Despite the fact that foreclosures have proven to be a great investment opportunity for most real estate investors, if you are not careful you can lose out on a lot, especially your time, effort and sometimes even money. This investment opportunity is full of pitfalls that can not only cause huge time delays but can also be very costly for you as an investor. Needless to mention, with the sole purpose of making as much profit as possible out of such an investment, you cannot afford to make any foreseeable mistakes, not as a foreclosure investor.
It is important to note that foreclosures can sometimes be downright frustrating to an investor. Say you have found a great property to invest in; you have finalized all purchases at the public sale and are just about to take full control of it when the defaulted buyer sees an opportunity and takes advantage of the period of redemption to get back their property. While this is great for the defaulted owner, certainly it is not good for you as the investor. You will receive your cash back with nothing to write home about your effort and time.
Liens on properties
You should know by now that foreclosure properties have liens too. Although the property owners inability to make monthly mortgage payments is what would have contributed to the property being foreclosed, there could be other bills that are most likely not paid. Liens are legally binding documents filed against properties and which have to be paid off in full before the transfer process to a new owner is over. Ensure you get this right before you “inherit” a huge bill on your newly acquired property.
The other notable pitfall is when the actual sale of a given property keeps being postponed for any number of reasons. Probably the defaulted owner has reached an agreement with the lender on an affordable way to pay for the mortgage. Or maybe he has raised enough money to save the property. Or maybe another buyer has brought forth a better offer on the property. As an investor, this can be disappointing and is a pitfall that you should be well prepared and well cushioned to avoid wasting so much time and effort on something that may not be viable in the long run.
Having said that, another important point that should be brought to the attention of foreclosure investors is to avoid making themselves legally vulnerable. It is often very easy for most people to sign legal papers without clearly understanding the legal ramifications. Your signature on any legally binding document can land you in real trouble, and you may find yourself with payments to make that you had not budgeted for.
As a foreclosure investor you ought to take every precaution to protect yourself and your hard-earned money. Keeping in mind that you are dealing with a distressed homeowner who is not ready to accept defeat, you could be in for a very rude shock when things turn against you. These homeowners tend to hang on to false hope praying for some easy way out of the situation. Knowing the pitfalls to avoid, however, will ensure you are strong enough to accept whatever problem you may encounter when dealing with foreclosures.
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Property management companies are now a ubiquitous feature in real estate and though many investors still want to shield and nurture their investments, the role played by these companies cannot be gainsaid. It is one thing to create a portfolio in real estate but when it comes to management, you will find that this is a different kettle of corn altogether. In fact, most real estate investors who have found themselves in trouble started out well but ignored the crucial role of property management. To avoid this pitfall, you need to observe some of these crucial aspects;
Basic Service Provided by Property Managers
As a property owner, catering for your property might appear a walk in the park. However, the services provided by managers form a complex spectrum which would definitely need your full time attention. Some of these services include;
- Rent collection; this is the most crucial role a manager brings to the table. They will not only collect and bank rent but also keep updated records on delinquency rates and other cash flow reports on your behalf.
- Maintenance; your property has to stay in tip top condition and the manager thus evaluates vendors, suppliers, equipment and all services provided. This in turn ensures the safety of the tenants is guaranteed hence improving their satisfaction.
- Bill payments; you are assured that no supplier will wake you from bed due to unpaid bills and even mortgages are paid through a monthly check registration.
- Personnel supervision; all employees on your property are answerable to the manager and hence, hiring, firing and supervision becomes the duty of the manager.
Other crucial roles include maintaining good tenant relations through 24/7 response service, rental analysis and recommendations, and also provision of financial reports as agreed in the contract.
Choosing a Property Management Company
There is a plethora of companies in the industry and you need to select and work with only the right one. Some of the things to consider include the experience of the company in the local market to ensure any rental issues or recommendations must be based on market realities. Additionally, check how long the company has been in the property management business before investing your money in their services.
It is also critical to ask for referrals from the company in order to evaluate the quality of their work and also to assess their reputation among past clients. One of the other important things is the company’s insurance to ensure they can handle your kind of property sufficiently and without any downtimes. Check the licensing of the company in your state and this is very easy to authenticate especially with online sources. Finally, check the company’s affiliation in the industry and its associations to bodies such as CPM, CSM among others. In simple terms, it is advisable to work with a company that is already tested and which has something to show for its work. Integrity is the key here and hence, be on the lookout for a company that comes across as committed and dedicated.
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Whether you are looking to buy or sell land, no doubt you need to choose a good realtor to work with. There could be so many realtors marketing their services to you, but like any other service provider, you need to pick the one that understands your target location extremely well. Of course you should consider all service providers at your disposal in your local area, but ensure you make a wise decision since your choice will ultimately help you save or lose money, depending on your choice. Read more
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The main reason why people sell real estate notes is so they can raise money quickly. A note is simply a loan document that was created when you paid for your investment property or house. A real estate note could be a contact-for-sale, a land-contract, or simply a mortgage note. The main thing here is that the buyer of the note would be making payments directly to you, so you might as well cash in big on it. Read more
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