Real estate investors know the importance of buying affordable real estate properties that allow for some value to be quickly added to them. The lower the price you pay, the more profit you make. Sounds great! But where exactly can you find cheap real estate on sale for below market value? Read on to learn a couple of ways to find the most affordable estate in the US.
#1 – Short Sale Properties (Pre-Foreclosures)
As you start looking for cheap houses for sale, it is a good idea to check short sale listings. Short sale properties can be very affordable real estate investments. A short sale is when a lender agrees to accept a lower mortgage payoff amount than owed so that a financially distressed owner can sell the property faster (since the owner cannot pay off the mortgage). Subsequently, the lender/bank will forgive the remaining balance of the loan. Why would lenders be willing to do that? Well, they simply want to avoid the expensive and time-consuming process of repossessing the home in foreclosure. This is also a much better situation for the owner/seller, as they get to avoid the credit hit of a foreclosure and the often accompanying bankruptcy it can cause. You as a buyer arriving at the right time can save the owner/seller from a terrible situation. In turn, you can land a very good real estate deal. This process, however, requires a lot of patience.
Related: The 12 Steps of a Successful Short Sale Process
Where to Find Short Sale Properties
How can you identify potential short sales then? Where are these investment properties for sale? You can look for the pre-foreclosures in the location you’re planning to buy a property by checking online listings, searching courthouse listings, ads or using a specialized agent who is experienced in working with real estate investors.
It’s best, however, to try to find the owners when they have already been given legal notice that the foreclosure process is about to begin and they have decided to sell the property to avoid that. In other words, you should find these property owners before the property is listed for sale. Here a specialized agent with a good network comes in handy!
When you do find these owners, make sure you know how much is actually still owed on the house versus the property value as it often indicates whether the lender will prefer a short sale or a foreclosure. To stay on the safe side, it is best to analyze the investment property and also contact the lender to negotiate and follow their procedures.
#2 – Foreclosed Homes
The second option for finding affordable real estate is to look for properties that have already ended up in foreclosure. Buying foreclosed homes can work out well for investors, although for the sellers, it is always a devastating experience. Foreclosure is a situation where the owner cannot pay off the mortgage, and a lender takes control of the property, evicts the homeowner, and sells the home.
Where to Find Foreclosed Homes
Investors can find foreclosure properties on Multiple Listing Service sites online. However, sometimes a better deal is to snatch them before they end up on the listing sites, so you need to keep your eyes, ears, and especially networks open! Note also that these investment properties are likely to end up for sale in real estate auctions for foreclosed homes. This is a place to hunt for bargains. The downside is that if your bid is successful, you usually need to pay in cash at the time of purchase. Also, you usually do not get a chance to see the investment property beforehand. This is a big risk, and not recommended for first-time real estate investors.
Related: Real Estate Auctions: Everything You Need to Know
#3 – Bank-Owned/Real Estate Owned (REO) Properties
A third way to find affordable real estate is to check out bank-owned homes/real estate owned (REO) properties for sale. These are the type of listings that simply have completed the foreclosure process. In other words, these homes went to auction, didn’t sell, and the bank is forced to take ownership. Now that the lender has the ownership, they want to sell it to make back the unpaid loan amount.
Where to Find Bank-Owned & REO Properties
These types of properties will end up on online listing sites. When you finally see it listed, it means the bank went through the entire process and chose a broker to help sell it. Banks are motivated sellers because they want back the lost mortgage payments. Despite this motivation, you are still looking at a long process. Waiting from the beginning of the foreclosure until the lender is actually listing the property for sale is only for those real estate investors who have patience and time to wait. And if you’re looking for affordable real estate, you need both!
To find and analyze short sales, foreclosures, and bank owned homes, sign up to Mashvisor now and visit the Property Marketplace.
#4 – Buying a Fixer-Upper
Although the aforementioned ways for finding affordable real estate can also include properties in need of renovation, buying fixer-upper properties is an investment strategy in itself. It is a fact that affordable real estate is sold at a lower cost for a reason: they require heavy renovation. This does not scare savvy investors though. They know if they put in the work to rehabilitate the property, they yield a better return on investment later on.
How to Find Fixer-Upper Properties
You will definitely want to make sure you choose an agent who is experienced in working with real estate investors and knows what to look for. These types of agents do not shy away from showing you those properties that are a little ragged around the edges. Do remember to get the investment property checked by a qualified inspector who provides a careful estimate of the renovation costs from licensed contractors. Managing time and costs is key to making this strategy work.
Related: Home Renovation: A Guide to Fixer-Upper Investments
This was our list of the 4 ways you can find affordable real estate in the US housing market. But before you try any of them out, you must also remember that finding an affordable real estate property is only one aspect of a good ROI. The second key aspect is the location! You should never try to find cheap investment property in a bad location. This is why the first step to finding rental properties with a high ROI is to find the right city and neighborhood. Turn to Mashvisor today to analyze locations and properties. You can now even find short sale, foreclosure, bank owned, and auction properties at Mashvisor – all in one place. Investment property search has never been easier!