To go from being an owner to being a successful investor before foreclosure or foreclosure, the first step is to plan your transition. The key to success in real estate investing is to consistently make money. Therefore, even if you only own one asset at a time, you need a plan for choosing the right investment property and making decisions such as how to finance the property, your exit strategy and s need to repair or remodel the property.
The great thing about pre-foreclosure and foreclosure investing is that you don’t necessarily have to pay for everything yourself. You can partner with other investors and, if you’re renting the property you’re buying, have your tenant not only cover loan repayments, but essentially buy the property on your behalf. Investing in pre-foreclosures and foreclosures also allows you to take advantage of a number of exit options. “Home flipping”, for example, is the term used for investment transactions involving the purchase, repair and subsequent sale of properties for profit.
Plus, since you’re focusing on pre-foreclosed and foreclosed properties, you can potentially get a significant discount on the retail value of the property you’re buying. This is one of the main reasons why these types of properties are ideal for a homeowner looking to get into real estate investing.
If you’re new to real estate investing, you can take an approach where you pay off your current home and try to save enough to invest in another property. The downside to this approach is that it can take an inordinate amount of time. You don’t have to wait! There are other ways to invest in pre-foreclosure and foreclosure properties that are easier and faster.
If you want to start conservatively, you may decide to invest, for example, in a pre-foreclosure or foreclosed property that would make an ideal holiday home or second home. The continued demand for such properties makes them relatively easy to sell, allowing you to invest more in similar or other properties.
Renting out your existing home while buying and moving into a low-cost pre-foreclosure or foreclosure is another way to get into pre-foreclosure and foreclosure investing. Another approach is to sell your family home so you have the money to invest in two or more other pre-foreclosed or foreclosed properties, one you live in, the other(s) you monetize.
You can also take advantage of the increase in value of your family home (if any) by refinancing it or taking out a second mortgage in order to invest in one or more other properties.
These are just a few of the ways you can make the transition from owner to pre-foreclosure and foreclosure investor. Overall, I highly recommend pre-foreclosure and foreclosure properties for someone just starting out, as they can be purchased relatively cheaply and pose less risk than many other types of real estate investing.