In this current real estate crisis, many people are loosing their homes either because they can’t make the payments or are walking away because their house is worth less then the amount owed. It was reported by CNBC on July 24 that foreclosures now represent half of all the homes sold in the US. Although this is downright scary to a highly leveraged homeowner or speculator this is also an opportunity of a lifetime for anyone looking to buy real estate at these depressed prices.
If you look at any successful real estate investor, they have accumulated much of their wealth by buying when there was a downturn in the market. Donald Trump is a good example of someone who was buying up real estate real when everyone else was selling as illustrated in the quote. “When I first started out in Manhattan, everyone was saying what a terrible market it was, and if I’d listened to them, I would not be where I am today. There are always opportunities.” Donald Trump.
Many of the top real estate investors, including Mr. Trump, now feel that this is currently a good time to invest in real estate by purchasing pre-foreclosed or foreclosed properties.
The main reason to consider buying a pre-foreclosed property rather then waiting until in becomes a foreclosure property is because that way you can buy it from the current owner. This will give you more time to inspect the home as well as developing a mortgage with the bank.
There are macro (local community, etc.) and micro aspects to take into consideration when looking for a pre-foreclosed home. Here are the some of the macro aspects:
- Try to find out how many other homes in the neighborhood are in pre-foreclosure or foreclosure. It’s best if the home you’re interested in is one of the only houses under financial strain. In order for properties to appreciate the number of foreclosures has to be minimal.
- Ask around to find out whether the rent rates in the neighborhood are going up or down. Buying in a neighborhood where demand for rental units is on the increase is important.
- What is the employment rate in the area? If declining then that may indicate that it’s not the right area in which to invest. Does the local economy appear to be stable?
- Check with local authorities to become informed about any infrastructure projects that may be planned within the next two or three years. Things such as new buildings and highways being built or corporations moving into town can be a positive indication of future growth.
- Demographically if there is a high number of elderly people living in town who are home owners, then there could be an over supply of housing in the future, as they move in with family or nursing homes for care.
If you do your homework and find the majority of these answers to portray a positive community, then you should consider buying in that area. Buying pre-foreclosed homes at the right time in the right place can prove to be a very profitable venture.
If you would like to make a comment, please fill out the form below.
