Are Foreclosed Homes Long- or Short-Term Investments?

Some people buy foreclosed homes for long term strategies and others purchase foreclosed homes as short term investments.

Consider David and the purchase of his new home in Los Angeles. Last year, he purchased a condo with his wife at what they believed to be the biggest bargain of the century. Their goal is to live in their home for at least ten years and David has always fancied himself a long term strategist.

Even after David scored his foreclosed home, over the next few months he noticed that some property values in his building were declining even further. As of this month, it appears that the sales prices are stabilizing and that his home is safe from any further decline. Either he knows he would have been fine as since he considered his foreclosure purchase a long term investment he will be able to wait out the storm until the market starts creeping back up.

Other times, foreclosed properties are purchased as short term investments. In David’s building there is a second condo that has been bank owned since his purchase.

Recently, the vacant apartment was sold at auction at a substantial discount that made David’s bargain pale in comparison. However, only two months later that property is listed and trying to be sold again. In this case, the purchaser considered the apartment a short-term investment.

Whether you are looking for a home for a long term living situation, or you are an investor interested in flipping properties a foreclosure can be an excellent investment. Purchasing a foreclosed home can be either a long or a short term investment depending on your preference.

About the Author

GOBankingRates Staff

These articles are written by the in-house GOBankingRates team.

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