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Foreclosure Property Investment
Why Invest in Foreclosure Properties?
Are you aware that more millionaires came out of the Great Depression than went in? It is a fact. Just like then, there is an extraordinary amount of money to be made in this economy right now if we just open our eyes and minds to the opportunities that are presenting themselves to us in foreclosure property investment.
It is said that more millionaires have been created from real estate investments than any other form of investment. And the primary reasons that most people invest in real estate are: 1) because it has "intrinsic value" and 2) historically, it appreciates over time.
Unlike stocks, which can become worthless in the event of the issuing company's failure, real estate will always have an underlying value of some amount. And, if history repeats itself (and there's no reason to believe otherwise), real estate will be worth more in the future than it is today.
Today, we are in uncharted waters for the real estate market in the United States. Many people like to say that "the bubble" finally burst. Millions of homes have lost significant value. Foreclosure properties are at all time highs and selling for pennies on the dollar.
Now, ask yourself this all-important question:
"As an investor, do I view these circumstances as an opportunity or a reason to hibernate until the real estate market turns around?"
If your answer is: "AN OPPORTUNITY!" Keep reading....
What are Foreclosure Properties?
For the purposes of this discussion, we will focus on "residential" or home foreclosures. According to Answers.com, residential foreclosure is defined as:
"A situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, (be it a bank or other lender) can seize and sell the property as stipulated in the terms of the mortgage contract."
Foreclosure is a legal process and the laws involved can vary by state. During the foreclosure process, homes being foreclosed upon are known as a "foreclosure properties". (A home that is in some stage of the legal foreclosure process.)
However, at the end of the foreclosure process, regardless of the state involved, the foreclosed properties will either be sold at auction or they will become the property of the bank if they do not sell. The foreclosure auction (known as a "Trustee's Sale or Sheriff's Sale") marks the completion of the legal foreclosure process.
If the foreclosure properties do not sell at the auction they will revert to bank property and become known as an "REO properties", meaning "Real Estate Owned by the bank.
Many people tend to blur the definitions for foreclosure properties and REO properties and use them interchangeably. Therefore, "foreclosure property investment" is a term that is collectively and broadly used to refer to both types of properties.
The "Perfect Storm" for Investors
There are two important facts that we know today relating to residential real estate in America and foreclosure property investment:
1. There is a glut of homes on the market right now in many areas of the country. In other words, we are "over-built".
2. The United States population is projected by the U.S. Census Bureau to grow +29% between the years 2000-2030.
What does this information tell us?
First, it tells us that we currently have more homes available than we have people to buy them. Second, it tells us that this is only a temporary situation.
How do we know that? Well, if we do the math, we are going to have approximately 82 million (that's 82,000,000) more people living in the United States by the year 2030!
And I can tell you, without hesitation, that despite being over-built today, we do not have anywhere near the amount of homes available to house 82 Million new people in this country. So, the bottom line is that we will absolutely grow out of the current "over-built" situation. The $10,000 question is: "When?"
"Depending on the "expert" opinion that you subscribe to, we will outgrow the current over-built housing situation in the U.S. in 2-3 years."
Why is this relevant for investors interested in foreclosure property investment?
"As long as there is a glut of homes on the market, the pressure on home prices will continue to be downward".
This is basic economics:
Excess Supply = Lower Home Prices
So, let's say that you an investor considering a foreclosure property investment. Not only can you acquire homes for "pennies on the dollar" today, but you can be quite confident that the value of the foreclosed properties and reo properties will appreciate within the next 2-3 years. (Sooner, in some geographies.) The reason for this is also basic economics:
Increased Demand = Higher Home Prices
The increased demand will come from the 82 Million new people that will be added to the U.S. population over the coming years.
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Q: Do you have to wait 2-3 years to earn a profit with a foreclosure property investment?
A. Absolutely not! You can earn extraordinary profits right now if you know how and where to invest in foreclosure properties and reo properties.
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Foreclosure Property Investment
