Buying Foreclosure Properties for Investment Purposes

First check and see what the other home’s in the area are selling for, what is the climate of the neighborhood and is the area located in a flood plan.  After you have found a home that is selling for a great deal below the average cost in that area STOP!

Smell the roses and look for the thorns, get involved with a real estate agent if you are new in the business of real estate investments.  Wrong decisions here can mean your first investment will be your last investment.  Consult with a professional real estate agent that specializes in buying homes in this market area, better yet, one that specializes in foreclosure investment properties.

Next, contact a licensed real estate inspector who has extensive experience with foreclosed or reposed property inspections.  Compare their qualifications, but also their quality of home inspection reports.  The inspection report is only as good as the paper it is presented on.  Trash in equal’s trash out, a poorly written inspection report will not benefit you in making the final purchase decision. 

Have the home inspected, asks the inspector; if they were you, would they buy the home for investment purposes.  If they are hesitant to answer that question, you may have hired the wrong inspector.  OK, ask them that question before you hire them.  They should be more than willing to give you an honest answer at the conclusion of the inspection process.  Most professional real estate inspectors will give you a rough estimate of the cost of needed repairs.

Most of the homes that are foreclosed have been legally reposed by the lean holder, they are normally eager to sell the property, but not always eager to have the property inspected.  Most often the utilities are disconnected to these properties get involved with your real estate agent to negotiate with the lean home to have the utilities turned on and schedule your inspections accordingly. 

The house is generally sold at 20-35% discounted rate of the market value. Therefore the investor can purchase the house, repair it and resell it to make a huge profit.  Take the selling price, add in the estimated cost of repairs and determine if this is a profitable investment for you.  Be careful on you first couple investment properties that you do not get in over your head and purchase a home that requires extensive or timely repairs.  Always be aware of homes that have significant damage to the roof, foundation, electrical systems or homes with excessive termite or water damage.

Buying a foreclosure can ensure a lot of money in just a short amount of time. It is definitely a good investment to make and especially when the market for distressed homes is continuously growing. 

However, once you have bought the house, you should repair it and refurbish it so that you can put it back in the market at its after repaired cost. This will give you a huge profit margin. But to get that profit margin you must make sure that the debt’s are not very close to the market value of the house. If it is, it will be best if you move on to another property in the hopes of buying it.


Robert Welch, PRI

Houston Professional Real Estate Inspector


This article contains information about buying bank foreclosed properties for investment purposes.  Do you homework, hire a team of professionals who specialize in foreclosed properties and by all means have the property inspected by a professional real estate inspector.


Robert Welch,
Professional Real Estate Inspector
Houston, Texas

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