Foreclosure investing can be difficult if you are not sure what to look for in bank-owned homes. There are certain learned skills that come with consistent investment in foreclosures. Let’s take a glance at what a trained foreclosure investor’s eye looks for when seeking out the best home for his or her buck.
Just like the price of homes sold normally, different locations offer different price ranges for foreclosed homes. Depending on the budget, foreclosure investors will decide which area they want to purchase in. Usually, the bigger the price tag of other homes in the area mean the investor will make more money off of the single sale of the house.
With smaller investment neighborhoods, the single sale may not be a high return, but there is usually a quicker turn around on the sale. Some investors only secure funds for short periods of time, which means the house needs to be flipped and sold quickly. This would call for a smaller investment neighborhood that will see more possible buyers in a short period of time.
Foreclosure investors also look at the market values of the surrounding homes. These prices will determine the sale price of the invested house. Knowing the market value allows investors to be smart about which homes they decide to invest in. The value of the houses in the area could be the determining factor between buying a house in one neighborhood over another house in a neighborhood five blocks away.
Market value also helps the investor to know how much work to put into a house. There is only so much work that can be done to make a house profitable. After that, the investor is just throwing money in to make it look nice with no return on investment. Understanding the market value gives the investor the cap for maximum sale price in the neighborhood.
By knowing what the sale price will be capped at, foreclosure investors are able to determine if the work needed to fix up the house will be worth the investment. Well trained foreclosure investors know a general range of prices for what it would take to fix certain issues within a house. All of these fees needed to get the house ready for sale again get factored into the investment price.
Time also costs money. Understanding the amount of work needed let’s the investor know how long he or she will have to support the mortgage and bills for the house. If the work is a quick turnaround, there will be less money spent keeping the house up. If the work will take a long time to complete, the investor knows to plan for a bigger budget.
Understanding how to estimate time and work needed to fix a foreclosure comes with time, patience, and practice. Knowing what you should be looking for when deciding on a foreclosure is all about understanding location, market value, and what a good house should look like. Take your time when assessing a foreclosure and ask for advice from someone who has experience. Finding the right foreclosure to invest in will make all the difference in the success of your project.
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Attorney William ("Bill") Bronchick, host of Legalwiz.com, has authored six best-selling books and is sought nationwide for his 25+ years of real estate and legal knowledge. He has been interviewed by numerous media outlets, such as CNBC, TIME Magazine, USA Today, Investor Business Daily, Forbes, and the LA Times, to name a few. William Bronchick is the co-founder and past President of the Colorado Association of Real Estate Investors and the Executive Director and founder of the College of American Real Estate Investors. Click on the "About" link above for more information on William Bronchick.