When it comes to making profits in real estate, pre foreclosure investing can go hand in hand with flipping homes. (For those who are new to the world of flipping homes or to pre foreclosure investing, flipping generally means to buy a home at a very low price, make improvements to it, and quickly sell it again for a profit; a pre foreclosure home is one that is scheduled for a foreclosure auction because the owner has defaulted on mortgage payments.)
You can profit from flipping homes by buying and improving pre foreclosure properties, if you exercise some caution. Here are some points to keep in mind for pre foreclosure investing, especially if you plan on flipping homes you buy:
Don’t underestimate the cost (or the time needed) for repairs to a pre foreclosure home. Because the owners of pre foreclosure homes are most likely in a desperate financial situation, it’s likely that they have also not been able to keep up repairs and maintenance on the pre foreclosure home. Because the owners of pre foreclosure homes are most likely in a desperate financial situation, it’s likely that they have also not been able to keep up repairs and maintenance on the pre foreclosure home. If you plan on flipping homes you buy this way, make sure your repair costs don’t negate your profits.
Make sure that you acquire the pre foreclosure home at a low enough price that that you can turn it around quickly, even after repairs, at a profit.
Don’t put top-of-the-line, expensive upgrades into a pre foreclosure home that you plan to flip, unless, of course, the quality of the other homes in the neighborhood demands it.
Putting granite countertops and a luxury spa into a $65,000 house just doesn’t make sense, and will force you into a corner where you’ll be forced to ask a price that’s not supported by the market in the neighborhood.
Look for pre foreclosure homes in areas that will appeal to a wide range of buyers. If you plan on flipping homes for profit, you need to concentrate on a market where people are ready (and able) to buy. It just doesn’t make sense to buy a pre foreclosure home and expect to make a huge profit if it’s in an area where no one wants to buy, or where the homes are all worth less than the price you need to get out of the pre foreclosure home in order to profit. Many people who have had success with flipping homes suggest looking for pre foreclosure deals in mid-range neighborhoods with slightly run-down but solid-looking homes.
Keep these points in mind if you plan on making a profit flipping homes that you’ve bought in pre foreclosure. It can mean the difference between buying a peach and being stuck with a lemon.