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Five Mistakes Investors Make When Buying A Detroit Foreclosure
Author : Shah Karim
Over the last few months property investors have benefited substantially by investing in Detroit foreclosures. There are numerous risks associated with these types of properties. Such investors should be aware of the risks in order to ensure that their Detroit foreclosure property is a success.
Mistake #1 - Purchase Price: Whilst the price for foreclosure property is likely to be significantly less than its value just a few years back, many such properties often require substantial repairs. Houses that are only a few years old, it can deteriorate quickly. Therefore, you must allocate a realistic budget for these repairs or upgrades and always keep a contingency fund in place, for any unexpected works. Remember, it's vitally important to keep these repair costs in mind when negotiating, so you do not end up over-paying for a foreclosed property. In addition, you will need to ensure that you have funds for the closing costs and advance taxes (especially for properties in the City of Detroit).
Mistake #2 - Bad Location: Inexperienced buyers sometime may overlook the location of the property in favour of a discounted price. This is a false economy as you must consider the location as paramount importance when investing in property for the long term. It's never a good idea to buy the best house in a bad neighbourhood, as not only will the property and the value detoriate with the neighbourhood you may have difficulty in renting the property or selling in the future. The golden rule is buy the worst homes in the best neighbourhoods, to ensure yourself of the highest rentability and resale values in the future.
Mistake #3 - Home Inspection Report: Most foreclosure properties are often advertised "as is" with a tight timescale. As a result some buyers waive a home inspection. A prudent buyer is never advised to do. Because such homes are neglected by owners who stopped caring about their home once they stopped making their mortgage payments.
Home inspections on these types of properties can reveal leaky or damaged roofs, rotting foundations, malfunctioning plumbing, electrical, mechanical or heating systems, mould and radon contamination and termite infestation. Without having an experienced home inspector examine these components thoroughly, a buyer could inherit a much larger and costlier repair invoice than expected.
Mistake #4 - Instantly Flip: With foreclosed properties some investors believe they can flip the property immediately with substantial profits. This maybe possible with heavily discounted foreclosures that are rehab properties. But generally you should think of a foreclosure as a long-term rather than a short-term investment. You will need to be patience for the region to stabilise and allow time for Detroit and the particular neighbourhood to benefits from the effects regeneration of Detroit, in to resell the property for a profit.
Mistake #5 - Instantly Flip: With foreclosed properties some investors believe they can flip the property immediately with substantial profits. This maybe possible with heavily discounted foreclosures that are rehab properties. But generally you should think of a foreclosure as a long-term rather than a short-term investment. You will need to be patience for the region to stabilise and allow time for Detroit and the particular neighbourhood to benefits from the effects regeneration of Detroit, in to resell the property for a profit.
As a new investor to foreclosure properties you must ensure you calculate the amount you may require in addition to the purchase price. Secondly, ensure that you research the neighbourhood and ensure if you are buying a property in good neighbourhood. Thirdly, ensure you conduct a home inspection to assess the structural and internal condition of the property. Make sure your property is likely to increase in value in the longer term. Again, this will be helped by selecting a property in a good neighbourhood. Finally, conduct a title search to determine if there are any unpaid liens and ensure you obtain a clear title.
Author's Resource Box
We operate an full investment service for investors looking to acquire Detroit properties. For more free resources and information about Detroit and available investment properties visit http://www.detroitinvest.co.uk
Article Source:
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Tags: detroit property, foreclosure, real estate investment, reo, investment real estate
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Submitted : 2010-03-15 Word Count : 1 Popularity: 100 Times Viewed: 11
