If handled carefully by experts in real estate, investing in Penticton home foreclosures can lead to high returns with some time and effort. Two factors determine the price of a foreclosure. One is the remaining balance of the existing mortgage, and the other is the quality of the property. Penticton home foreclosures can be a good investment, and you can make good money out of it. There are a number of ways to make money from home foreclosures. These are explained below:
1. Flipping a house
It is one of the best ways to make money from foreclosures. Many small time investors go to the local auction on foreclosed properties in Penticton and purchase the property. Then they flip it for a profit. The property may require a lot of initial capital to make the house ready for resale. You need to your research properly to find out whether the property has an unpaid tax or other dues. In foreclosure auctions, no information about the property is given away. So, you need to make sure that you don’t end up paying more by going for blind auctions, instead of doing their homework carefully.
2. Stay on the property as a rental instead of selling it right away
You can buy a foreclosure property for $80,000, and then invest $20,000 in renovating it. Your total cost becomes $100,000. When you put it up in the market, your appraisal value may be $120,000 which is more than the buyer paid for the property. Now the buyer can take up a mortgage for $120,000. He can pay off the first mortgage of $80,000 and recover the $20,000 invested. So he gets a profit of $20,000. He can then rent the foreclosure for the monthly mortgage payment. The investor can keep the property without using the money from his capital. This way of making a profit is very risky as several factors are involved. First, the investor needs to buy the property for a low price; second, he needs to fix it up without spending much money; third, the appraised value of the property must be more than their total investment value. Finally, you must find renters who will be willing to pay the monthly mortgage. There is a high probability that a few factors may not work in the favor of the investors.
Lenders who win the bid at a foreclosure auction classify and sell the property as an REO or ‘real-estate owned’. You can purchase an REO direct from a mortgage lender. Lenders want to get rid of REOs from their books as fast as possible. So, they offer favorable terms to buyers, like low closing costs, interest rates below market, low down payments, etc. If the property needs renovation, then they even accept a discount price. You can find REOs if you attend the foreclosure sales and follow up after that. You can also get in touch with real-estate agents who market REO listings.
4. Buying property from distressed owners
You can buy properties from distressed owners. Incidents such as accident, job loss, business failure, divorce, etc. can let anyone miss their mortgage payments and get into foreclosures. You can help these distressed owners by saving them some equity and their credit record.
Not everyone can make money by investing in Penticton home foreclosures. This kind of investment is profitable, be needs experience and lot of time and effort. If you have the patience and ability to research well, then you can go for this type of investments.