Distressed Properties: Making Money with Foreclosure, Short Sale and Bank Owned Homes
Author: Simon Volkov
Distressed properties refer to foreclosure, short sale and bank owned real estate. Many investors seek out these types of properties because they can be purchased below market value. In today's market distressed real estate can be an investor's dream. However, careful consideration should be given before making an offer. Otherwise, these properties could quickly become an investor's worst nightmare.
Real estate experts proclaim distressed properties could quickly become the next hot investment opportunity. They also warn this type of real estate investment will not create overnight wealth. Instead, buying fixer-upper homes is primarily for investors who prefer slow and steady growth or those who participate in house flipping.
The key to success in this real estate niche is to locate properties that are located in areas where people want to live. With a little work and various upgrades, distressed properties can be used as rental homes, sold as rent-to-own property, or quickly flipped for profit.
Investors who prefer long-term tenants should seek out distressed properties located in family communities. Investors who prefer short-term tenants should look for foreclosure, short sale or bank owned homes located in areas where people enjoy vacationing. The right home located in popular vacation destinations can potentially yield higher profits than long-term housing rentals. Only you can decide if you prefer long- or short-term rental properties.
It is crucial to engage in due diligence prior to investing in distressed properties. Obtain repair estimates through contractors. Determine if any unpaid tax or creditor liens are attached to the property. More important, make certain you can afford the mortgage payment if unable to rent or flip the home.
Foreclosure homes tend to be a riskier investment than bank owned houses. On rare occasions, investors are fortunate enough to locate foreclosure homes in nearly perfect condition. However, most distressed properties require substantial work to return the home to livable condition.
Foreclosure real estate is purchased through public auction. Investors must be capable of obtaining financing if their bid is accepted. In some cases, the previous homeowner continues to reside in the home and investors must engage in eviction. If you do not want to deal with these types of problems, it is better to invest in bank owned properties instead.
If no acceptable bids are placed on foreclosure homes, the properties are returned to the originating mortgage lender. The bank eliminates the mortgage and negotiates with creditors to remove liens. Banks also take care of eviction. Mortgage lenders aren't notorious for 'giving away the bank', so be prepared to engage in multiple counter-offers to obtain the desired price.
A more profitable and less stressful way to purchase bank owned properties is to seek out real estate investors who purchase bank portfolios. Investors who purchase entire portfolios are able to buy distressed properties at wholesale prices. They then pass along a percentage of savings to other investors; creating a win-win situation for all parties involved.
It is not uncommon to purchase bank owned homes through private real estate investors for 60- to 70-cents on the dollar. Even when investors must spend 10- to 15-percent in repairs, they still have accrued equity in the home. In order to triple or quadruple profit margins, real estate experts suggest holding the property for ten years.
There is money to be made by investing in distressed properties, but it is rarely easy or quick. By taking time to make informed decisions, investing in bank owned, foreclosure and short sale homes can eventually make investors quite wealthy.
About the Author
Simon Volkov is a successful California real estate investor who specializes in buying and selling distressed properties. Simon offers solutions to homeowners who need to sell their house to stop foreclosure or avoid bankruptcy. He offers multiple investment opportunities to real estate investors via email. If you need to sell your house or are looking for solid investments visit www.SimonVolkov.com today.
Foreclosure of LLC’s properties due to personal bankruptcy?
I may be filing for Chapter 7 bankruptcy protection. Last year I became a guarantor of two mortgages for an LLC that a friend & I established. Several months afterward I left the LLC. I no longer own any part of it or work for it. However, I’m still liable for the mortgages. The mortgages are totally current. The LLC pays the mortgage on time and religiously.
My question is this: Since I’m filing for bankruptcy protection, how will that affect this LLC that I use to be a part of? Will those houses be foreclosed upon by my creditors? I’m personally going to lose my own properties that I hold title to and I realize that fact.
My concern is that the LLC will suffer. I care simply because I care about the people that are in it now. Please note that the LLC has warranty deeds. This wasn’t some crazy deal where I bought properties and Quit Claimed it to some corporation.
The LLC has no way of purchasing these mortgage instruments. It is not cash rich, nor are it’s current principals.
If you have property and file bankruptcy, does it show on your credit foreclosure and bankruptcy?
Doe it show foreclosure and bankruptcy or just a discharge of your mortgage debt??? If so then what’s the use of filing bankruptcy. why not just walk a way from you properties.
Is bankruptcy the best option after receiving foreclosure on investment properties?
What is the best way to search for residential properties in foreclosure, tax lien, bankruptcy, etc? ?
I’m concentrating in South Florida and Ohio.
All of the websites I have found require a membership and, although I am willing to pay for a service if necessary, I’m reluctant to join one of these sites when I don’t know anything about their legitimacy. There are countless sites to choose from.
Thanks!!
Purchaser of foreclosure property responsible for 2nd mortgage forgiven in bankruptcy?
2nd mortgage relieved in bankruptcy & home is now in foreclosure with 1st mortgage bank. If someone buys the property, will they have to pay the 2nd mortgage or is it gone because it was part of the bankruptcy? BTW, the property is in Michigan.
These websites are mostly scams. I would say all scams but since I don’t have proof, just let me say I have never seen or heard of one that was legitimate.
It would be foolish to buy a house simply because of why it is being sold or simply because of who owns it.
If you want to get the best price on the best home then use an agent and have them help you search the Multiple Listing Service. Every bank that forecloses on a house, every couple that gets a divorce, everybody that goes thru bankruptcy or has any other financial problem puts the property in the Multiple listing service. (Again- I am sure there are a very small number of exceptions but the number would be VERY small)
who ever buys the property isn’t buying the debt. they just buy the property. the debt has to be dealt with prior to the sale. bankruptcy can sometimes wipe out a line of credit or second mortgage look at the bankruptcy discharge paperwork to be sure. good luck
If your house is in foreclosure when you file, yes it would show both foreclosure and bankruptcy, it should only show a bankruptcy if your house did not in fact go in foreclosure. Your mortgage debt gets discharged unless you reaffirm the debt but the lien is still on the property, they just can’t go after you personally. But bankruptcy and foreclosure aren’t one and the same. Plenty of people file bankruptcy but are current on their mortgage and keep the house with no issues (assuming no excess equity). I never heard of such people complaining that their credit report indicated there was a foreclosure (especially if they kept the house) unless a foreclosure was already happening.
That usually doesn’t work. The American Bar Association has reported that 96% of homeowners who declare bankruptcy end up losing their home to foreclosure anyway. Bankruptcy is very unlikely to help you save your home. If you declare bankruptcy you will likely end up with BOTH a bankruptcy and a foreclosure on your credit report.
There are several options to get you out of foreclosure including negotiating with the lender, reinstatement, loan repayment, loan modification, loan Restructuring, loan refinance, redemptions etc. Find out which is the best option for you to avoid foreclosure at the earliest.
The LLC is not the guarantor on the mortgages–you are. Unfortunately, the LLC will not protect the loans in a BK. You’ll have to reaffirm those debts or let the properties go…