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
Save for Your Future
Sponsors of

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

Related Video

About the Author

GOBankingRates Staff

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

Read More

The Basic Concept of Making Money on Foreclosures
Close popup livericher_png

We're here to help you Live Richer.

Sign up to receive our daily weekday newsletter with the latest finance and lifestyle content.

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.