Looking to start investing in Real Estate? Read this guide that is full of information to help the beginning novice learn how to begin mastering the real estate market. From renting, to selling, to buying my goal is to help educate as much as possible.
Now that we are covering more advanced topics, we are moving along to distressed properties, as well as foreclosed properties. These are not something simple for the novice investor to manage, however these types of property will tend to increase the amount of profits in which you are able to realize. Remember as you continue reading these installments you still need to be reviewing the newspaper ads, calling sellers, taking notes and viewing the properties that interest you.
Distressed properties are something that typically are classified as distressed because the property is not in top-notch shape. It is in need of some repair and maintenance and possible renovations to bring it up to date and improve the appearance of the property. Such properties tend to sell for well below market value because the owners want out, and want or need a very quick sale.
These properties are often able to be purchased very cheaply, and with some renovations can either be turned and sold quickly, or they can be rented out for a price in align with the market value of the house after the renovations are done. Many people who flip properties, that is what purchasing cheap houses and renovating to resell is called, tend to make good profits as long as they carefully choose which houses to invest in, and have a good contracting and subcontracting team they can work with.
You need to be prepared that these properties can run massively over budget and take quite some time to be completed. There are permits that must be obtained often, as well as inspections that must be passed before you can sell the property. Make sure you are allowing adequate time for any and all problems that can appear on the horizon, better to come in early and under budget, than late and over budget.
Foreclosed properties are those in which either the owners cannot afford the property anymore, or they do not want the property anymore and cannot afford to sell. This happens quite often all across the country, when properties have been foreclosed upon the mortgage companies need to turn around and sell them quickly. Their main goal is to recover the amount of money that is still due on the property, which means there can be wonderful deals found by looking at foreclosed properties.
Foreclosure occurs in several stages before the process is completed. The first stage is delinquency. This is when the payments fail to be made; typically, the lender will turn the case over to an attorney within 30-60 days of the first missed payment. Some lenders allow a longer period of time before this occurs, however most are not willing to wait long.
At this point, the buyer has three options, the first is to pay off the mortgage in its entirety, the second is to bring the mortgage to current this is called reinstatement. The final option is to do nothing and the foreclosure proceeds to the next step. The last date that is available for the mortgage company to accept payments to bring the mortgage current is called the cure date.
If the mortgage is not brought up current, the attorney for the lender will typically file at the courthouse in the local area where the property is located asking for a judgment requesting the property to be sold. A copy of any summons and the complaint that was filed will be served upon everyone who has an interest in the property; this includes anyone who has any liens on the property.
The next major phase of the foreclosure process is the public sale. The sales are typically required to be held at a local courthouse in the same area as the property. Any money that is over the price of the mortgage lien will be paid to the mortgage company. The property owners who lost the property are not entitled to any of the funds. If however, the funds obtained during the sale do not cover the amount owed then the lender can apply for a deficiency judgment against the original purchaser.
There are several ways to locate foreclosed property; many courts require that a notification of the sale, as well as the date and time be placed in the newspaper. Typically, these ads are found under Legal Notices. One of the ways in which to acquire the property easier and with fewer hassles than a court auction is to approach the homeowners directly. This also enables the opportunities to use some of the creative financing options that we have discussed in previous installments.
As I am sure, you can imagine a foreclosure process can cause a great many stresses for the family who is in the process of losing their home. If you are able to structure a sell that will allow them to walk away with some cash, as well as you walk away with a great deal on the property you have created a win/win situation. These types of situations are the best option, for everyone. If the seller is leaving the property on their own terms, they are more likely to leave the property in good condition, which will decrease the amount of money that will be needed to rehabilitate the property.
There are several government opportunities to obtain foreclosed or seized properties. They include the Federal Deposit Insurance Corporation (FDIC), the General Services Administration, Internal Revenue Service, Treasure Department, and the County Real Estate Tax Authority. Each obtains the property they sell through different means.
The property the FDIC obtains for sale are due to properties that banks have foreclosed upon that have gone out of business since the foreclosure. If a bank had 10 pieces of property when it failed, the FDIC then becomes responsible for disposing of all the property. Next is the General Services Administration, they dispose of property that the government no longer needs, or property that was seized by a government agency.
