You may already know about the fantastic profits to be made from foreclosure home investing. And while foreclosure investing can be a legitimate and rewarding way to quick profits, it’s not a completely fool-proof way to easy money. Being able to honestly answer the following four questions can help ensure that your foreclosure home investing ventures are always good deals (and can help you to stay away from the money pits).
How much money will I need to spend in order to make the house saleable?It’s not a foreclosure investing deal unless you can make a profit. Many would-be investors underestimate the cost of necessary repairs. If at all possible, get an inspection, or at least walk through the house with someone who is knowledgeable about what needs to be done to make the house livable and safe. If you’ll be doing the work yourself, get estimates for material costs. If you’re hiring someone else, get estimates for their total costs to you.
How much time will be required to make the house livable?Be realistic. If you’re doing the repairs yourself, do you have the knowledge, skill, and time to make this foreclosure investing venture profitable? Many a would-be foreclosure investing tycoon has bought a “fixer-upper,” with great do-it-yourself plans to fix it up and sell it at a profit. In many cases, they’ve found themselves years later, still working on a seemingly endless bunch of repairs. And remember, a house that was obviously fixed up by a “do-it-yourselfer” (e.g., with an amateur drywall job) is not likely to be attractive to many buyers.
Is the house in a desirable neighborhood?This is not to say that your foreclosure home investing has to take place in only the “best” neighborhoods, but you should keep in mind the level of appeal the property will have to potential buyers. Will a variety of people find the area safe and pleasant? Surroundings are part of the package you’re selling..
If I ask a realistic selling price for this property, will I still make a profit?
With rare exceptions, you can only sell a property at a price the market will support. In foreclosure home investing, even if you’ve spent a pile of money on repairs and upgrades, you can’t expect to sell a property for $250,000 when the highest-priced homes in the area are going for $150,000. This is key to foreclosure investing success.