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Using Foreclosures as a Primary Source of House Flipping

Updated: Sep 7, 2023

One of the first things that you learn about flipping houses is that you need to buy cheap. You don’t always get that opportunity when a house is being sold on the market.

But a foreclosure home is different. The bank or lending institution has taken back the property because the homeowner couldn’t or didn’t make the payments anymore.

Home mortgage lenders are in the money business and they won’t want the hassle of having a foreclosed property on their hands so they try to unload the home as quickly as possible.

The longer they hold the home, the more money they lose. That means you can get a property for a whole lot less than you’d normally pay for it. Some people are reluctant to get involved with buying foreclosures because they think that means the house is in terrible condition.

While that can sometimes be the case, more often than not, it isn’t. You can find foreclosed homes through multiple sources. They can be listed in the newspaper or at online real estate sites or other sites.

You can also find them at local auctions as well as listed on bank and mortgage lending sites. You can also check the U.S. Department of Housing and Urban Development for their list of foreclosures.

You’ll want to look at the property before you buy it but keep in mind that foreclosure homes are sold “as is” which means that you don’t get any kind of guarantee.

These homes could have minor issues such as needing to be cleaned and painted to major issues such as foundation problems. Keep in mind that not all foreclosed homes are open to an inside viewing.

This can happen if the home carries a risk to health. But you can gauge if the home might be worth it by looking at the price of the home, and the neighborhood that it’s in.

If you can’t get inside, always expect the worst possible scenario. For homes where you are able to check out the inside, it can be helpful to take a professional with you who can give you a rough estimate of the expenses that you’re looking at if you buy the property.

Know the budget you have for flipping the house. It’s not a good deal if you’re just going to break even. You need to know what the repair costs are going to be and if you do go to an auction, don’t get caught up in the frenzy and go over your budgeted buying price.

Just like with any other flip, you have to rehab it fast and get it back on the market to get the most out of your investment. When buying and selling a foreclosed home, you have to figure in the price you pay to buy it, closing costs or fees, the amount of money you spend on fixing it, the selling costs and any taxes paid.

Then you subtract that from what you turn around and sell the house for. That’s your profit amount. If you divide that profit amount by the time it took you to get the house back on the market, that gives you a percentage figure for your ROI.


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