Quick cash is one of the best ways to get started in real estate investing, as it can build confidence, pay bills, and help move you to a more wealthy tomorrow. One of the really hot button topics out there in the world of real estate right now is foreclosure. Thousands of Americans are going through it and foreclosures are somewhat symbolic of the tough economy we find ourselves in right now.
Foreclosures as real estate investments generally fall into two main categories: preforeclosure and REO or bank owned property. Many investors favor preforeclosures, since it gives them an opportunity to work directly with the seller of the property and also gives the satisfaction of being able to profitably help someone out of a bad situation.
Preforeclosures usually manifest themselves as two types of deals for the real estate investor. One is an arranged loan reinstatement, often called a subject to transaction, where the investor takes over both payments and control of the property, offering more immediate relief to the person or group being foreclosed on. While this has been an attractive deal structure over the years, more and more legislation has been passed nationwide that limits or governs the nature of these kinds of deals so investors need to be fully aware of what rules exist to do this successfully.
The other type of preforeclosure deal that is commonly pursued by real estate investors is a short sale. In this case, the investor negotiates with the foreclosing lender to secure a reduced loan payoff for the property in question. Circumstances, timing, and a little good old fashioned negotiating savvy can turn a marginal deal into a goldmine when investors work the short sale business well.
Because of the high volumes of properties that are either in the process of foreclosure or that have already been foreclosed, bank repossessed properties have become a more popular choice for investors to pursue in recent times. These properties, commonly known as REOs, represent a significant financial burden to the lender and there are some fantastic deals to be had when investors play their cards right.
There is a dramatic difference between investing in preforeclosures and purchasing REO property from a lender. REOs typically are realtor listed and the terms of purchase are often very rigid, requiring that an investor have available cash and solid financials to be able to work this part of the real estate market. The upside is that there is an abundance of REOs and an investor who gets his or her ducks in a row can make a virtual fortune tapping into these deals.
