The past couple of years has seen a tremendous increase in foreclosures. Banks have had to take back more and more properties. Banks don’t want properties on their books, so the past couple of years has been a headache for some of them.
You have to be careful when investing in foreclosures. You have to wonder why someone just decided to stop paying on a house and leave. So you, as an investor, have no idea why they left the property. Was it something on the property that caused the problem? Was there a problem with the house itself? If it was an investment, was the investor having to put too much money into the property? You have no idea. That is why investing in bank owned properties can be tricky.
The banks don’t have to tell you why they took the property bank, making it even more difficult to figure out. Oftentimes the properties are sold as is, so you don’t know what you are getting. The banks want to make money too, so if you see a bank owned property that is dirt cheap, you may want to think twice.
It will be more difficult to obtain financing for bank owned properties, especially if they are discounted properties. Plus, since you are investor, banks will be even less inclined to loan you the money. That is what got them into trouble in the first place! Odds are a big down payment would have to be made to purchase the property.
Also make sure that you have a good inspection done before buying the property. Do as much research and try to get as much information as you can on your own. As I mentioned, banks don’t have to give you any information about the condition of the property.
Be prepared to put in a lot of money and do a lot of work to get your investment property up to par and get tenants in it, or sell it. It is better to overestimate the costs and length of time needed to get the property back into good condition.
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