Are You Making Money Or Losing Money With A Property Foreclosure?

By Author: Otto Ruebsamen
Total Articles: 135
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Is it even possible to consider making or losing money with a property foreclosure? All the news that you hear about property foreclosure is gloom and doom-people in the streets, mortgages defaulted. Of course, if you are one of those people suffering through a property foreclosure, this is not something to be made light of. Certainly it is a critical problem that we face as a nation.
However, if you are one of these people, chances are you would not be reading this article in the first place. If you are one of these people, you would not be wondering about making money or losing money with property foreclosure.

First, what are the drivers that enable you to make money with property foreclosure in this environment? At its most fundamental level, there is no more earth being made. There is only so much allotted land. Our population continues to grow which means people need a place to live. The law of supply and demand tells us that over the long run, real estate values can do nothing but go up.

Unfortunately, we are not living in the long run. We are living in the moment. We do not know how ...
... long it will take for the long run to move values back up again. However, we do know another fundamental market rule. It is applicable to any market that we seek to make a profit in, and simply stated it is Buy Low, Sell High.

You do not have to wait for some long run population explosion for this maxim to apply. It is hard to imagine being able to buy real estate at a price any lower than once it has been foreclosed. Banks are not interested in keeping some asset on the books that cannot be accurately valued. They are interested in getting these properties off of their books as quickly as possible, in many cases for pennies on the dollar.

So here is your first indicator for making money with property foreclosure. This indicator would be if you are buying them from a bank that is motivated to sell them. If you are getting properties for a song, you have the first part of the Buy Low, Sell High equation.

Before you get to the Sell High part, here are some points to consider. First and foremost, you need to determine what needs to be done to the property foreclosure before it can be sold. You bought low, but now you need to figure out how much your return is after the initial investment. Other factors that should be included in a dwindling profit margin are factors such as labor cost, labor materials, time on market and more. The next step would be to determine how quickly the property can be sold. The longer it sits on the market, the more it will cost you. Before you make a purchase of a property foreclosure, make sure you make a profit that outweighs putting the money into another investment. In other words, make sure it makes sense. That is the return to compare to-the risk free rate. That's what you have to beat. People are doing it, and making a fortune.
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