Greg Chan asked:


Are you looking for an investment opportunity in real estate? Foreclosures can be a tremendous opportunity for new investors. The profits can be enormous. Foreclosure investing, however, does have risks and one must be fully prepared before beginning.

 

There are three basic ways to invest in foreclosure: buying from the lender after foreclosure, buying pre-foreclosures, and buying at foreclosure auction.

 

Buying REOs

 

When you buy from a lender after foreclosure, it is called buying REOs or real estate owned. REOs is the least risky way to buy a foreclosure property. Buying an REO can be very similar to regular real estate and are thus relatively safe. One possible risk is that you may not get a seller's disclosure. You can usually, however, sue the lender for restitution if something goes wrong.

 

Buying Pre-Foreclosures

 

Buying a pre-foreclosure property is somewhat riskier than buying REOs. For example, desperate sellers may lie to you about the condition or the presence of liens on the property. One should also pay close attention to whether the seller has entered bankruptcy. If the seller is already in bankruptcy, the deed may not be valid unless it has gone through bankruptcy court. Moreover, even if the seller files bankruptcy after the sale, you may have to deed the property back to the seller up to three years after the sale. Laws, however, vary from state to state.

 

Investors hope to purchase foreclosed properties well below market value. If the seller is under bankruptcy, the bankruptcy trustee may claim that the sale was a "fraudulent transfer" that was not fully valued to pay off creditors. This would force the deed back into the bankruptcy estate.

 

There are steps you can take, however, to mitigate these risks:

 

Get an inspection

Use a knowledgeable escrow agent

Look at the property yourself

 

Buying at Auction

 

Buying a foreclosure at auction is the riskiest way to purchase a property. At auction, you have almost no safeguards. For example, there you have no real estate agent, escrow, or title report. Moreover, you are not allowed to inspect the property and thus you have no idea or warranty on its condition. In most states, auctions are an all cash transaction that you must complete in a week to a month.

 

If the property is occupied, it may take months to evict the tenants. Tenants may also vandalize or steal from the property before eviction. Also, the former owner may sue you to overturn the sale, particularly if you flipped the property for a nice profit.

 

 

Buying a foreclosure can be rife with risk but also can have great rewards. You can minimize risk by fully understanding the foreclosure process.

 

For more information, visit BestForeclosureLists.com



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Ajeet Khurana asked:


The concept of house flipping has become quite popular as of late and is seen by the average investor as a means of making money relatively quickly through the use of real estate flipping. What is house flipping? Generally speaking, house flipping is a term that is used when one purchases a house with no intent other than to make a profit off of it. The house flipper will buy a house that needs significant renovations or work, and then they will have the work done themselves and sell the house for more than they bought it in order to make their profit. House flipping has become so popular in fact, that many people have gone into this business full time and use the profits from house flipping as their sole income. If you are considering house flipping as a career, there are a few things you will want to know about the process that may make your life a little easier.

You do not need to be good at renovating to flip houses, but it is recommended that if you are not, you hire someone like a general contractor that can ensure that the work you need done is done properly. Hire someone with a good reputation and it is a good idea to use personal referrals for this when you are looking for someone. If someone you know has a good experience with a contractor, then you will likely have one as well. Your contractor is going to be your ‘go-to guy’ for all of your renovations and will meet you regularly at your property to ensure the repairs are met to your standards.

Before you choose a house that you want to flip, investigate the surrounding market in that area. Many house flippers fall into the trap of overestimating how much their house will finally sell for and often end up losing money on their homes. See what the houses in your area are going for and conduct your calculations accordingly. It is rare that you will be able to sell something that is priced out of the market in a certain area, so the term buy low and sell high is something that is appealing, however can backfire if you don’t do your calculations correctly.

Your contractor will be able to give you an estimate on how much your repairs and renovations will cost. Add an additional 3-5% on top of this estimate as many times projects run over budget as just a simple fact of life. Your contractor is not trying to scam you, but this happens more often than it does not. If you are prepared going into the flip with these budgetary guidelines, you will protect yourself in the long run. Take the cost of your house and add this to the contractors estimate, and when comparing with the market values in the area, you should have a healthy estimate of the profit you can expect from the house you wish to flip. No two experiences with house flipping are identical, so always be prepared for surprises. In the business of house flipping, the more prepared you are, the more profit you will make.



