Foreclosed Property: What is it and How to Avoid It
FIME
September 30, 2021
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Foreclosed properties have been said that because it is the result of an owner
In real estate investing there are so many vehicles you can choose to ride in and there are many starting points to choose from. Depending where you are, your capitalization and your choice , you may prefer a dorm-type apartment if you are targeting students and colleges. You can go foreclosed property if you don’t want to be bothered by an extensive capitalization of building your way up. Or you can opt for a single-family residence if your targets are families and couples.
Buying a single-family home is a great way to start your real estate ventures. Of course, as I said, everything depends on where you are, your personal preference and your capitalization. But let’s say you opt for a single-family dwelling. This kind of real estate investment is almost in-demand everywhere you go, since who doesn’t want to have a stable home to stay together with their family?
Let’s say for another example, that your market research shows that senior citizens make up a vast portion of the buying pool in town. These individuals would most likely want a house that is not too small, nor too big. A two-bedroom, two baths and something like 400sqm is generous enough for them.
You might have been advised sometimes that you are going to look for a house with no steps with them or just a few. Old people, for obvious reasons, prefer a house with very minimal steps up. Most seniors want a house ready for move-in and occupancy. They don’t want to bother on repairs and repaintings. So, accumulating the raw data around, this is where you come in and venture into looking for a house exactly what these majority of buyers are looking for.
If you can’t find any bargains at all, you might want a unit that needs more attention from you – such as repairs and aesthetic make-ups. Be sure to be very astute on this since units with further rebuilding requirements need good calculation on expenditure, loss and profit.
Remember two things that’s very important in real estate investing (especially here in the Philippines):
“Always start checking and investing in properties where you are located. Second, it is better to buy an ugly house in a beautiful subdivision, than buying a nice house in an ugly subdivision.”
Reasons for the scruples above are first, to save you time and energy. And second, to save you from total failure.
You need to look for properties right in your neighborhood, this will save you time since the property is just next door and this will save you energy. You don’t want to be traveling a hundred miles away only to be disappointed with the property and go back home another hundred miles empty handed, and being burned out is just a hair strand away.
Second, is to save you from almost total failure. It is always tempting to buy a comely apartment unit at a bargain. But again, remember that it is better to buy an ugly or dilapidated apartment in an ugly subdivision rather than the other way around. You can always repair and leverage an ugly unit than an ugly subdivision. An ugly subdivision can have crimes lurking, filth or waste disposal problems, water utility problems, broken and ugly neighboring units – how you wish you can fix those as well – but good luck with that one!
Know from common sentiments that families’ first concern in looking for dwelling is security (free from crimes), second accessibility (near major utilities and business hub, mall, hospitals, churches), third free from calamities (such as flooding and earthquake).
Really visit that prospective unit. Notate every significant detail, it could be minor or major rough edges that need repairs. But also notate those desirable features of the house where you can use as selling points for prospective clients. Check the kitchen, floors, cabinets, countertops, roofs for leaks. Do this for at least a couple of units for you to assess and compare probable expenditure and profit and choose the most profitable.
As discussed above, you might be hunting for units you want to develop for a specific dweller – could be starting families, seniors, students, bachelors. But those are just conditions for you to prop up your decisions on what property you will be developing. Of course families and seniors could be your primary targets, but they are not the only buyers out there. What if the house also appeals to other age groups – students, transients, AirBNB. So, don’t limit your potential in just one corner of the trade – open up to other possibilities.
In most cases and almost all, you will be leveraging your capitalization by loaning from a bank. How you wish you have a solid personal capital to finance that. But more often, you don’t. So, you do want to get a loan.
First off, always be in a good credit standing. It doesn’t matter if your credit is from a housing loan, car loan, business loan – the bank will know if you have credit delinquencies. And these delinquencies will serve as your bottleneck in qualifying for a loan.
Another sound tip I can give you in loaning for a real estate investing is that, you’d be better off loaning the property from a bank that foreclosed the property as these properties are auctioned by the bank sometimes at a really bargain price.
Banks tend to accumulate foreclosed properties from defaulting loaner or delinquent owner. Undisposed properties by the bank will soon become non-performing assets that later on will eventually become liabilities because these properties needs to be maintained and pays taxes with or without dwellers.
Well, more about this in the upcoming articles on bank loans, profit and loss assessment for real estate investing.
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One Response
Great investment tips. Keep it up!