A lot of people have built enormous fortunes by investing in real estate. The old saying “buy low and sell high” is what many real estate investors live by. I’ve heard a number of different real estate investors say that you make money in real estate not when you sell it, but when you buy it. This basically means that if you buy at a good price you are almost guaranteed to make a nice profit.
A great way for savvy investors to practice the buy low sell high method is to invest in foreclosures. Foreclosures are at an all-time high in this creates enormous opportunities for investors to get quality properties at bargain prices.
A lot of real estate investors like to look at a bank foreclosure list and see what kind of inventory their local banks are trying to unload. When most people need to get a loan to buy a house they go to a bank so naturally banks would have a certain number of people default on their loans in the banks would then have a large number of houses that they need to sell. Banks have no desire to be in the real estate business. They do not want to flip houses or become landlords. Banks want to have a portfolio of good loans, loans in which people make regular payments. Because banks want to have a solid portfolio of good loans on the books and because there are more foreclosures than ever, many banks are willing to accept short sales. This means that banks are prepared to accept offers for less than what is actually owed on the property.
Another way that investors like to find bargain properties is to look for government foreclosed homes. Banks are not the only institutions that make real estate loans. The Veterans Administration makes financing available to men and women who have served in the armed forces so that they can purchase homes, often with little down payment money and favorable interest rates. Like any other lender, the Veterans Administration does have people that default on their loans and they do sometimes have to take houses back in foreclosure.
The Veterans Administration is not the only government agency that ends up with foreclosures. A lot of investors like to buy HUD foreclosures. HUD stands for the Department of Housing and Urban Development. The Department of Housing and Urban Development does not make loans directly but they are responsible for overseeing the activities of the FHA or Federal Housing Administration which provides mortgage insurance to approved lenders. If someone has a bank loan that is insured by the FHA and that person then defaults on their loan, and if the property were to go through the entire foreclosure process it would eventually go back to the Department of Housing and Urban Development which would then have the responsibility of selling that house to recoup losses.
The Department of Housing and Urban Development ends up with a lot of foreclosures because the FHA insured loans are usually made with very little down payment money and a lot more flexibility when it comes to buyers qualifying for a loan. The FHA makes it easier for people to buy but this also makes it easier for people to get in over their head and eventually lose the house to foreclosure.
Times are tough for a lot of people and foreclosures are at an all-time high but if you are an investor now is the time to buy. There are more opportunities than ever to find bargain prices and real estate prices will not stay this low forever. This is one of the best times in history to buy low and sell high.