Thursday, February 21, 2013
Real Estate Investing - Consider Purchasing Foreclosed Properties
Some buy property for their own purposes. On the other hand, there are others who invest in assets and try to make a long-term return on their investment. Do not let the recent housing crisis scare you from the real estate market. One innovative option available for home buyers is to go for foreclosed properties are available at a discount. The idea of buying a property at a discount may seem odd. However, there are discounts offered by drastic increase in the number of foreclosures in the country.
Foreclosure occurs when the borrower is not in a position to repay mortgage loans properly. By default, banks and financial institutions with the management and ownership of real estate and continue to sell the same to recover their investment. If the housing market is depressed, banks may consider offering discounts to recover part of their investment.
In such situations, you can easily invest in real estate by buying foreclosed properties at auction. This offer can help you buy property at good rates. Buyers can easily secure the 7-8% discount on the value of foreclosed properties. In August 2009, buyers were enjoying a discount in excess of 23%. Imagine buying a property worth $ 100,000 for only $ 75,000? Your investment will automatically enjoy $ 25,000 profit. That number is only going to climb higher and increases the value of the property.
Is the housing market has improved and examples of such discounts are becoming rarer. However, banks have not stopped offering discount completely. Number of foreclosures in October 2012 increased compared to the previous month. While there has been a 19% drop in foreclosures from October 2011 to October 2012, has been a 3% increase from September to October.
There's no harm in applying increases to find good investment opportunities available at a discount. Therefore, you should focus on countries that still have a high foreclosure rate to enjoy hefty discounts on property deals. However, you must consider several other factors before finalizing your investment.
Firstly, buy a foreclosed home is not the same as buying a second home. A home that was appropriated more than twelve months ago may need many repairs to make it fit for habitation again. You may not need to spend money immediately but you have to spend on renovations to get a good return on your investment. Make sure that you consider the cost of repairs and renovations already complete investment.
The last thing you want is to buy a $ 100,000 property at $ 75,000 and spend $ 30,000 on the replacement property. You will end up with a loss of $ 5000 from such an agreement. Consider this cost even if you are not planning to spend on replacement immediately.
Second, make sure you consider the various fees and duties charged by the bank to transfer enforcement in your name. Banks often offer discounts just to try to increase their income by adding additional charges to the buyer. Do not hesitate to step away from the transaction if you feel it is not attractive enough.