Today I want to wrap up my foreclosure investment strategies list with some information about buying wholesale properties that are bank owned or REOs. Many current real estate comps have REOs.   You can use your InvestorCompsOnline access to research these significantly lower priced properties and also use your account to make educated bids.

One way to obtain the best price on foreclosure properties is to seek out private investors who specialize in wholesaling.  Some investors and investment groups purchase entire bank portfolios consisting of dozens of bank owned foreclosure properties.  Also known as real estate owned (REO) homes, these properties are houses that did not sell at auction.  One of the biggest advantages of REO property is houses are sold with a clean title.  When banks regain ownership of foreclosure real estate they remove attached creditor and tax liens and commence with eviction action when foreclosed homeowners refuse to leave the premises.

Investors who buy homes in bulk obtain wholesale pricing and pass savings along to individual buyers.  REO homes can often be purchased at 20- to 30-percent below market value and provide investors with instant home equity.

It is crucial for real estate investors to become educated about all facets of buying foreclosure properties. Many newbie investors are tempted by the low price tag of foreclosures, but fail to realize the costs associated with rehabbing the property.  Foreclosures, short sale and bank owned real estate nearly always require some level of repair.  Investors must take time to calculate the true cost of the property before making an offer to buy.

Yesterday we talked about foreclosure investment strategies and we covered public options. Today I want to talk about another option which is to seek out foreclosure short sale homes.  These properties are in the midst of the foreclosure process and purchase negotiations take place with a lenders’ loss mitigation department.  A simple search of real estate comps using your InvestorCompsOnline account can give you an idea of what price you would want to offer for these properties.

With short sales, lenders agree to accept less than the full amount owed on the home loan.  Properties are listed through realtors or sold directly through the bank.  The short sale process can be complex and lengthy; taking up to four months or more to complete.  Buyers must obtain prequalified financing prior to submitting an offer.  Also, keep in mind it is important to note that banks rarely accept offers lower than the asking price unless property inspections reveal major problems.

Short sale houses can provide investors with a good deal, but may not be the best option for investors who participate in house flipping or plan to use the home to generate rental income.  Buyers willing to wait out the process can generally purchase homes at 10- to 20-percent below appraised value.

Stay tuned for tomorrow’s post as I wrap things up with the last of my foreclosure investment strategies.  Buying bank owned homes or REOs; and the advantages of buying these homes in bulk.

Foreclosure real estate investing can be a profitable niche for those who take time to learn the strategies.  Foreclosed realty encompasses a variety of properties including residential homes, vacant land, and commercial real estate.  As Investors, we must engage in due diligence by reviewing real estate comps and obtaining home inspections, property appraisals, and repair cost estimates to determine the true cost of buying foreclosure properties.  For the next couple of days I want to go over some investment strategies for buying these properties.

When buying foreclosure real estate, investors must be financially prepared to invest in property repairs or renovation.  While foreclosed properties are priced below market value, homes requiring substantial repair can quickly deplete home equity.  Several options exist for locating foreclosed properties at discounted prices. Once you have located a property be sure to use your InvestorCompsOnline account to research property valuation info.

The most common option to find foreclosed properties is to attend public foreclosure auctions.  All properties presented through auction are sold in “as-is” condition.  Buyers must be prepared to submit payment in full within 24 hours once their bid is accepted.  Once realty is transferred, property owners are responsible for removing creditor and tax liens and making necessary repairs.

Be sure and take a look at tomorrow’s post when I plan to run through short sales and how to benefit from those deals!

Residential investment properties can be great “bullet-proof” investments if you do your research.   Focusing on real estate comps in your targeted areas will tell you which areas are good investment locations.  Addtionally, below are three fundamental steps to follow before making a plunge in the property market.

1. Find a mentor and network with other investors

Finding someone that has “been there and done that” so to speak will save you lots of time on your journey.   Meeting other investors and experts in the area can help inform your decisions and take the guesswork out of buying a residential investment property.  Joining my coaching programs is an excellent way to manage this!

2. Make sure your finances are strong

This doesn’t necessarily mean that you have all of the cash required in the bank. You should just make sure that equity in your existing assets such as your home can be leveraged to purchase a suitable property and you have enough cash flow to cover repair costs.

You have to have a stronger financial base with buying an investment rental property than you do a property that you want to live in because defaults on investment properties are generally higher.  Therefore, the interest rates you are paying are often reflect this and you need a higher down payment.  Your silver lining here is that more attractive lower interest rate.

3. Choose your investment property carefully

With owner occupied properties, you make money when you sell. With rental investment properties, you are making your money when you purchase.

So you need to choose your area quite carefully. Many first-time investors are afraid to get out of their comfort zone and, instead, purchase a property in an area near their home. This may not be the best choice from a pragmatic investment perspective.

A smart buyer considers the demographics first and does their research with InvestorCompsOnline and often chooses properties outside of their district to get the highest possible return.