How can real estate investors successfully source, buy, and recycle foreclosure properties this year?
Yes, there are still thousands of distressed and foreclosed homes in the U.S. property market in 2016. There may be far fewer than before and they may be a little harder to find, but they are there. So how can real estate investors find them, buy them, and hold or flip them in a sustainable manner so they can boost their finances without falling prey to the problems that put these properties into foreclosure to begin with?
58k Foreclosures in Just One County
In just Michigan County 58,000 properties are set to go into foreclosure in March 2016. That’s just for delinquent property taxes according to the Wayne County Treasurer and Crain’s. There are many more properties falling into, and working their way through, foreclosure in 2016. Even in markets that some investors consider very strong, like NYC, distressed deals are found. Remember that even though foreclosures and short sales are declining according to data from the National Association of Realtors, it is largely in part due to the increased sales activity of non-distressed properties. So whether hunting for deals in Southern California or the Northeast; chances are there are some to be discovered.
Why So Many Foreclosures?
This year’s foreclosures are both a mix of new and legacy problems. There is the case of delinquent property taxes, which are properties that may have stopped paying there dues over three years ago. The same goes for many that have defaulted on mortgages. Some court systems and banks are still paying catch up even in spite of increased employment. Yet, in a number of cases, property owners are falling victim to a flawed system which hasn’t properly delivered notices.
There are also many properties that have fallen back into foreclosure. Fraud may be a part of this while some are the result of poor and predatory loan modifications that simply didn’t help borrowers. In other cases, distressed properties were purchased by new investors who didn’t invest in their real estate education first, didn’t do their homework, and didn’t know how to do the math or ensure they had enough capital and access to financing. So although we are no longer in crisis mode, there are still investment opportunities out there.
The Hunt for Foreclosure Deals
This year’s foreclosure deals may range from just $500 in Detroit, Michigan to millions of dollars in Southern California. So how can real estate investors find them and how might securing these deals be different than in previous years?
7 ways to find foreclosure properties in 2016:
- Foreclosure auctions
- Investor groups
- Real estate wholesalers
- Investor webinars
- Banks and mortgage lenders
- Direct mail
- Referrals from attorneys, title companies, Realtors, and mortgage brokers
Helping Distressed Property Owners
Just because there are property owners in distress doesn’t mean they’ll all be a slam dunk for investors to buy. Some of the challenges over the last few years may even be more potent this year. This includes property owners that have lost trust in virtually all parties that offer ‘help’, owners that are not convinced that they are really going to lose their properties – even though they will without action – and those that are too bullish on what their properties may be worth. Then add in new regulations and HOA and condo associations, which have put new rules into play to reduce turnover making it harder for units to be bought and sold.
Overcome these challenges with:
- Better looking real estate websites
- Smarter real estate marketing strategies
- Case studies which show the pros and cons of action and inaction
- Demonstrating your strength and reliability as a buyer
- Customized deal structures that deliver on owner priorities and concerns
Building A Sustainable Real Estate Investment Business
The ongoing presence and availability of foreclosure properties in 2016 is a big reminder to invest intelligently so that gains can be sustained.
This includes:
- Proper budgeting (a $500 property can cost a lot more)
- Knowing your numbers
- Keeping on top of continued education
- Having a cushion of equity and reserves for flexibility
- Thinking long term
- Superior management and bookkeeping
- Using reputable title companies when closing deals
- Having a real estate attorney on retainer for future issues
- Reselling and renting units sustainably
Summary
There are tens of thousands of distressed properties and foreclosure deals waiting for investors to jump on in 2016. Know where to look for them, how to prospect for them and how to make great offers, and you should never come up short handed. Just don’t neglect the flip side either. Make sure you are prepared to whether the future and sustain gains over the long term
