Unlike regular property investments, there are more ways to profit from foreclosed homes than just buying the property at a lower price and selling it off for a higher amount. There are several other measures that you can take to make sure that you squeeze out the most from your foreclosed property investment. Read on to know how.
Flip The House
The most common way of turning your foreclosed investment into a profitable investment is by flipping it. House flipping involves buying a property that is in a dilapidated state, fixing it at low prices, and then selling it for a much higher price than your investment plus the cost of maintenance.
This method might not always be foolproof, as houses that are in good neighbourhoods do not come for prices lower than their worth, even if they’re foreclosed. In such cases, where you have already paid a hefty sum of money to purchase the house, the subsequent repairs should raise the value of the house enough to cover your investment and bring you a percentage of profit.
While flipping the house, you will also have to get a good understanding of construction and repair processes, and get hold of contractors willing to work on the property at lower prices.
Keep It As A Source Of Residual Income
If you’ve purchased a foreclosed property in a stagnant market, you should consider turning it into a secondary source of income. Many people buy foreclosed homes and then rent them out in order to have some sort of income flow every month. Identify the perfect foreclosed property that matches your requirements, negotiate with the bank, buy the property for a reasonable price, and rent it out. Other than the monthly income, you will also enjoy certain tax benefits for long-term property holding. You can generate monthly revenue from your investment and then sell it off in a good market.
Wholesale Your Investment
The third and final way is a less common yet effective way to profit from foreclosed investments, especially for first-time investors or those with a low capital budget. The concept of wholesaling is to find the perfect foreclosed property, negotiate a sizable discount on the price, and then sell it off to investors looking to flip or rent the house. So instead of buying the house, you’re just getting it under a contract for other investors. In such cases, it is very important to have a list of potential buyers ready.
Although this method is less profitable than those mentioned before, the risks involved and the capital needed for this one are much less. So, if this is your first real estate encounter with foreclosed properties, it’s much better to start off with wholesaling the property, and building up a strong client base for bigger investments in the future.