Should You Invest in Foreclosures?

The number of foreclosures in the United States is increasing dramatically. In 2006, a remarkable 1.2 million homes entered the foreclosure process. That number was up a whopping forty-two percent from 2005. For many savvy real estate investors, the rising number of foreclosures reeks of opportunity. And many aspiring real estate investors are eager to get in on the action. But whether someone should invest in foreclosures is an important decision that should be made only after careful investigation and thorough research. This article will help aspiring investors determine whether they should take the plunge. It will help answer the question: Should you invest in foreclosures?

Unless you are entirely familiar with the process of purchasing foreclosures for investment purposes, this can be a dangerous game. Yes, there are many bargains out there thanks to the growing number of foreclosures. But there are also just as many traps.

First, experts advise: Do not assume that just because a home is heading for foreclosure that it is automatically a good deal. This is a mistake many novice real estate investors make.

Also, investors need to realize that investing in foreclosures always involves some risk. Do not simply rely on a strong market and expect a good return.

New investors need also realize that investing in foreclosures involves a lot of hard work. And not everyone has the wherewithal to succeed.

The first step in deciding whether you should invest in a specific foreclosure is determining whether the deal makes sense financially. Many factors must be taken into account, including how much it will cost you to get the property into marketable condition, the value it will ultimately have at resale, and how long it will likely take you to find a buyer. Unless, of course, you intend to rent the property out or live in it.

It is widely recommended that you use a spreadsheet to calculate the costs involved with a particular foreclosure investment. A complete analysis will help you to determine precisely what you should pay for the property in order to make a good return. An incredibly helpful formula can be found at

Another factor to consider is at what stage of the foreclosure process you should purchase a property for investment. Many savvy investors prefer to purchase homes before the actual foreclosure proceedings. Some prefer to wait for the actual auction. There are many schools of thought pertaining to this, and you as a novice investor need to decide what will work best for you. It is important to consider this factor very carefully, as each stage of the foreclosure process comes with its own set of headaches.

Of course, as in many industries, there are any number of sharks and con artists participating in the foreclosure market. New and novice investors should learn about these scams, not only to avoid becoming a victim, but to avoid appearing like a shark or con artist themselves.

Prior to investing, you should always do your homework. Study the market carefully, know all the ins and outs, and then proceed with caution. Best of luck in determining whether you should invest in foreclosures.

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