Buying a foreclosure sounds like a great investment opportunity, and in many cases, it is. However, there are some drawbacks that buyers should be aware of before making this type of investment. It is advisable for novice buyers to learn the pros and cons of buying a foreclosure before embarking on this venture.Justnewlistings.com explains the pros and cons of buying vs renting a home
Foreclosed properties often sell below market value, so even if a home is in need of repairs, it may still be a good deal.
Buying a property for a low price, then re-selling it at market value can earn you a substantial profit. Some people have earned millions this way.
Buying a foreclosure and then renting it out can not only cover the mortgage payments but earn you a profit as well.
Lenders who own foreclosures are usually looking for a quick sale, so they may even offer financing with no money down.
Buying a foreclosure may be a good option for first-time home buyers who can’t afford to spend much.
Due to the popularity of investing in foreclosures, the foreclosure market is a competitive one, so prices may not be as low as expected.
Some foreclosed homes may be abandoned or in severe states of disrepair. You have to assess whether or not you are willing to accept the expense of repairing or rebuilding. A ‘handyman special’ may be too much for some first-time home buyers, and they should make sure that they are not biting off more than they can chew.
If you don’t have a ready supply of cash, you may miss out on auctions or good deals. It is important to be pre-approved for financing before making an offer.
The foreclosed properties that are within your budget may not be in desirable areas.
When buying foreclosures for the purpose of renting them out, you must be prepared to take on the responsibilities of a landlord. Poor tenants may result in expensive repairs or litigation, and you must be able to cover the mortgage payments regardless of whether or not the property is rented.
Take some time to research before you buy. Learning about the pros and cons of buying a foreclosure is the best protection for buyers who are investing in a foreclosure for the first time.
There’s a lot to learn about the real estate market when you get into foreclosures. Don’t fool yourself into believing that it will be easy to go out and find great deals. It will require research on your part if you want to do well.
Anytime you are dealing with foreclosure investments you need to be very clear on what the laws are in your area. Take advantage of all the free resources you can find.