Millions of real estate investors around the world have made a lot of money and built massive real estate portfolios by investing in foreclosures. Following the 2007-08 housing crash, foreclosures flooded the housing markets in America, and as the economy rebounded, investors bought these properties at a discounted price and then either sold them for a profit or turned them into rentals.
If you are starting out your career as a real estate investor, you can also invest in foreclosures Fargo ND, but you should know that there are strings attached with this strategy. Due to the improving housing markets, household income and employment growth, the number of foreclosures on the market has hit a record low, causing competition among buyers.
Here are a few things you should know before buying foreclosures in Fargo:
Finding a good deal
You can find a foreclosure home by going through foreclosure listings in newspapers, magazines or property listing websites. You should also try to network with real estate agents, home inspectors, appraisers, mortgage brokers and real estate lawyers who can tip you off as soon as a foreclosure listing hits the market.
Making sure it’s a good deal
You can buy a foreclosure home regardless of its condition if it is located in a high demand neighborhood. Once you zero in on a foreclosed property, it is important that you buy it at least 20-30 percent below its market value. Your offer price should be determined by the property’s condition. Most foreclosure properties are in bad condition simply because owners can’t afford to spend money on maintenance due to their precarious financial situation.
Due to the increasing competition in the market, you should be prepared to make a cash offer. Lenders and owners prefer cash offers for distressed properties as it enables them to close the deal quickly and save money by not having to pay some of the closing costs. You will also increase your chances of beating the competition with a cash offer.
Financing a foreclosure deal
Most real estate investors buy foreclosures with hard money lending, private money lending, partnerships or crowd funding. Which option you should choose depends on your individual investment strategy and financial goals. You can also finance the deal with a conventional mortgage, but keep in mind banks have stricter underwriting norms when it comes to lending to investors for foreclosure properties.
Creating an investment plan
Even before you buy a foreclosed property, you should be very clear about your investment strategy. Will you repair the home and resell it for a profit? In this case, you will need to hire a contractor or a team of skilled workers. Are you planning to put the property under contract and then sell it to another investor? If so, you should build a list of potential buyers ahead of time so that you can start marketing the property to them at the earliest possible. Keep in mind your timeline is going to be the most important factor in your investment strategy.