For people who are new to the real estate investment world, there’s one common question that we hear quite often: Is a foreclosure a good investment? After all, isn’t it an easy way to profit by house flipping? While it certainly might seem that way, our team here at Wilshire Quinn is here to tell you that buying a foreclosure isn’t all that simple.
As a leader in capital markets, our lending experts can work with you to help you decide if a foreclosure property is a good investment. Keep reading to learn the advantages and disadvantages of investing in a foreclosure:
Advantage: Foreclosed Properties Are Below Market Value
To start with the obvious, foreclosed properties are purchased below market value. Banks are looking to sell foreclosed properties as quickly as possible, and the best way to do this is to offer them for less than they’re worth.
Naturally, this opens the door for the possibility of investors turning large profit margins. Every real estate investor is open to cutting back on expenses, and purchasing foreclosed properties is an easy and straightforward way to do just that.
Disadvantage: Foreclosed Properties Can Be Neglected
Foreclosed homes and properties usually come from distressing situations. Although this lowers their market value at purchase, it often means they are purchased in less-than-ideal condition. As a result, investors should be prepared to undergo more repairs and improvements than they would a regular property.
Advantage: Better Financing Opportunities
Foreclosed properties are great opportunities for investing, and investors are able to secure hard money loans or bridge loans. Additionally, since foreclosure properties are sold for less than market value, they require lower monthly payments. This is especially beneficial for beginning real estate investors who do not yet have a lot of capital.
Disadvantage: High Competition
As you can probably imagine, a lot of investors want to get their hands on foreclosure properties. Since these properties are below market value, many investors compete for the same property, which can easily lead to a rejected offer. Furthermore, multiple offers drag out the buying process, so it might take longer than desired for you to acquire the property you’ve got your eye on.
Advantage: High ROI and Potential Appreciation
One of the main factors determining a property’s return on investment (ROI) is its initial cost. In real estate, the lower the purchase price, the higher your ROI could be. Since foreclosed properties are sold for lower than market value, they generally guarantee a higher ROI.
On a similar note, as investors make renovations and improvements to the property, its market value will rise. That way, not only will the initial ROI be higher, but there will also be higher real estate appreciation.
Premier Hard Money Lenders in California
So, is a foreclosure a good investment? Well, it depends. If you can acquire the property for a good price and it requires minimal renovation, then it might be. However, on the other hand, if you pay quite a bit of money for a property that requires a lot of upkeep, you might be better off browsing the regular real estate market.
If you’re interested in investing in a foreclosure property, visit our website. At Wilshire Quinn, we provide rapid and reliable funding for those looking to invest in commercial and residential real estate in California. As a leader in capital markets for almost 20 years, we are confident in our ability to help you. Contact our lending experts today to learn more about what we can do for you.
