There is always a profit to be made in times of economic downturn and investors have many opportunities to secure good deals in the current housing market. As foreclosed properties fall into the hands of bankers who have too many properties to unload back onto the market, investors are able to find foreclosed properties which they can negotiate down on still further. Buying property at bargain basement prices is a good way to acquire a profitable rental property for income, or an excellent way to get onto the property ladder.
Banks know that the property could fall into disrepair if it remains empty too long and risk becoming derelict. They are obliged to insure the property and pay taxes on it. Banks will see their property assets depreciate even further in value if they fall into dereliction, so investors who are skilled in the art of negotiating can approach the bank and attempt to gain yet further discounts on price.
The two main investment opportunities from purchasing foreclosures are anticipated higher resale values and rental income. Naturally the buyer can combine the two by renting the property until prices regain value. If properties can be bought at good discounts to actual value, as opposed to inflated paper values, then over time a profit will be achieved. In the interim there is the opportunity for a steady rental income, in some cases from the actual previous owner.
Properties which are purchased in disrepair and need money and work investing in improvements, stand to gain too once disrepair is corrected. Investing in real estate in popular areas where people aspire to live can be a safe move, whereas there is more of a gamble in areas which need revitalization or are already besmirched with high levels of foreclosure. As with all things to do with property location is the key to long term growth, and it is just as important to know which areas to avoid as which areas have potential.
A lot of necessary research needs to go into a property and its area in order for a foreclosed property to be a sound investment. Good neighborhoods with low crime rates, good schools, and excellent transport links are all excellent signs, particularly when combined with neighborhood pride. Although the market may be saturated with lower value housing foreclosures there are opportunities for investors to buy into more affluent areas too and thus benefit from a quicker bounce back in prices.
Whilst tales of properties being purchased at half market value may be spread, the reality is more likely to be a 10% to 30% under value bargain, which may or may not be a bargain depending on the area. Those who purchase in less than affluent neighborhoods may well find their new property increasingly surrounded by other foreclosures which lead to further degeneration of the neighborhood.
Those thinking of investing in a falling market should research well before leaping in, but with homework done in advance it is possible to invest in property priced at excellent discount levels, which are ripe to shoot up in retainable value once the housing market improves.