Pre-foreclosures – Locating the Ideal Neighborhood to Buy a Home
Many people are either losing their homes to foreclosure or walking away because it doesn’t make sense for them to keep making expensive mortgage payments, when the house is worth less then the remaining mortgage. Currently 50% of home sales across the US are foreclosed homes. Although the real estate crisis is worrisome for homeowners, it is providing opportunities for families and investors.
If you look at any successful real estate investor, they have accumulated much of their wealth by buying when there was a downturn in the market. Donald Trump is a good example of someone who was buying up real estate real when everyone else was selling as illustrated in the quote. “When I first started out in Manhattan, everyone was saying what a terrible market it was, and if I’d listened to them, I would not be where I am today. There are always opportunities.” Donald Trump.
Many of the top real estate investors, including Mr. Trump, now feel that this is currently a good time to invest in real estate by purchasing pre-foreclosed or foreclosed properties.
The main reason to consider buying a pre-foreclosed property rather then waiting until in becomes a foreclosure property is because that way you can buy it from the current owner. This will give you more time to inspect the home as well as developing a mortgage with the bank.
When looking to purchase a pre-foreclosure you also need to pay closer attention to the macro aspects (I’ll cover micro aspects in a later article) of the property in order to limit your risk as much as possible. Some of these property macro aspects are:
- Do you notice an extremely unbalanced number of foreclosures available in the area? It’s preferred that your pre-foreclosure deal is the only one in the neighborhood.
- Ask around to find out what the average rate for rent is in the neighborhood and if it has changed lately. This will indicate if local housing demand is on the rise or not.
- What is the employment rate in the area? If declining then that may indicate that it’s not the right area in which to invest. Does the local economy appear to be stable?
- Check with local authorities to become informed about any infrastructure projects that may be planned within the next two or three years. Things such as new buildings and highways being built or corporations moving into town can be a positive indication of future growth.
- Consider the age of the majority of the population within the community. If the majority of the local population is seniors that own homes, that could translate into an excess of future housing as they move into elderly care facilities.
If you do your homework and find the majority of these answers to portray a positive community, then you should consider buying in that area. Buying pre-foreclosed homes at the right time in the right place can prove to be a very profitable venture.
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