Investment Property Foreclosure – The Basics

Investment Property Foreclosure – The BasicsWhat is investment property foreclosure?

An investment property is any property that you have bought to generate income, take advantage of tax benefits or to profit from appreciation.

Investment Property Foreclosure – The BasicsDifferent type of investment properties include:

  • Commercial property
  • Residential property that is rented out
  • Property that is purchased so it can be sold for a profit. This is known as property that is bought to “flip”.

Foreclosure is a legal process which happens when a borrower is unable to repay his loans in complete. The lender/ bank then tries to recover the remaining balance of the loan by selling an asset of the lender that was being used as collateral for the loan. There are a number of reasons why the borrower stopped making payments on the loan.

Investment Property Foreclosure – The BasicsSome of these include:

  • Unemployment
  • Excessive bills and/ or mounting debt
  • Unable to work to work due to a medical condition

Downside

Foreclosure has taken away the homes of many people as they are forced to give up their properties to pay off the remaining loan. With the foreclosure of an investment property, because it isn’t your primary residence, it is less devastating to part with. However, many people rely on the income or rent generated by their property so its foreclosure can result in the loss of their sole source of income.

Investment Property Foreclosure – The BasicsUpside

While foreclosure has resulted in the loss of their homes and investment property for many people, it is a good investment for those looking to buy an investment property. This is because an investment property that is on sale due to foreclosure will sometimes sell below the market value. Some banks want to get the balance on their investment so the price on the property is set below market value to sell it quickly. This is where realtors and other buyers have the advantage. A buyer can purchase the property and either “flip” it (sell it for profit) or he can rent it. But before buying a foreclosure you need to go through the property thoroughly to make sure you aren’t incurring a loss or making a bad deal.

Sometimes, when owners begin to fall back on their payments, they tend to let go of the maintenance of the property. If you’re looking to rent out this place or sell it for a profit, make sure it hasn’t been damaged inside in any big way otherwise you will end up spending more on fixing it than what you spent buying it.

Investment Property Foreclosure – The BasicsSuch problems include:

  • Vandalism: properties left empty are easy prey of vandalizers. Make sure there isn’t any serious damage to the property before you proceed.
  • No electricity: if bills haven’t been paid, chances are there is no electricity. Take a strong flashlight so you don’t miss any property damage in the darkness.
  • Water damage: with no one around to take care of small problems like leaks, these can turn in to big problems like mold and major water damage.
  • Personal property: if anything is left behind, it will fall on your head to dispose of the useless things.

 

 

 

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