Written by Danielle Babb of Entrepreneur.com
As an alternative to house-flipping, I'm focusing on how to balance your potentially upside-down portfolio with foreclosure properties -- or any property you can get for far less than its market value.
There are many ways to buy houses on the cheap. What's cheap? Thirty to 50% below market value, in my view.
Why will banks give up properties for little? First, they don't want them on their balance sheets. Also, what many don't realize is that a foreclosure, even on a house worth less than $100,000, costs the bank about $50,000 in legal and agent fees, fixing up the home and so forth.
What's the ultimate goal? To balance your portfolio with properties that are worth more than you owe and to hold onto them until the value returns, at which point you can either leverage the equity or sell the home. That's why you want to buy properties in the best condition with the least hassle.
Getting Started
There are three primary ways to buy foreclosures. The first is to buy the home in the pre-foreclosure stage. This is the ideal position because you can help save a homeowner from foreclosure, and the bank, homeowner and you -- the buyer -- work together to decide on a price. Of course you'll offer far lower than the home is worth. But banks frequently accept low offers because they don't want the asset on their books or the $50,000 in costs to foreclose on a home.
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