The Basic Concept of Making Money on Foreclosures

Profiting from a foreclosure purchase is a goal for many first time real estate investors. It seems simple enough, buy a diamond in the rough for $25, put $100 into in a coat of paint and then sell it for hundreds of thousands of dollars. The concept is simple, but the process can be painstaking and require a lot of hard work, determination, and dedication from the investor. There are two basic ways an investor can make money on a foreclosure, either flip the property and sell it or rent it out.

The concept of flipping a home to make money on a foreclosure is to:

  • Buy a low-cost house or apartment in a great location with excellent potential
  • Secure the lowest rate mortgage to finance the purchase of the house and minimize your out of pocket purchasing expenses, since this is not a long term investment there are many mortgage options to choose from
  • Invest some money (and lots of elbow grease) into fixing up the home and making it market ready
  • Sell the home at a price that covers the initial investment, the cost for the repairs, pay off the mortgage and sell it for a profit
  • Appreciate the house value

Fixing up and renting foreclosed properties is another way to make money in the real estate industry, you can do so by:

  • Buy a low-cost house apartment in a great location with excellent potential
  • Secure a low fixed rate mortgage to finance the purchase of the home since this is a long term investment it is better to know the long term rates so you can decide upon a rental fee
  • Invest some money (and lots of elbow grease) into fixing up the home and making it market ready
  • Calculate a rental price that should cover your monthly expenses for your mortgage, property taxes and income
  • Find a tenant for your home and make sure to have them sign a lease

Whether the purpose for your purchase of a foreclosed property is for living or for making money – it is advisable that you do a thorough research of the property and the paperwork that is involved so that there are no surprises.

>>See Conditions of Foreclosed Homes