buying foreclosuresFirst responders might be a little nervous these days when it comes to calculating the amount of monthly pension pay that will be available after retirement – if it’s there at all. With the foreclosure market still swirling strongly through the news and income property investing circles, the idea of buying foreclosures has probably crossed your mind to get in on the action.

The reality is that big money might not fall into your lap immediately, although Heroic Investing thinks there is no better asset on this planet to purchase than rental real estate. The stock market doesn’t even come close. Avoid these three rookie blunders and your chances of building an impressive property portfolio increase dramatically.

1. The Bank’s Sale Price is Set in Stone: Actually, we don’t suggest you ignore the bank’s sale price completely but don’t make the mistake of putting in your first offer near it. A good rule of thumb is to reduce the listed price by 30% and make your first bid in that vicinity. The reality is that the price the bank would like to collect may have no relation to the actual value of the property. There could be a chasm between what they want to sell it for and what the market of value will actually bear.

2. One Source is all You Need: In this busy life we all lead, the tendency is to find a relator you get along with and rely on him to notify you when there are new foreclosure deals on the MLS. Sort of a set it and forget strategy. In our humble opinion, this is not the way to go about buying foreclosures. Though it’s more work, a good buyer’s agent is a start but don’t neglect the banks themselves as well as REO brokers.

3. No Exit Strategy: Before you ever go into a deal, know what the outcome is going to be. Are you going to fix it up and sell it, fix it and rent, or even wholesale it to another investor? Having a fixed exit strategy allows you to narrow your search to only those properties that meet your goals.

Buying foreclosures in today’s market can be quite lucrative but the process is not like following a rainbow to find the pot of gold at the end. There are potential perils that seasoned investors know to look for and newbies should brush up on quickly.

The AIPIS Team

AIPIS.org

Flickr / Eric Hamilter