The Internal Revenue Service forecloses on property that is owned by someone with large tax delinquencies. The Treasury Department, auctions off houses and real property that was seized in connection with illegal activities. The final major area is County Real Estate Tax Authorities; if people are not paying their property taxes, the county can seize the property to sell at auction to recover the unpaid taxes.
Remember that a very important detail of foreclosed, or seized property is that they are sold “as-is” which means you are typically not allowed to view the property before bidding, nor are you allowed to make requirements that a roof be replaced for the sale to be completed, etc. If you are unable to financially sustain this type of risk, then just learn and do research for now. Attend a few auctions so that you can get a feel for how the sales are conducted in your area.
Unless you have extensive experience doing repairs and maintenance it is highly suggested that you avoid any property with missing windows, extensive water damage, termite damage, severe plumbing issues, severe electrical problems, and foundation problems. These are all very costly to repair usually, and will most likely involve the use of permits to complete the work.
When purchasing a house that is in need of repairs, you must carefully determine the extent of the damage, as well as try to determine exactly how much repairs would cost, so that the property is still financially affordable. Things like carpet, paint, and doorknobs etc are all cosmetic, that can greatly affect the price of the property. Remember the purpose obtaining distressed property is to increase profits. With that in mind, do not replace anything that does not need to be replaced, for example do not rip out kitchen cabinets because they are ugly, instead paint them, strip and varnish, or even replace the doors and hardware. This is a much cheaper alternative that will cost much less than new cabinets.
Several things that are very important to the exterior appearance of the property is making any repairs necessary to the sidewalks, and driveway. Trimming all shrubs and trees, installing new shrubs, mulch and beautiful plants all help as well. If necessary install shutters, paint the exterior, replace outside lighting and even installing a new front door can greatly improve the exterior.
For the interior, you need to make things as clean as possible; people do not want to consider purchasing or renting dirty property. Your goal is to make it as attractive as cheaply as possible. To accomplish this you need to first thoroughly clean the entire property from top to bottom. This will enable you to see what if anything really needs to be replaced, carpet etc. You should always paint all interior walls, as well as ceilings. A neutral color is always best, if you are planning on working with more than one piece of property in your investment career, it is a good idea to note the name and brand of the paint you select. This will reduce the amount of paint that must be purchased at a later point.
Now that we are covering more advanced topics, we are moving along to distressed properties, as well as foreclosed properties. These are not something simple for the novice investor to manage, however these types of property will tend to increase the amount of profits in which you are able to realize. Remember as you continue reading these installments you still need to be reviewing the newspaper ads, calling sellers, taking notes and viewing the properties that interest you.
Distressed properties are something that typically are classified as distressed because the property is not in top-notch shape. It is in need of some repair and maintenance and possible renovations to bring it up to date and improve the appearance of the property. Such properties tend to sell for well below market value because the owners want out, and want or need a very quick sale.
These properties are often able to be purchased very cheaply, and with some renovations can either be turned and sold quickly, or they can be rented out for a price in align with the market value of the house after the renovations are done. Many people who flip properties, that is what purchasing cheap houses and renovating to resell is called, tend to make good profits as long as they carefully choose which houses to invest in, and have a good contracting and subcontracting team they can work with.
You need to be prepared that these properties can run massively over budget and take quite some time to be completed. There are permits that must be obtained often, as well as inspections that must be passed before you can sell the property. Make sure you are allowing adequate time for any and all problems that can appear on the horizon, better to come in early and under budget, than late and over budget.
Foreclosed properties are those in which either the owners cannot afford the property anymore, or they do not want the property anymore and cannot afford to sell. This happens quite often all across the country, when properties have been foreclosed upon the mortgage companies need to turn around and sell them quickly. Their main goal is to recover the amount of money that is still due on the property, which means there can be wonderful deals found by looking at foreclosed properties.
Foreclosure occurs in several stages before the process is completed. The first stage is delinquency. This is when the payments fail to be made; typically, the lender will turn the case over to an attorney within 30-60 days of the first missed payment. Some lenders allow a longer period of time before this occurs, however most are not willing to wait long.
At this point, the buyer has three options, the first is to pay off the mortgage in its entirety, the second is to bring the mortgage to current this is called reinstatement. The final option is to do nothing and the foreclosure proceeds to the next step. The last date that is available for the mortgage company to accept payments to bring the mortgage current is called the cure date.
