To transition from homeowner to successful pre-foreclosure or foreclosure investor, the first step is planning your transition. The key to success in real estate investing is to consistently make money. So even if you own only one asset at a time, you need a plan to choose the right investment property and make decisions about how to finance the property, your exit strategy, and whether to repair or remodel the property.
The great thing about pre-foreclosure investing and foreclosure is that you don’t necessarily have to pay for everything on your own. You can partner with other investors and, if you rent the property you buy, have your tenant not only cover loan repayments, but essentially buy the property on your behalf. Investing in prior foreclosures and foreclosures also allows you to take advantage of a number of exit options. “Home renovation,” for example, is the term used for investment deals that involve the purchase, repair, and subsequent sale of property for a profit.
Also, since you are targeting prior foreclosures and foreclosed properties, you can potentially get a significant discount on the retail value of the property you purchase. That is one of the main reasons why these types of properties are ideal for an owner who wants to start investing in property.
If you’re just starting to invest in real estate, you can take an approach where you pay off your current home and try to save enough to invest in another property. The downside to this approach is that it can take an inordinate amount of time. You do not have to wait! There are alternative ways to invest in pre-foreclosure and foreclosure properties that are simpler and faster.
If you want to start conservatively, you may decide to invest, for example, in a pre-foreclosure or foreclosure property that would make an ideal vacation home or second home. The continued demand for such properties makes them relatively easy to sell, allowing you to invest more in similar or other properties.
Renting out your existing home while you buy and move into a low-priced pre-foreclosure or foreclosure is another way to start investing before foreclosure and foreclosure. Yet another approach is to sell your family home so you have the money to invest in two or more pre-foreclosure properties or foreclosures, one of which you live in and the other(s) you monetize.
You can also take advantage of the increase in value of your family’s home (if applicable) by refinancing or taking out a second mortgage to invest in one or more properties.
These are just a few of the ways you can transition from homeowner to pre-foreclosure and foreclosure investor. In general, I recommend pre-foreclosure and foreclosure properties for someone starting out, as they can be purchased relatively cheaply and present less risk than many other types of real estate investment.