Investing in houses offers buyers the opportunity to earn profits. Whether buying a home as a personal residence, vacation home, rental property or for house flipping, real estate can be a smart investment choice. However, buyers must become educated about the process and learn how to spot a good property vs. a potential money pit.
Buying houses in today's real estate market requires investors to investigate their options. Housing choices can range from single dwelling homes to multi-family residences, newly constructed houses, and distressed properties such as foreclosure, bank owned, short sale and probate real estate.
With the current recessed housing market, homes values are at an all time low. Localities with high foreclosure rates such as California and Florida have seen housing prices plummet by as much as 50-percent. Many homeowners in these areas owe more than the appraised value of their property; leaving little room for price negotiation.
Home buyers have a better chance of obtaining reduced price real estate by seeking out foreclosure, real estate owned (REO), probate properties and real estate listed as for sale by owner or those offering seller carry back financing.
Buying foreclosure houses can be tricky and often are accompanied by headaches and challenges. Most houses sold through auction require substantial repairs and renovations. Some have been neglected for years and require major overhaul. Unless buyers intend to hold onto the property long-term or are professional rehabbers, investing in foreclosure houses might not be the best investment strategy.
A less risky option is to purchase bank owned homes. When houses do not sell through foreclosure auction, the property is returned to the mortgage lender. Oftentimes, foreclosed properties have creditor and tax liens attached. When foreclosure homes are returned to the bank liens are removed and the house is sold with a clean title.
Occasionally, lenders makes minor repairs and spruce up the house with a fresh coat of paint, new carpet or flooring, power wash or paint the exterior, and clear the yard of weeds, overgrown bushes and debris. These expenses are added to the sale price.
In most cases, REO properties are sold "as is" and repair costs are left to the buyer. In order to negotiate the best deal, buyers must thoroughly inspect bank owned properties and assess the advantages and disadvantages.
Although bank owned houses generally cost more than foreclosure homes, they are usually a better deal and can save buyers time and money. With REO houses, investors do not have to waste time and money removing liens or evicting tenant; which often occurs when buying houses through auctions.
Investing in housing in a recessed real estate market can be risky, but also lends the opportunity to reap substantial profits over the long run. By investing in properties priced below market value and obtaining low-interest financing, buyers can secure their financial future.
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