How to Start a Business Securing & Maintaining Foreclosed Homes
Experts such as Steve Berges teach that regardless of the state of the economy, real estate is always a good investment as long as you know what you're doing. Due to the ease of getting a business started, investing in foreclosed homes remains a popular strategy among young investors.
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Instructions
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1
Decide on a name for your real estate company. Choose something that is synonymous with real estate such as Montana Realty Company, or Sun Life Properties.
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2
File the appropriate business entity with the state in which you plan to begin acquiring homes. This can be done online through your state's Division of Corporations. Consult with an attorney if you are unsure what legal filing would be best for you.
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3
Determine how you will finance the foreclosed properties. Knowing this will help you decide in which stage of foreclosure to invest. Your credit rating and cash reserves will ultimately be the deciding factor, so take some time to learn about creative financing. Creative financing is a concept, not a hard and fast rule. Financing methods change every year as the banks change interest rates and investment strategies. Possibly you can find a business partner with great credit and or reserves.
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4
Decide in which stage of foreclosure you would like to start investing. In "The Complete Guide To Investing In Foreclosures," Steve Berges explains that foreclosure on property has four primary stages: pre-foreclosure is the stage in which the homeowner has missed at least one payment, yet still has time to bring delinquent payments up to date; the auction sale stage is the point in which the default stage of the property has expired and the property is auctioned off at the county courthouse to the highest bidder; the redemption period stage is when ownership rights to the property are transferred to the highest bidder of the auction; the post-foreclosure stage is when ownership rights of the property transfer to the successful bidder at the auction, which is usually the lending institution that brought about the foreclosure. The property then becomes a nonperforming asset, or what is commonly known as an REO (real estate owned).
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5
Begin searching for homes in the stage you have chosen. In the pre-foreclosure stage you would want to talk to the distressed home owner. At the auction sale you may be able to outbid the bank, or negotiate terms with the representative at the auction. During the redemption period you could convince the distressed homeowner to sell to you at a discounted price as long as you bring the account current, leaving his credit in tact. The post-foreclosure stage is the most hassle-free stage in which to invest because you only have to deal with the lender. Since the bank isn't in the business of owning real estate, you can usually get a great deal on the property. The only caveat is that you must have better than average credit, and proof of income to make the payments each month.
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6
Purchase your first foreclosed property and repeat steps 3-5.
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