How Complete Beginners Can Invest in Foreclosed Homes

If you want to invest in a foreclosed home, though, you will have to understand a little more than that. It's not very complicated. Quite simply, a foreclosed home is a home that has been legally repossessed by a lender or government agency, usually because the homeowner did not pay their mortgage as promised. Since the lender has lost money on the bad loan, the home is offered for sale right away so that the lender can regain the money lost.

Since lenders or government agencies holding the bad loan want to earn back their money quickly, they often price a foreclosed home low - sometimes below what the home is actually worth. In some cases, the home has not been carefully maintained due to the owner's financial problems. This can drive the price down further. Sometimes, the property assessor sent by the lender does not carefully consider the true value of a home and prices the home too low. All of these factors can mean that a home is priced below its actual market value. For the buyer considering the home, this can mean a great bargain.

For a buyer considering buying a foreclosed home as an investment, this is even better news. Every time an investor buys something for less than it is worth, he or she can make a good profit.

For the complete beginner, the best way to invest in foreclosed homes is to carefully select one home to buy. It is best to look for a good home in a nice neighborhood. Look for a property that does not need major repairs, only a little cleaning. While this means that you may save only a few thousand dollars over the market value, those few thousand dollars mean instant equity. If you occupy the home as an owner-occupant and fix up the property so that it is as nice as surrounding houses, you will have a valuable asset that can boost your credit score and can provide you with a nice nest egg against retirement. If you buy a foreclosed home near a college, consider renting a part of your home out, if zoning permits. This is a good way to ensure that someone else pays all or part of your mortgage while your equity in the property grows.

Reality television shows promote house flipping and other more advanced methods of real estate investing. If you are just getting started in investing, though, buying a good home at a slight discount and holding onto that property makes more sense. There are far less risk and far fewer tax disadvantages when you buy a home as an owner-occupant. Once you have plenty of equity in your home, you can always consider buying a second home to rent or own. For the new investor, though, gradual gains are best.

Joseph Smith has been educating buyers on the finer points of Invest in Foreclosed Home at ForeclosureDeals.com for over ten years. Contact Joseph Smith through ForeclosureDeals.com if you need help finding information about foreclosuredeals.com/how-to-invest-in-foreclosures.php investing in foreclosure homes. Or, simply foreclosuredeals.com visit ForeclosureDeals.com to find the latest professionally-compiled listings of foreclosure homes across the country.