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James Klobasa asked:


A person can make a lot of profit from residual income through real estate by the practice of remodeling, buying or reselling houses. An easy way to make money is to flip a house. Homes that enter a foreclosure period will always sell at a value lesser than that of the original price of the property. Foreclosure is a great time to acquire an investment property at a cheap rate and resell it at a higher price. Hence every successful sale will mean more residual income through real estate.

The potential of income is limitless if you have more than one house in the remodel stage and one or more houses that have already entered the process of sales. When you purchase a home for an amount less than its cost price and sell it at higher rate, you definitely don't want to spend more on remodeling the house. The key here is to plan out every thing accordingly. Start by making a list of area statistics and furniture that needs to be repaired, refurnished or replaced. This will give an idea of expenditures which you might incur for getting these done.

You should not unnecessarily spend on heavy duty replacements. There are lots of convenient stores that offer building and repair materials at a low price. Try to do most of your projects rather than hiring some one else for them. A project should be completed in weeks instead of months. The value of a house diminishes if it sits vacant in the market for a long time. It is extremely essential to pay attention to time line if you want to make profit from residual income through real estate.

Once the property is flipped and sold, you should immediately start looking for a new property. If you work as an individual then you shouldn't take more than one house at a time. But if you have other helpers, you can go in for more houses. However at no point there should be a lag in getting a property otherwise the profits will not be consistent.

There is an advantage of having more than one property to flip i.e. you can always move on to the sale of your next property if the other one takes longer time to sell. This way your revenue and time will also be free to make the next investment. A windfall of income can be created if real estate investing is handled properly. The profit from residual income through real estate can continue as long as there is property that is in the process of being flipped by you all the time. Therefore you should always be alert, vigilant and aware of what is going on the real estate market in your targeted location.



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Everyone has heard about house flipping. There is even a reality show called flip that house. A lot of news headlines and real estate people talk about illegal house flipping. But if this process is illegal, then how is everyone doing it and talking about how to do it?

The fact of the matter is that house flipping is not illegal if it is done properly and ethically. Anyone who has ever bought real estate for a primary home and then sold it for a profit later has successfully flipped a house. That is the basic idea behind house flipping. The real estate investment is purchased, and then resold later for a higher price. The length of ownership time may be months or decades, and that does not matter for this purpose. Sometimes this may involve renovating or repairing the real estate before selling it, to increase the value of the investment.

What everyone has been calling illegal house flipping is actually real estate fraud. These cases generally involve people who have lied or misled about significant facts to wrongly inflate the value of the real estate investment. This includes payments or bribes to get the property appraised at a value higher than what the real estate is actually worth, falsifying down payments or any other information like tax receipts and check stubs to get a loan that is not qualified for, and more. One type of real estate fraud is lying or covering up obvious or serious problems with the house to lenders, as well as to buyers who are not sophisticated. Another fraud type is to back date any documents that are needed for the loan, such as lease agreements, to give the impression of a longer length of time.

Unfortunately, the news media has confused house flipping with the types of fraud mentioned above. Many escrow and title companies refuse to do double closings, and many lenders have something that is called seasoning requirements on the ownership by the seller. This generally means that if you have not owned the real estate investment for at least half a year most lenders will assume there is something funny. This means that these lenders will not loan to a buyer who is trying to buy your house under these circumstances.

Flipping houses is not illegal as long as there are no misleading or fraudulent statements made or signed. If you are investing in real estate, make sure that you read all the paperwork and contracts very closely. The contract is the statement of facts that you are providing to the lender. This contract should not contain any deceptions or false statements. This process only becomes illegal when fraud is committed, usually in the form of deceptive or misleading statements made in the lending contract. As long as you act honestly and ethically, there is nothing illegal about making money by doing honest business.

Copyright © 2007 Joel Teo. All rights reserved. (You may publish this article in its entirety with the following author's information with live links only.)