What are the draw backs of looking at real estate foreclosure listings.?
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Answer:
If you don't already know, you need a good buyer's agent to help you. There is no way you are going to learn it all as you go.
Foreclosures can be a great way to make some money. But you have to have cash you're willing to risk, you have to move fast, and you have to know all about that property and the market. If you're not careful, they're a good way to *lose* huge amounts of money.
Draw backs are usually the HUD properties which must be owner occupied for 1 year, then most foreclosures are not ready to move in so work must be done. But, as a former owner and "flipper" who made $120K profit from a foreclosure deal..there are great deals to find indeed. What to look for? An easy flipper with the potential of appreciation for cheap. I see them all the time.
Be careful. Everyone wants to find cheap properties to flip. And not everyone can do it. You buy these properties as-is. Many times they need extensive work that you may not see with the eyes. You can sink a hugh amount of money in these fixers and as the market slows you have to be able to go with the flow. In other words, the money you pay in morgage, expenses, and repairs must be money you do not need to live on for at lease a year or two. Please do not buy and expect to turn a profit right away. It does not work like that. Also keep in mind who will fix your property? Do you have the expertise and time? If not you may be paying $50 or more per hour for the help (like I am doing right now at $260 per day).
There are other drawbacks too. Will you rent it out? What is the neighborhook like? You need time and lots of it. Don't expect a quick flip? Many mortage brokers won't lend on foreclosed properties?
I have been flipping properties all my life. I have made great money but only when the R.E market went up. If the market is level you may not make a cent and do alot of work for no profit. I am presently fixing a home I lived in 3 years ready to turn it. It was so old it needed new bathrooms. I have spent $10,000 on two bathrooms and still counting. While I am waiting for these to be done (2 months) my home is at a loss (no income from it). It may take another month since while they are being done the exterior is going down hill (now I need weeds taken out, windows washed, touch up paint, power wash, driveway sealed). So now it takes more money and time. This is the problems with flip it properties.
Years ago I bought a foreclosure at auction (cash required) for $200,000. Looked good just cosmetics. When we moved in to work on it major issues started appearing. Needed a new roof ($10,000) new boiler heat system ($15,000), new windows ($25,000) new carpets ($12,000), new fixtures ($7,000), mold abatement ($25,000). Thats only the tip of the problems. I fixed it, sold it for $300,000 and just barely broke even. Was it work it? Maybe since we got to live rent free for a year but it was a ton of headaches to boot.
Have a well thought out plan and stick to it. Make sure you get a sound home with no MOLD or WATER DAMAGE. Have it inspected by a pro before your purchase. Make sure you have the cash and time to fix it up.
Good Luck
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