Foreclosure Properties

Written by Linda Alexander
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Buying foreclosure properties and "flipping" them has become a popular way to invest in real estate recently. Foreclosure properties don't always need to be fixed up, and even if they do, the money you will make on the sale is incredible. What many new investors forget is that investing in real estate is launching a business.

It sounds like a really simple deal: Find foreclosure properties, buy them with hardly any of your own money down, or none at all, fix it up, and sell it, right? Close. But there are a lot of steps you may have left out. Talking with a real estate agent about details beforehand will save you a lot of hassle.

Flipping Foreclosure Properties Requires Attention to Detail

When you bought the house you now live in, chances are your agent took care of finding contractors for inspections, repairs, and helping you with financing. If you want to invest on a regular basis, you'll first need to develop a strong relationship with a real estate agent as well as these other professionals. And you will first need to obtain financing-without it, you won't go one step further.

There are programs out there that require no money of your own to invest. If you can, take advantage of one of them. Or, find one that needs as little of your own money as possible. If you have remodeling or repair costs, look for a program that includes money for these as well. Talk to more than one mortgage provider to seek out all options. Owner financing is also available sometimes; the owner holds the note until you have finished remodeling.

Returns on real estate investing are usually higher than other types of investing. This is because you're not just earning a return on what money you invested, which is often five percent or less. You're earning a return on the leveraged value of the house. There will be capital gains taxes to pay, so talk to your accountant as well as a lawyer before you establish the business.

Setting up Your Foreclosure Properties Business

Be aware that you might need to get insurance on the property if you're going to have contractors work there. If you're doing electrical or plumbing work on the foreclosure properties you may also need permits. You'll need a title company to check out titles, and an escrow company for settling and closing on the houses.

This is hard work! Just like any other business venture, flipping foreclosure properties takes an investment of time, money, and hard work. You'll need to do all of these steps over and over again for each property you buy and sell. Make sure you realize what you are getting yourself into before you begin.

Write down your financial goals and discuss them with your spouse before you begin. The good news is, investing in foreclosure properties does yield fairly high returns. Over the long haul, the real estate market is a fairly safe investment. Even if the market is down, investing in real estate gives you options you don't get with the stock market, such as renting and tax advantages.

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