Flipping bank-owned properties can lead to a large amount of funds in your bank account. However, it is not as simple as watching a late-night infomercial, buying the product and cashing a check two weeks later. It takes time and effort to learn the rules of the foreclosure game, build quality relationships with those who can help you and begin to understand the language of the bank-owned property investment world.
Purchase real estate that is owned by the financial institution for at least 15 percent below the price of the last similar house that was sold in the area. It is important to base this figure on the housing inventory that has already been purchased because you know that it has sold for a certain price. Houses that are still actively listed may be overpriced, and they are not an accurate representation of home values.
Deal with property that needs only cosmetic repair. If you are focusing on buying houses that need a great deal of work to sell, you are going to need time to bring them back to resale condition. Taking more time to repair the property will result in extra mortgage payments, contractor fees and even unforeseen repair costs. Focusing your efforts on houses that need minimal work will allow you to beautify the property by just hiring a pressure washer, lawn company and expert painter. These types of repairs will make the house look appealing to potential buyers who are viewing it for the first time.
List your property as a rent to own home. Selling your bank-owned property in this manner will result in having a larger pool of buyers from which to draw. You will also be able to command a higher price point because you are offering great purchase terms to your future buyer.
Get a nonrefundable rent-to-own fee from the person who is purchasing your property. If you are not sure of how much money to collect from your buyer, make it a point to collect at least 3.5 percent of the property price. Allow your buyer to repair their credit in the event that it is below average. Allowing your buyer to pay rent each month, consult a credit repair expert and take care of the property will help them to create an emotional bond with the house. In a period of 18 to 24 months, the purchaser of the home should be able to obtain a loan from the bank and pay off the remainder of the mortgage balance.
- property image by Christopher Hall from Fotolia.com