Before you start investing in real estate foreclosures and invest your hard earned money be aware of certain items that pose considerable risks. If you know those risks you can act accordingly and protect your investment.
1. Ensure that the property you are buying has a clear chain of title. Are there any last minute liens that were added? You may have an abstract that you pulled during the process but you must check to determine if any liens have been added since then? Your title company will issue a title insurance policy after an investigation.
2. Do not over pay for the property. The price that you pay for a property is directly related to the price you hope to sell the property for. This sounds like a simple concept but is often overlooked. You make your profit when you buy a property not when you sell it! If you pay too much you will have a difficult time selling for the profit you want.
3. Know your costs. Estimating your costs is very important. You not only have your purchase price but any repairs must be added in. You can not overlook insurance, lawn services, interest, closing costs and utility costs. They add up to more than you would ever imagine. Keeping tabs on expenses is the secret to making money in foreclosures. Keep a good checklist or worksheet up to date.
4. Get the seller OUT! Don't even consider leasing back to the seller. They are in a foreclosure situation because they didn't make the payments to the lender. Don't take the lenders place. I know some of you are thinking how heartless I am. I am not heartless and have helped many a down on their luck homeowner. But it's your hard earned money which is on the line. You must be tough. You are already helping them by removing the mortgage from their back.
5. Minimize any cash to seller while they are in the property. Of course, the seller may need some funds to and relocate. Never give all the funds to the seller while they are still living in the property. Make the transfer of funds contingent on the seller leaving the property prior to receiving the proceeds.
6. Have enough insurance and make sure its the appropriate type of insurance. A house that will be renovated will normally cost at least twice as much to insure as one that will be rented. Speaking of renting your policy will normally stipulate how long the property can be empty. Pay attention.
Follow the above steps, keep track of expenses and you should make money with foreclosures.
Ray Caran has owned and operated a multitude of businesses over the years. He has been buying and selling real estate for over 20 years. For more tips go to: Property Money Making Secrets.
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Thursday, January 24, 2008
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