Monday, September 29, 2014

Is foreclosure the way to go?

Whether you’re an investor or a home buyer, foreclosures pose a certain appeal if you’re in the market with a budget. As properties that have been repossessed from parties who could not pay the mortgage in due time, foreclosures are sold at lower costs, with lower interest rates.

However, given the current economy, and what with the renovations that come hand-in-hand with foreclosures, the question is: are they “the way to go”? Is it ideal to purchase a foreclosure?

There is, as of late, a boom in the local real estate sector. One need only to look at the number of forthcoming residential enclaves, high-rises, and townships in development to come to the conclusion that property, right now, is a red-hot commodity.

The benefit that comes from choosing foreclosures over brand-new property is a case-to-case basis.

The benefit that comes from choosing foreclosures over brand-new property is a case-to-case basis – one that factors in the buyer’s resources, purposes, and the location of the home. Looking to brand-new spaces is surely a more straightforward transaction. Repairs are unnecessary, for one: these spaces are ready for occupancy. They’re ready for occupancy. They have a warranty to their name. But these properties cost more. 

Foreclosures come at reduced rates, but take time, resources, and commitment. In general, however, they can be purchased and renovated for less than the cost of a new property of the same type, in the same location. It all comes down to the condition of the foreclosure, the estimated cost of repair, and its After Repair Value (ARV), or its market price once the space has been spiffed up enough to live in.

Foreclosed fixer-uppers are often sold below the market value. They’re a bargain, for sure, but pose an inconvenience, especially to buyers looking to live in the home. For investors, however, it’s a chance to profit from immensely. Given smart calculations in the cost of repairs and the estimated ARV, investors can cash in on large returns by flipping a foreclosure, with the right conditions in line.

Foreclosures also tap into the affordable housing market. The middle class is the largest demographic in the real estate market as of late. Analysts point to a pronounced demand in modest and affordable spaces, citing a growing workforce and new or upcoming policies allowing for businesses from abroad – from neighboring countries, in particular – to set up shop on local turf. 


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