Making Money With Real-Estate Investing By Buying Foreclosures

In today’s market you can find an astonishing number of investment offers. Depending on your personal situation, you can have different reasons why you want to invest. It can be to earn additional income, capital growth, retirement or to set up a college fund for the children. But it will in all cases be basically the same: have your money making more money for you without too much hassle. Therefore real estate is a good option. Later in this article I will go in more detail about selecting foreclosure as your ideal vehicle.

With real estate you can choose for the short term or long term, that is up to you. But the most people prefer for the long term. In some cases you may get identified by the IRS not as an investor, but as a realtor. Don’t hesitate to contact your tax advisor to learn about all the details when you want to choose for the short term option. You definitely don’t want to find any surprises in the mail. A friend of mine bought a house cheap at an auction. He is a guy who knows how to use tools, so he fixed it up and sold at three times the purchase price. For him this was a great return on his money. It cost him about a year to get all the work done. He was smart enough to reinvest the money to buy two other distressed houses, and after the sale he had doubled his money.

If you decide to get into real estate for the long haul, you can buy properties to rent out to others. The risk involved is greater, but that is also applicable for the rewards. You have to spend time on tenant relationships and maintenance. Arrange all kinds of insurance as a landlord. After you have bought enough houses can make a nice monthly income form your properties. It is only a matter of time before you are able to retire completely.

Without money you can buy nothing. So you need enough money of your own or you have to go to the bank to borrow money. If the bank is prepared to lend you money depends of several factors. One of them is of course what your objective is with the property. Either sell it within a short time frame or rent it out. The second option gives you the monthly cash to repay the loan and interest. In the first option you are fully responsible. Because no one enjoys living outside, there are always people looking for a house to buy or rent.

But why choose for foreclosures? One of the big advantages of foreclosures is that they are more profitable. You can buy them at pennies for a dollar. Sometimes even at half price. Last year there were more then one million foreclosures in the US. Some of the properties you can buy through the internet, by which you can save a lot time on travel and therefore do your work at home.

The foreclosure process is divided into three steps, upon which you can act:

1. Pre-foreclosure
2. Auction
3. REO

If the house owner misses more then three monthly payments, most banks start to take steps. But some of them can wait up till six months. That is determined by the policy of the bank and the payment history of their client. The bank will go to the county office to register the notice of default. This document is then official announcement that the borrower is late with his payments. With this act the reinstatement period starts and ends in many cases one week before the sale of the property. Of course when the borrower comes up the money in that period, the sale will be cancelled. But otherwise a foreclosure date is also set. This date has must also be entered in the records of the county office and will appear in the local newspapers.

The county courthouse is the designated place for the auction of a foreclosure. The bidding starts at an amount that is equal to the accrued interest, the loan balance and any additional fees. When there are no buyers at that price, then the attorney of the bank who conducts the sale, will buy the house.

Should this happen, that the property is now labelled as a REO or Real Estate Owned. This can happen when the perceived value of the property is lower then the total amount owned to the bank. But please note that I wrote perceived value. Because, what is of low value for many people, still can be of high value for the right buyer.

Also another advantage of buying a foreclosure is that all junior liens except property taxes are removed. The priority of liens is determined by the date of recording. When you purchase a REO also known as a Bank REO, you will typically receive the property with a clean title.

Learn more about Real Estate Investing and locating sellers. Stop by Marcel Bongers’s site where you can find out all about buying a foreclosure and what it can do for you.