Buying Foreclosures Improves Investments
With The number of Foreclosures recently , we noticed that the number of homes taken over by banks topped 100,000 for the first time since the "mortgage meltdown" began over three years ago. In September, the banks foreclosed on 102,134 properties, a large slice of the 347,420 total foreclosure filings for the month, according to RealtyTrac.
In 2005, before the housing crisis, banks foreclosed on just 100,000 in an entire year! Now, the yearly total is close to a million foreclosed homes, or one in every 139 homes. Make no mistake about it, losing your home has got to be one of the most traumatic experiences anyone can go through. At the same time, the huge increase in home foreclosures created an opportunity for others who "service" the foreclosed homes. When a home is foreclosed, the property needs to be inspected regularly to prevent further loss of value.
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Beyond the obvious: "Buy low, sell high", what may be less obvious is this: your money on a transaction is made when you buy. It is realized when you sell. You only have one opportunity to buy at the right price. And paying too much for a property is a large part of the reason so many people are in trouble today!
Buying right allows you options in case things don't go as planned or as scheduled. For example, you buy a property to rehab and flip and you run into a major zoning snag that delays the project 6 months to a year.
If you have bought the property right, you may still be able to salvage the investment. Here are some options you can explore:
* You can just "flip it" without doing the anticipated improvements - in effect, selling the problem to someone else to solve - who may have deeper pockets or more experience.
* Go forward with the improvements but rather than sell, you rent the property - creating cash flow until the market "catches up" to your improvements.
* Structure a "rent with option to buy" scenario for a "wannabe" homeowner that can afford the monthly payments but doesn't have a down payment saved.
Ideal candidates for this type of scenario are professionals recently graduated from college with large student loans - doctors and lawyers come immediately to mind.
* Depending on your loan situation, perhaps you can sell the property by taking back paper - i.e. owner financing.
This can be an attractive option for the professional we mentioned above or for someone that has damaged credit that can't otherwise get financing. You will, of course, want to be cautious about transacting with such a person. However, not everyone with damaged credit is a deadbeat.
Remember: Life is what happens when you make other
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