If you are curious about investing in foreclosures, you may wonder exactly what it takes to make money in the foreclosures market. Deciding which sort of properties to invest in is often the first step. Many savvy investors prefer to buy REO real estate directly from lenders. This is the most popular way to buy these properties simply because it is less of a hassle and far easier than other types of investing. In addition, investing in REO homes bought directly from lenders such as banks brings with it fewer risks and complications.



Once you know what you're looking for, you can find foreclosures through a good listing service. You can also find these properties in court documents, newspapers, or through realtors and networking. Once you've found some likely real estate properties that meet your basic requirements, you will need to decide which foreclosures are worth pursuing further.

The best way to do this is to subtract the asking price of the properties you are interested in from the average price of similar sized and similar styled homes in the same location. The resulting sum gives you a very general idea of the amount of profit or equity you can make from the purchase. You should only attempt to buy foreclosures that give you a good return on your initial investment and give you plenty of equity as well. Look for repossessed real estate that gives you a discount of a least 15% to 20% off the actual market value. Also, look for properties that will earn you at least 35% to 40% in profits after you have spent all the required money on closing, securing, and repairing the foreclosures.

You should also only look for investment real estate in good or in improving neighbourhoods, since homes in poorer neighbourhoods may take a long time to resell and may mean smaller profits. These homes may also depreciate in value.

Once you've done all this, you may be down to only a few foreclosures that meet your requirements. This is the time to contact the real estate agent or the seller in charge of the properties that interest you. Where it all possible, have the contact person meet you at the foreclosures that interest you so that you can look over the properties yourself. Bring along a qualified inspector and get written documentation about any repair estimates, damages, liabilities, and problems with the properties. Deduct the costs of these problems from the asking price of the home and use this information to negotiate for a better asking price.

If you're investing in foreclosures, you must subtract all the costs that are associated with repairing, borrowing, managing, closing, and buying foreclosures. Subtract this total sum from the price you think you may get on your foreclosures and make sure that this price represents at least a profit of 35% to 40%. Don't be afraid to bargain down the costs associated with the down payment, interest rates, closing costs, and even the asking price. You can negotiate all these factors on your foreclosures to get a better bargain and therefore a better profit.

Of course, you will want to have the inside track on investing in these properties. Your best bet is an experienced mentor who can guide you through all the steps of the buying process and can help you steer clear of the pitfalls along the way. Jeff Adams at RealEstateWebProfits can be that mentor. I can show you what it really takes to invest in real estate like a winner.