The foreclosure situation is a good deal different from what we were discussing a few years ago when the tidal wave of 7.3 million foreclosures and short sales swept the nation. When The New York Times “Dealbook” recently pronounced that the supply of cheap foreclosed homes in America is dwindling, it came as news to…well, no one.

Let’s face it: investors wouldn’t need to look up the latest statistics to guess that number of offerings would be down. The continuing rebound in home values, slow but steady improvement in the overall economic picture, and even just the passage of time has to mean that the glut of subprime-crisis-era foreclosures would have worked their way through the system. 

But there are always new foreclosures, and for anyone hoping to make a bargain buy in today’s foreclosure market, the same qualities that brought post-crisis success still apply today:

• Knowledge of (or willingness to research) comparable neighborhood values
• Realistic appreciation of rehabilitation costs
• Decisiveness (willingness to act swiftly)
• Ready access to investment capital

The principal difference in today’s foreclosure milieu is that far fewer are available, and the difference between market value and listing price has narrowed. There may be fewer competitors to worry about, but some are still out there, as always. Today sees fewer institutional investors—in fact, some are leaving the market altogether, taking their profits and selling out to groups more committed to long-term property management.  

Aside from the qualities described, there is still no blanket formula for landing the best foreclosure deal. But among other observations, there are two that are worth considering.

First, despite the lessening of the impact institutional investors previously had on the market, it may still be necessary to prepare to offer more than the listed price. The dwindling number of foreclosed homes tends to create an imbalance between supply and demand. If other buyers are offering higher amounts than the asking price, it can easily result in a bidding war situation. As always, by researching underlying values, the best investors avoid foreclosure buys that wind up being little more than break-even propositions.

Another wrinkle to be aware of is the possibility of future cost increases. For instance, it can transpire that an investor succeeds in purchasing a property significantly below its true value, only to find that a reassessment by taxing authorities raises its property tax bill through the roof! Canny investors prevent this surprise by finding out how the local Assessor’s office sets rates and schedules appraisals.

The foreclosure picture changes constantly. If you are interested in the investment possibilities—or are looking for a buy on your next home—don’t hesitate to give me a call to discuss the latest offerings! You can reach me on my cell phone: 812-499-9234 or email Rolando@RolandoTrentini.com

With property prices currently sagging, more and more investors are looking towards real estate as a smart addition to an investment portfolio. Certainly there is money to be made in property, but there is also a great deal of risk involved. Education and experience are the keys to navigating the often-hazardous property market. Here's a quick guide to help you build up the right property portfolio.

Why should you invest?

Property investment carries with it numerous advantages for investors. According to broker and President of Equity First Realty, Ben Yonge, the current down market is the perfect time to capitalize in the property market.

"Real estate prices are so extremely low. Buying an undervalued or distressed piece of property usually means that it can be 'cash flowed' with a nice annual yield if the right tenants are placed," he explains. "Prices are already on the rise so holding cash-flowing properties for the next three to five years should mean substantial gains in appreciation."

Preparing your finances

Gaining the correct financing is often the key to building a great property portfolio. It's always wise to arrange financing before looking at your first property, to avoid losing out to other buyers who may have already secured financing. Many lenders will demand an up-front sum of up to 30 percent as a down payment on the loan, so ensure that you've got the money prepared before proceeding.

Know your market

Buying property is a major investment, so it's important to analyze all the facts before taking the plunge. If you plan on renting the property, Yonge says that the current rental market and total cash required are the two most important factors to consider.

"Buyers need to know where they're buying and should verify that the property can be tenanted quickly," he says. "In addition to purchase costs, buyers must also factor in the costs to bring the property to rental ready condition.

Similarly, if you plan on renovating the property in order to resell it, you should speak with a real estate agent or financial planner to ensure that the investment will be worthwhile.

Taxes

Even the brightest prospects can be sunk by a heavy tax burden. That's why it's always wise to consult a real estate attorney about the relevant taxes before closing a property deal, to identify any loopholes or money-saving measures. For example, investors may be able to sidestep capital gains taxes on an investment property if they have lived in the home for at least two of the last five years, according to the IRS.

Growing your portfolio

Once you've successfully purchased your first property, you can begin growing your investment portfolio. To help expedite the process, Yonge recommends hiring a professional. "Working with a good real estate agent, and preferably a good wholesale brokerage can save a ton of time and greatly increase the number of deals a buyer is able to analyze," he notes. It may be wise to invest in several different types of property to reduce risk in the face of market fluctuations.