Is Buying A Foreclosed Home A Good Investment?

by Editor on April 30, 2013

Steve Jobs Home, the garage where Apple Started

The recent global economic crisis has pushed people into foreclosure, causing some to lose not only their house, but their families as well.

When a homeowner is not able to make mortgage payments on their home, the bank must foreclose and sell the property so they do not lose their own investment. For people who are looking to invest in real estate, foreclosed properties may be a really smart investment.

Buying a foreclosed home can be done as a personal investment or for profit by renting it out. People who want to buy their dream house, or something close, might find a foreclosed property appealing since these properties are often competitively priced below market value. More often than not, foreclosed properties are being sold for bargain prices because banks simply want to make sure their costs are covered, as well as any outstanding loans on the property. A foreclosed home purchased at a reasonable price can provide the new owners a means to reassign their budget into other things like renovating the house according to their own specifications or other priorities.

There are also quite a number of people who buy foreclosed properties to make a profit. Since an investor can buy the foreclosed house at a lower price, they can get a good turnover rate. Location is one of the biggest factors in the value of a property. But what many home buyers do not understand is that for most investors, it is all about location, location, location. Getting a property in a prime area where there are schools, supermarkets, places of worship and other important facilities can make a foreclosed house a hot investment. If an investor were to buy a foreclosed home in a centrally located neighborhood, it can be re-sold for a good profit.

One thing you should be aware of when buying a foreclosed home is the condition of the house. You might find a house that’s a bargain but there might be a lot of work needed to be done to resell it or live in it. Visiting the place and having a professional go with you to inspect the house for any kind of damage would be essential. Usually foreclosed homes are sold as-is and without warranty, so you want to make sure that there isn’t any permanent damage that might cost more than the home cost you.

To get the most out of investing in a foreclosed home, you should still do a great deal of research about the market price of the neighborhood where the property is located. While some might think they are getting a potentially good price buying a foreclosed home, there might be some challenges when you want to start reselling the home.

Like with many other types of investment, the success of investing in a foreclosed home will be on a case to case basis. There is a lot of potential for this type of investment, but you must do your research and make sure you’re getting the better end of the deal. You probably need to consult with a knowledgeable real estate agency, a realtor, and possible a contractor to understand if a particular foreclosed home will turn out to be a wise investment.

Michael Lancsek – broker/owner of a real estate company.

photo by: gflinch

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