3 Creative Ways to Finance the Purchase of a Foreclosure Investment

1. Leverage (Other People’s Money).  Leveraging will make every dollar count.  You do this by pooling you money with other people’s money.  It’s simple:  If you have $50,000 and pool with three other people with $50,000 each, together you have $200,000 to invest.  This makes is it easier and more profitable for all of you.  And because you organized this deal and worked to make the investment property profitable, you will keep the majority of that profit.  The investors didn’t have to do anything but put up their money, but they made a profit as well. 

In order to gain the trust of other investors is by having a strong credit history, good character (ethical), and have good references.  They need to know that they are doing the right thing by putting their money into your hands.  This is a trust situation.  They are trusting you to be who you say you are and do what you said you would do – turn a profit.

2.   Pre-approval with an equity line of credit.  If you’re a property own now,  and have a good credit history, you may be able to get and equity line of credit for the quick purchase of your investment property.  This line of credit is drawn against the equity of your current home.  You have a check book and a line of credit that you can draw funds from with little restriction.  The interest  is charged only on the current balance from this credit line.  If you don’t use it, you don’t pay interest on it.  But, when a property comes up that meets your criteria and passes all of your tests, you will be able to purchase it immediately with this line of credit. 

3.  Pledged Account Programs.  This is a very short term line of credit, used to get the purchase of your investment property finished.  It is a no down payment loan.  This is also an adjustable rate mortgage plan, so selling quickly is extremely important.  If you can’t sell quickly, then refinance at a fixed rate to keep payments under control.  Then you can use the property for rental purposes, with the tenant making the mortgage payment, until you can sell. 

In a pledged account, the borrower or his/her relatives pledge certificates of deposit to a lender for security on the no down payment program.  The principal and interest earned continue to belong to the borrower or their relatives.  But, the CD secures the no down payment loan and lowers the lender risk.

There are other creative ways to finance the purchase of foreclosure property.  Check with your local banks, credit union, or savings and loans.   Don’t forget to check out this site for a short sale package.

5 Things to Look for When Buying a Foreclosure Property

Buying foreclosure property is a good way to make money for many people.  But if you’re just starting out you need to look at some very important factors when buying.  Here are five to keep in mind when you start your search for a property you want to invest in.

1.  When you find a property in a listing that you think you’d be interested in, go and take a look at the neighborhood before going any further.  The real estate slogan ‘location, location, location’ holds just as true for foreclosure property as it does for conventional house sales.  The house may be beautiful, may be grand, but be sure to look at the other houses in the neighborhood.  If they are in decline or are in poor condition your house will be more difficult to sell.  That doesn’t mean that it won’t sell; it simply means that it may take more time to sell and you may have to decrease your selling price and take a lower profit.  If this your first property it will be easier for you to start with a house in a better neighborhood.  

2.  Check to see how close schools are to the neighborhood you’re house is in.  Does the school have a good reputation? Other amenities to consider are shopping, parks, and possible neighborhood upgrades.  Is shopping close by?  Is there a neighborhood park for the kids?  Is the city going to revitalize this area of the city?  All of these issues will have an impact on how quickly you can sell the house.  They also make great selling points to prospective buyers.

3.  The condition of the house is a key issue.  If a house needs major repairs this is a house to be avoided.  Paint, paper, small repairs are all you want to take on, otherwise you will be losing a large portion of your potential profit, if not all of it.  You’re looking for a shabby house that’s structurally sound.  No major plumbing, structural or electrical problems.  Remember that the amount of money you spend on repairs comes out of your pocket right up front. 

4.  When buying a foreclosure property you need to do a title search to make sure you are paying for only one mortgage.  If there is a second mortgage attached to the house that you didn’t know about before purchasing, you will have to resolve this second mortgage before taking possession.  There may be other liens on the property, as well, and a title search will reveal this.  This is an important step in how to short sale and should not be missed.

5.  Take good look at yourself.  Do you have the ability to finance a project of this size quickly?  Do you have the ability to pay cash for a property, such as in a tax sale?  Would having a second investor with you be a good idea?  When you are buying foreclosure property it is essential that financing is available and ready.  Banks do not like holding a property; they want to move it as quickly as possible.  Timing is key at this point.

Buying foreclosure property as an investment can be a good way to make money.  But, be sure to do your homework.  It will pay off in spades.

3 Reasons To Invest In Foreclosures

Investing in foreclosed  property isn’t for the faint of heart.  There are large risks and consequences.  But if you do your homework, and are an aggressive go-getter, you should fare pretty well.  With the subprime melt down, there is no time like the present to start investing in foreclosures.  Here are three ways you can dive in. 

1.   The market for buying foreclosed property is red hot right now. This is a great opportunity to get your feet wet if you want to get into foreclosure investment.  But remember to do your homework.  Know your market and know the property.  There are a lot of people out there that have the same idea that you have. 

Make sure you know all the information you can possibly find out about the property.  Is it occupied?  What’s the condition of the house.  Find out as much as you can.

2.  Having said all that, you can get great properties for jaw dropping prices. All foreclosure homes are sold at a discounted price and can vary from 5% to 15% discount and even more.  This is a great time for investors.  With the right house you can turn a pretty good profit!  Especially if you are doing a real estate short sale.

3.  You can help your community.  When a foreclosed home sets empty for months on end, it can be difficult for the community.  An empty house is an easy target for vagrants to break into, for vandals to destroy, and for vermin to infest.  This brings down property values all over the neighborhood.  When a foreclosed house is purchased and given updates, the neighborhood looks better.  Then when you sell it to a new family, it gives them something to be proud of. 

These are all great reasons why investing in foreclosure property may be a good way for you to invest your money.  It’s not something that you take lightly – there will be costs involved in getting the house ready for selling again.  The possibility of not being able to sell it as quickly as you like is always there.  You may even need to rent it out for a while.  But when you are able to sell it, you’ll see that profit come right back to you.