located in extremely nice neighborhoods that are thriving in the local economy. Some investors have purchased foreclosed properties in high crime areas and this has labeled foreclosures as risky. The majority of foreclosures that you will find were once owned by middle class families that were the victim of job loss or other financial hardship. Many neighborhoods have been affected by the recent economic crisis. There are now more foreclosures than any other time in history. This is excellent news for real estate investors.
Disadvantages of Foreclosed Properties
The process of foreclosure can extend well past a year and a home that sits vacant during this time can be damaged by weather or pests. This means that additional cleaning and maintenance expense will be required after the intial purchase of the property. If you have put most of your investment into buying a foreclosed property, it can be hard to come up with the financing that is required to make a foreclosed home liveable again. Hiring contractors, painters or pest control companies can be a hidden expense that you might not expect when you acquire a foreclosed property.
The time frame of cleaning up, repairing and turning a foreclosed home around can easily exceed 6 months or more. If you are hoping to make a profit quickly, you should consider the advantages and disadvantages that come with a foreclosed property. Many investors go into a purchase thinking that money will start flowing in the first month, but this is not always the case in the real world. It is essential that you have the financial resources to totally turn a property around and be prepared to wait 3 to 6 months to start making a monthly income. Working with an established turnkey investment property company can eliminate the disadvantages of buying foreclosed properties.