If the mortgage is not brought up current, the attorney for the lender will typically file at the courthouse in the local area where the property is located asking for a judgment requesting the property to be sold. A copy of any summons and the complaint that was filed will be served upon everyone who has an interest in the property; this includes anyone who has any liens on the property.
The next major phase of the foreclosure process is the public sale. The sales are typically required to be held at a local courthouse in the same area as the property. Any money that is over the price of the mortgage lien will be paid to the mortgage company. The property owners who lost the property are not entitled to any of the funds. If however, the funds obtained during the sale do not cover the amount owed then the lender can apply for a deficiency judgment against the original purchaser.
There are several ways to locate foreclosed property; many courts require that a notification of the sale, as well as the date and time be placed in the newspaper. Typically, these ads are found under Legal Notices. One of the ways in which to acquire the property easier and with fewer hassles than a court auction is to approach the homeowners directly. This also enables the opportunities to use some of the creative financing options that we have discussed in previous installments.
As I am sure, you can imagine a foreclosure process can cause a great many stresses for the family who is in the process of losing their home. If you are able to structure a sell that will allow them to walk away with some cash, as well as you walk away with a great deal on the property you have created a win/win situation. These types of situations are the best option, for everyone. If the seller is leaving the property on their own terms, they are more likely to leave the property in good condition, which will decrease the amount of money that will be needed to rehabilitate the property.
There are several government opportunities to obtain foreclosed or seized properties. They include the Federal Deposit Insurance Corporation (FDIC), the General Services Administration, Internal Revenue Service, Treasure Department, and the County Real Estate Tax Authority. Each obtains the property they sell through different means.
The property the FDIC obtains for sale are due to properties that banks have foreclosed upon that have gone out of business since the foreclosure. If a bank had 10 pieces of property when it failed, the FDIC then becomes responsible for disposing of all the property. Next is the General Services Administration, they dispose of property that the government no longer needs, or property that was seized by a government agency.
The Internal Revenue Service forecloses on property that is owned by someone with large tax delinquencies. The Treasury Department, auctions off houses and real property that was seized in connection with illegal activities. The final major area is County Real Estate Tax Authorities; if people are not paying their property taxes, the county can seize the property to sell at auction to recover the unpaid taxes.
Remember that a very important detail of foreclosed, or seized property is that they are sold “as-is” which means you are typically not allowed to view the property before bidding, nor are you allowed to make requirements that a roof be replaced for the sale to be completed, etc. If you are unable to financially sustain this type of risk, then just learn and do research for now. Attend a few auctions so that you can get a feel for how the sales are conducted in your area.
Unless you have extensive experience doing repairs and maintenance it is highly suggested that you avoid any property with missing windows, extensive water damage, termite damage, severe plumbing issues, severe electrical problems, and foundation problems. These are all very costly to repair usually, and will most likely involve the use of permits to complete the work.
When purchasing a house that is in need of repairs, you must carefully determine the extent of the damage, as well as try to determine exactly how much repairs would cost, so that the property is still financially affordable. Things like carpet, paint, and doorknobs etc are all cosmetic, that can greatly affect the price of the property. Remember the purpose obtaining distressed property is to increase profits. With that in mind, do not replace anything that does not need to be replaced, for example do not rip out kitchen cabinets because they are ugly, instead paint them, strip and varnish, or even replace the doors and hardware. This is a much cheaper alternative that will cost much less than new cabinets.
Several things that are very important to the exterior appearance of the property is making any repairs necessary to the sidewalks, and driveway. Trimming all shrubs and trees, installing new shrubs, mulch and beautiful plants all help as well. If necessary install shutters, paint the exterior, replace outside lighting and even installing a new front door can greatly improve the exterior.
For the interior, you need to make things as clean as possible; people do not want to consider purchasing or renting dirty property. Your goal is to make it as attractive as cheaply as possible. To accomplish this you need to first thoroughly clean the entire property from top to bottom. This will enable you to see what if anything really needs to be replaced, carpet etc. You should always paint all interior walls, as well as ceilings. A neutral color is always best, if you are planning on working with more than one piece of property in your investment career, it is a good idea to note the name and brand of the paint you select. This will reduce the amount of paint that must be purchased at a later point.
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