How to Make Money With Bank-Owned Real Estate

Bank-owned properties

For real-estate bargain shoppers and investors, making money with bank-owned properties can create a goldmine of profits. Banks are not in the real-estate business and are anxious to remove foreclosed properties from their books. These banks will often negotiate bargain prices with buyers, which means you may be able to buy low and sell high to increase your profits. According to Realty Trac, there will be approximately 3.5 million foreclosures in 2010, which is an increase from 2009. With the right strategy and plan, you can take advantage of the overabundance of bank-owned properties.

Things You'll Need

• Real-estate agent
• Investment money

Instructions

1. Determine a realistic investment budget for purchasing bank-owned real estate. Your budget should include costs for repairing and marketing the properties. Also consider expenses such as taxes, insurance and real-estate commission fees.

2. Contact an experienced real-estate agent who has access to the multiple listing service (MLS), and ask to receive daily updates of bank-owned properties that are priced within your budget.

3. Request a comparable market analysis (CMA) from your real-estate agent on the properties you are interested in purchasing. The CMA is an informal appraisal that determines the market value to decide if the bank-owned properties are good investments.

4. Conduct inspections on the properties you are considering by walking through each one with a handyman, looking for structural damage, cosmetic repairs and mold and mildew. Estimate costs for repairs, and select properties that require minimum renovation.

5. 

   Bank-owned real-estate purchase agreement

   Complete purchase agreements for your real-estate agent to submit offers to banks on your behalf.

6. Purchase properties with cash, mortgage or a hard money loan.

7. Repair damage to your bank-owned properties. To maximize your profits, renovate only when it is cost-effective to do so, such as fixing minor cosmetic items and absolute necessities.

8. Market your properties in the MLS and local newspapers with a price that is slightly lower than other available properties in the area.

9. Negotiate selling and financing terms with buyers. Determine if you will cover closing costs or even accept seller financing with a land contract.

Tips & Warnings

• Find bank-owned properties that are located in decent neighborhoods that do not have an overabundance of foreclosures.

• Develop a detailed plan before you invest, and determine how much you want to profit from each bank-owned property.

• Submit multiple offers, and include contract contingencies such as inspections and financing, so you can withdraw from contracts if you wish.

• Competition is fierce with investors who make offers on bank-owned properties. Many will submit multiple offers and some will even overbid if the real estate is in a nice area or does not require a lot of repairs. Do not bid too low, or you might lose the property to another investor.

• Build a team of professional contacts to help with managing your real-estate investments such as handymen, real-estate agents, REO officers and appraisers.

References

• StlToday.com: RealtyTrac forecasts foreclosures up 25% in 2010