77. Make $1 million+ over 20-30 years Become a millionaire Purchase foreclosed properties, renovate them, and resell them for profit or rent them out
This article describes a solution to make money with foreclosed properties.
Aside from simply purchasing foreclosed properties at a 30-50% discount, you could also choose those properties that need a little bit of renovation.
You could take, on top of your mortgage, a home improvement loan to make this happen.
Then, after a few years of work, you simply flip, or sell the property for its real value, or rent them out, over 20-30 years, as investment.
Here is an example: If you mortgage a foreclosed property for a $100,000, which is actually worth $150,000, thus $50,000 in discount, then suppose you have to do a little bit of renovation, let's say for $50,000, the property could be valued at $300,000.
Then, after 1 or 2 years of renovation work, you could decide to sell it for $250,000 and make a $100,000 profit or decide to keep the property and rent it out for let's say $1,500 per month over 20-30 years.
If you purchase only 3 properties for $100,000 each over the next few years, with $50,000 of renovation per property, (they are worth an estimated $300,000 each), then in 20-30 years time, once they are fully paid off, you have amazed close to $2 million. Your properties will appreciate by 3-4% per year according to the inflation rate, unless there is another real estate collapse as we experienced in the past, which is unlikely to happen again. Your rental income will also increase by 2-3% per year as a result of inflation-adjustment (while your fixed/variable-rate mortgage stays the same) so in 30 years time, your rental income will be twice as it is today, or twice the current mortgage payments.
You could also rent them out to family or friends or place an ad on Craigslist.com.
Despite the natural rise and fall of the real estate market, over the long term it has consistently proved to be a great way to make money. People have bought properties and sold them on just a few years later for huge profits the kind of profits you cannot generally get anywhere else. Even the stock market isnt as easy to negotiate as the real estate market.
For example: They found it in Sarasota, Fla., where they set about transforming a ramshackle, ranch-style house on the brink of foreclosure into a bright, airy home. Armed with a pair of safety goggles and Google, Brett learned how to grout floors, install ceiling fans, and sledgehammer old tiles off a wall. It took one week of vacation time and a $4,000 tax rebate (Brett and Sue purposely over-contribute to get a yearly windfall), but they saved at least $6,000 on the bathroom renovation alone.
Make sure the renovation costs are within limits of your budget, sometimes properties require too much renovation to make it worthwhile. Get a specialist involved to investigate the property, like investigate the state of the roof, the state of the walls (no moisture), etc.
Find a cheap contractor to do the work you can't do yourself. The more you do yourself, the more profit you make. You can also ask friends to help you out while you pay them by the hour.
Convert a 3 bedroom house into a 5 bedroom house, gives it additional value.
Redecorating the property is the least cost but gives it the appeal it needs to get it sold or rented out.
You could also decide to split up the property into individual apartments to rent them out, or to sell them individually. Like, you invested $150,000 in the property and you rent them out as 3 apartments for $500 per month rent, or sell them for $75,000 each.
If you do decide to sell the properties, try to sell them as rented out properties, thus as investment properties. A house that is worth $300,000 can be sold much easier, if it is a $300,000 house with renters covering the mortgage payments. Then the house becomes a rental-property investment for the buyer.
Be careful, there are tax-considerations when selling a house for profit, you will have to pay taxes on the profits.
Don't even think of buying a house until you've had it thoroughly inspected. Not only will you be more comfortable with the purchase, but you can use the report as leverage to get the price lowered. (The inspector will ALWAYS find something wrong.)
Time your home purchase. The hardest months to sell a house are the best months to buy one: October, November and December. You could negotiate a better price when you purchase a property during these months. In case of buying foreclosed properties, compare the prices of similar-sized houses in the neighborhood that are selling.
If you decide to sell you property - also try to sell it yourself. Real estate commissions are among the costliest of fees, especially considering the value you get in return. If you're in a lousy housing market, you may not have a choice: realtors will expose your home to the maximum number of potential buyers. But if the markets popping, try selling it yourself, after reading a book or two on the subject. Many other people have gone this way successfully and its a way to save many thousands of dollars!
