Buying Multiple Foreclosures

Posted on July 16th, 2008 by saman

As the number of home foreclosures continue to rise across the United States, both experienced and novice investors are trying to find ways to profit from the mortgage mess. Some are even considering buying them by the dozen.

When no one bids on a foreclosed home at a foreclosure auction, the property becomes a real estate owned or REO property on the balance sheet of the lender. The bank has thousands of REO homes on their books. If a bank has thousands of foreclosed properties on their books, the banks are closely scrutinized and stock holders become agitated. Banks and lenders want foreclosure homes off their books as fast as they can. In order to get rid of these foreclosed homes, it is standard practice to list REO homes with a real estate agent in the area so buyers can find out about the properties for sales.

A big obstacle in getting these REO homes sold is that no one is lining up to buy these homes. This is because most potential home buyers are living in fear because of all of the bad financial news. Even if this is not a deterrent to the potential home buyer, lenders have tighter lending standards and it is very difficult to qualify for a mortgage. One realtor who is handling more than two hundred REO properties may only find two buyers per month. This means that banks will make fantastic deals with an individual who is capable of buying more than one property.

If you are interested in investing in multiple homes but do not have a large amount of money, one strategy is to pull together a group of real estate investors. Previously, one could do this by creating a real estate partnership which is limited. A good substitute for this would be establishing a Limited Liability Company.

It is easy and cheap to establish a Limited Liability Company. There is little paperwork and the taxes go through the personal income tax of the members of the company. Therefore there are less tax complications.

You might start gathering investors by asking those around you if they or someone they know would be interested in investing in foreclosure homes. Many will not consider this a threatening question and the majority of people will become interested. The good thing about asking is they or someone they know would be interested in real estate investing is that you are not forcing the information on them.

So how does a real estate investor turn a profit when investing in multiple homes? When you buy multiple homes, you can get discounts of fifty percent if not more. Even in home values continue to all you can still acquire a good profit if you sell the homes. You can also generate cash if your investment group holds on to the foreclosure homes for a number of years and rent them out.

It can be hard for an average investor to reach the right individual to talk to about purchasing Real Estate Owned homes. One can simply speak the manager of your local bank. You can tell them that you have an investment group that is interested in buying the REO homes. They will gladly help you.