"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well." -Warren Buffet Hopefully by now we've all learned that real estate is not a get-rich-quick game. But with about a third of all home sales being foreclosures right now, there's definitely a nice field for investors to play in.
Maybe you are an investor looking to buy up some distressed properties on the cheap. Or maybe you're an agent dealing with a lot of clients who are interested in getting into some investments. Either way – these properties are a substantial part of the housing market right now. Most people are expecting the market to get a little worse before it gets better – which means even more foreclosures coming to market.
Freddie Mac recently announced a $4.1 billion net loss in the third quarter. The mortgage finance company owned nearly 75,000 homes at the end of September due to foreclosure. And that's just one part – the big banks own loads more too.
With more foreclosures expected, are we looking at a potential fire sale of properties? If so, you'll want to be ready. But how? A recent New York Times story detailed the long, complicated and frustrating process of buying a foreclosed home. It certainly takes persistence and preparation.
What are the keys to success when buying a foreclosure property? First, you'll need a strong support team – enlist an agent who truly knows what they're doing as buying a bank-owned home is definitely not the same as buying a home from an owner or builder.
Second, have cash and lots of it. You will need it for negotiating the best price and closing the deal.
With your cash in hand and experienced agent by your side, you can then proceed to research your local market. This can be tricky as many reports in the news these days seem to paint confused or conflicting pictures of the housing market. Put your blinders on and focus on your immediate location. Look at not only the housing data, but also the overall economic data – are there jobs or expected job growth over the next five to 10 years? What kind of schools are around? What is the area's biggest industry and what is the outlook for that industry going forward?
Of course, there's a lot more to it than this. My point is that even though we're still staring at a long recovery, don't think you have time to jump into foreclosure investing. Now is the time – because once that bottom is called, the masses will be back in and you may find that you're too late to the party.