What is foreclosure investing?

Foreclosure refers to a legal process that occurs when a homeowner (borrower) is no longer able to make their mortgage payments. At this point, the lender puts the house (used as collateral for the loan) back on the market to retrieve the loan balance. Through this process, the lender will be able to minimize any loss as a result of the defaulted mortgage.

Having said that, foreclosure investing is the purchase of foreclosure homes and turning them for a profit. After buying a foreclosure home, a real estate investor can decide to fix it up before reselling it or rent it out.

Related: What Is a Foreclosure? How Can You Invest in One?

Foreclosure investing has become more popular in recent years. However, is it smart to buy a foreclosed home? There are many misconceptions about foreclosure investing that have made some real estate investors scared of investing in them. However, the truth is that investing in foreclosed homes offers some unique and great opportunities. Nevertheless, it is important to be aware of both the pros and cons of foreclosed homes before you dive into the world of foreclosure investing. Those capable of capitalizing on the benefits of foreclosure investing while taking proper precautions can gain good returns. Today, we will look at the benefits of buying a foreclosure for investment.

The Benefits of Foreclosure Investing
The following are 6 common benefits of investing in foreclosed homes:

1. Discounted Price
The sellers of foreclosed homes, who are also the mortgage lenders, are usually motivated. They need to quickly sell the property and recoup the loan balance. As a result, they will lower their prices so as to get multiple offers and facilitate a faster deal. Moreover, foreclosure properties are cheaper because they are often in a distressed condition. They are usually sold below market value, sometimes 20% to 50% lower than other properties in the same neighborhood.
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With good research, you can find cheap real estate in a good neighborhood that can have a great appeal to prospective tenants. You could also make a lot of profit by immediately selling the investment property.

Essentially, a lower property price increases the potential of generating a higher return on investment. Due to the discounted prices, foreclosure investing helps to open up investors to real estate deals that might otherwise be unavailable to them.