Buying Foreclosed Homes During Hard Times

Restored from the Empower Network archive (2011–2017), lightly edited to meet our current advertising standards. Views are the original author’s.

Hard Times how does an investor Buying Foreclosed Homes within a depressed market?

In these hard times there is a ton of foreclosed homes on the market. The problem is that it is harder for buyers to qualify for loans when buying foreclosed homes. This is particularly true if you are buying the home to live in as your primary home. If you are thinking of buying foreclosed homes as investment properties you may have an easier time of it. The reason is that even the people that have lost their homes to foreclosure have to live someplace, so a smart investor that takes advantage of the foreclosure market to buy rental property is considered a help to the lenders that don’t want these properties just sitting around on their books.

Lenders do not want to become landlords. So when they find a buyer that wants to take these properties off their books, they will sometimes make some especially good deals. For example if the property was torn up before the last owner left, the lender may make the loan and then put a moratorium on the first payment for up to a year, giving the buyer time to get it fixed up and rented out. When the payments do start, the home will be worth more than the loan because of the repairs that were needed when it was sold.

Another interesting thing about buying foreclosed homes from lenders is that if you can bundle several properties under one loan you may be able to get a very good deal. You will want to make sure that you can sell off individual properties and use those funds to reduce the principal of the loan while still being able to make a profit on that sale. This way you can get several properties and fix them all up at the same time and sell part of them to lower the principal of the loan and still have some of the profit to consider buying even more investment properties.

Buying foreclosed homes is an art when you are buying the homes as rentals. Buying the same foreclosed homes as your principal residence may be a bit more tricky. Lenders are feeling burned by the collapse of the real estate market where it comes to individuals buying property to live in. These lenders are really tightening down on their loan qualifications and that means you will need a very high credit score, a good job that you have been at for 3 or more years and probably a larger than usual down payment.

One method that was applied was to have an “Angel Investor” buy the property along with several others in a package as an investment property and then having that investor give a lease with option to buy to the person that really wanted to buy the property in the first place. The investor gets a combination loan that not only includes the price of the properties being bought but a percentage amount that is to be used to fix the properties up to be ready to rent. The agreement between the buyer and the renter is that the renter gets a rent that the house would bring after it is totally fixed up and the rental agreement has an addendum attached to the lease that stipulates that the renter will do the repairs as part of the payment for the option to buy.

That was a complex purchase by a knowledgeable investment buyer but it shows what sort of things that can be done to make buying foreclosed homes a workable situation.

Images by: 3d House by renjith krishnan