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How To Lose Your Shirt In Foreclosure Investing
ast year was a record year cash cow die right in front of
for bankruptcies. them. I have personaly seen happy
Delinquent payments on investors bidding on a property
mortgages, according to the in Malibu Bay, Pembroke
Mortgage Bankers Association of Pines,Florida up to $158,250. I
America, reveal a coming wave of met them the next day and asked
foreclosures on the horizon. them why they just overpaid for a
property with a market value of
There's opportunity now for $150,000-$152,000. By the way,
investors to step in and benefit next door was on the market for
from these properties that are an asking price of $154,900. If
about to hit the market. However, you must have a 20 or 25 percent
despite all the hyperbole, spread to make money on the
investors can lose money in real purchase, then stop bidding when
estate – a lot of money. If you the price gets below that spread
have some cash itching a hole in amount.
your bank account and you're
looking for positive cash flow In simple terms, if you're
and possible high returns on bidding on a property with a
investment, be sure to avoid $150,000 value and you intend to
these pitfalls in the foreclosure sell it for a 20 percent gain,
investor field. then stop bidding when the price
gets above $120,000. In a hot
Paying too much for a market, even foreclosures will
foreclosure. Many VA and HUD sell at market price, but then
foreclosure buyers have found the new owner must move in and
themselves getting caught up in most likely fix up a dilapidated
the excitement of auctioning up property that has been neglected
on properties and watch, without by the former owners. (Usually,
even knowing it, their supposed when an owner is headed toward
foreclosure, fixing the leaky years, you're setting yourself up
roof or basement is the last for financial hardship if an air
thing on his mind, leaving it up conditioner breaks or the
to the 'bank' to fix instead.) refrigerator has a compressor
attack.
Getting a house without clear
title. Since I'm not an attorney, The monthly cash flow should
I won't go deep into this point, include enough to finance any
but make sure you can get clear breakdowns or repairs while the
title to a property before you tenant lives in the dwelling.
put your $10,000 earnest money Negative cash flows are not
deposit into the deal. Order a deductible expenses.
title search by an attorney to
find out if you're going to have Not taking care of little
any problems taking title to the problems before they become big
property. If you can't get title, problems.
you can't sell the property.
Don't take the cheap way out on
Negative or unprofitable cash being a landlord. A house starts
flows. The whole idea behind deteriorating from the day the
buying a foreclosure is to buy builder completes its
low enough so that rent checks construction. Your new investment
will cover the investor's property is creating cash flow –
mortgage payment, taxes, take care of it. Keep it painted
insurance and fees each month and regularly, clean carpets and
then leave the investor some floors between tenants, fix
profit at the end of the month. broken windows, repair leaks
Unless the property is in promptly, replaced rotted wood,
pristine condition and all the etc. If you let the property
systems will last repair -free deteriorate until you can't rent
it out any longer, you've waited with professionals in the field
too long to fix these items. In who know how to maximize your
addition, to fix defects early on financial benefits form this new
will save you money if you wait form of investment. Accountants,
and the bill doubles or even attorneys and real estate
triples. practitioners are all worth their
fees as they help you avoid
Failing to educate yourself on pitfalls, increase your gain and
tax benefits of owning investment keep you out of trouble.
properties. If you're going to
invest in rental property, talk
About the Author:
Cody THOMAS, REALTOR, is a Real Estate investor.
http://www.eforeclosureguide.com
Read more articles by: Claude Thomas
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