Investing in foreclosure property or any kind of Real Estate "in distress" in a present market and prices is always a good idea.
But what do you need to know to do it the best possible way? Let's discuss what the investment property is.
Usually, but not always, investment property buyers already own a home that they live in. Their situation is different from first time home buyers, especially in the current environment.
Investment property is property that you are counting on to make a profit.
Active investment property is property that you rent out, and manage yourself.
Passive investment property is property that someone else manages for you, and which you don't actually do anything with other than invest your money and collect your profit.
There are more details, especially income tax and estate details, which are too lengthy and detailed to discuss on this page.
Your second home or a vacation home are not considered investment properties. These you keep nice and neat for your own use, but they are empty most of the year and do not bring in rent. You still make profit hopefully, when you sell either kind of property.
What kind of property is a GOOD investment?
One kind of property we look for is property that is selling for a third or less of what it sold for previously, and which we can afford to buy for cash.
They are out there, houses that once sold for over $100,000, but which can now be bought for $20,000, because they need some fixing. Or ones that sold for more than a million, and are now going for about $300,000.
Another kind of property we look for is property that can be rented out for significantly more than the mortgage payment.
We have an unprecedented market right now for these kinds of properties. Properties can be bought with mortgage payments of $600 to $700 per month, and which can generate $1,000 to $1,500 per month in rent.
Why is the market so good right now?
Because the President is still pushing the same old programs that former presidents pushed, which is doing whatever can be done to get people into owner-occupied homes.
If you are buying a property to live in, then you have a lot of federal help available right now.
Historically, a large percentage of buyers are investment buyers, and nothing is being done to help those buyers. So investment buyers are finding themselves willing but unable to buy homes.
This is one thing that is keeping the market down. It is largely the investment buyers that drove up the cost of homes, and caused the housing bubble.
Preventing investment buyers from buying homes right now is forcing prices the other way - down.
Foreclosed homeowners are finding themselves in need of a place to rent, and there is a shortage of rental property available.
What can we do about all of this to help you?
We have a solution for most situations. For example, if you want to buy a property to rent out, you will likely be denied a mortgage loan.
Instead, rent out the home you already own, and buy the next house as your new residence. If you have cash, buy rental homes outright, until you run out of cash. Then get creative in a modern way with how to finance your additional purchases.
Some homes are so cheap now that you can buy them with a credit card, even at 25% interest, and still be able to collect enough rent to make the payments and show a profit, even without the mortgage interest tax deduction.
And credit cards can pay down a lot faster in this situation than a typical mortgage, so that your profit increases every month!
If you can buy a house with a credit card, and rent it out for enough rent to pay off the credit card in three years, why would you not do it?
Taxes are only one variable in the investment equation. You pay some tax in the short term, but you also show an increased income because of it, which translates into more borrowing power within a couple of years.
If you need more information regarding this topic, or if you would like me to assist you in an investment property search, contact me.
More investors are rehabilitating homes and looking to sell them for profit, a move known as flipping.
RealtyTrac recently evaluated more than 600 metro areas to find where flipping single-family homes offers some of the highest returns based on the investor’s gross profit. The top eight metros for house-flipping are:
Average purchase price: $103,701
Average flipped price: $168,677Gross profit percent: 63 percent
Average purchase price: $133,198
Average flipped price: $203,945Gross profit percent: 53 percent
Average purchase price: $146,528
Average flipped price: $210,290Gross profit percent: 44 percent
Average purchase price: $79,538
Average flipped price: $113,676Gross profit percent: 43 percent
Average purchase price: $68,318
Average flipped price: $96,870Gross profit percent: 42 percent
Average purchase price: $138,064
Average flipped price: $189,291Gross profit percent: 37 percent
Average purchase price: $68,444
Average flipped price: $93,715Gross profit percent: 37 percent
Average purchase price: $108,851
Average flipped price: $146,872Gross profit percent: 35 percent
Source: “Best Markets for Flipping Homes,” HousingWire and http://realestate.glozal.com/profiles/blogs/8-best-markets-for-flipping-houses?xg_source=msg_mes_network