Florida Foreclosure Properties Present Bargains For Small-Time Investors
Even with Florida mortgage loans up significantly in price from a year ago at this time, the stock market still looks to perilous for small investors. As a result, people are putting money in the asset they are most closely tied to and understand the most — real estate.
One of the best places to invest within the real estate realm is with foreclosures. In this one segment of the market, current conditions make it the perfect time for a small-time investor to purchase one or more foreclosure properties for their private residence, rental or resale.
In this difficult economy, more and more upscale properties are going into foreclosure, so the traditional assumption that foreclosure homes are only available in crime-ridden areas is inaccurate. Beachfront homes and pieces of South Florida real estate in affluent suburbs are part of the mix of foreclosed properties available.
Homes valued at $200,000-400,000 regularly appear in the national listings that can be found on sites such as foreclosuresus.com. The availability of more desirable properties combined with still attainable Florida home loan costs many people to qualify for mortgages on homes that would have been out of reach only months ago.
Take the example of a Florida man, who last year purchased a four-bedroom townhouse in foreclosure status for about $100,000.
After renovations conducted in his spare time, which cost about $12,000 for materials, cabinets and fixtures, he recently sold it in “like-new” condition for $197,000, giving him a tidy $85,000 before-tax profit.
He also purchased another foreclosure property that after renovation has also doubled in value. He decided to rent the second one, and succeeded in doing so, exceeding the Florida mortgage costs by $500 a month and giving him another $6,000 in annual income from the property.
Keep in mind that many owners of homes that go into foreclosure have been struggling financially for almost a year, which usually means a house has not received needed repairs or general maintenance in quite some time.
The three rules of real estate — location, location and location — applies in these situations. If there is trash in every room of the house, but if the foreclosure is in a good area with high property resale values, just suck it up. Hold your nose, walk through the entire house and consider making an offer.
Also, be on the lookout for what are often called hidden foreclosures. Not all foreclosures are previously owned homes. Some are new or almost new, and these homes are not as easy to identify as they rarely appear on any national lists.
The slow economy has left many area home builders of new mid-scale and upscale properties without a market to purchase them. With thousands of homes up for sale in every city, some builders have reached the end of their construction-loan periods without finding buyers for their homes.
In these cases, the banks that issued the original construction loans take possession of the homes and attempt to sell them, using real estate agents to handle the deals. These, too, are foreclosures, only they are “hidden” because no one associated with the sale of the properties will refer to them as such.
The climate of the competition for Florida foreclosure properties is largely dictated by the number of professional “rehabbers” in the area.
Rehabbers buy properties and renovate them quickly to resell them for a profit in 30-60 days. They are constantly purchasing properties to keep their crews working, although the current market downturn has somewhat curbed flippers’ ability in this arena. Still, Florida leads the nation in growth of housing units by volume, so there’s plenty of activity.
In general, rehabbers have a maximum price they’ll meet that is very low compared with the value of other homes in the neighborhood. If you are willing to exceed the listing price by $3,000-5,000, you may be able to snar the home at what is still a very low amount.
Getting started costs less than people think. With good credit, many banks will loan the full price of the foreclosure or more. If the home is to be used as a rental, many banks will require only a 10 percent down payment.
Individuals with a large amount of money tied up in another home may get a Florida home equity loan from their bank to purchase a foreclosure. Under such circumstances, when they convert that line of credit to a mortgage, no down payment may be required.
