The Results Reflect The Potential Gross Profit In The Property

Category: Finance, Real Estate.

Now that you know the default amount.

First, let us look at the properties estimated market value. Based on the information gathered from the legal notices or from the foreclosure list provider that you have used, you can begin to research and analyze the potential in the properties. To determine the gross estimated equity in the property subtract the default amount from the properties estimated market value. If the resulting amount is low or very little between the properties market value and the debt then move on to the next pre- foreclosure. The results reflect the potential gross profit in the property. However if the amount is large, the property may yield enough equity to result in a sizable profit.

You must keep in mind that you may have carrying costs, and broker and, interest real estate agent fees. The profit potential in a specific property must yield a potential profit in order to achieve success in the foreclosure market. These costs and fees can add up very quickly and a home that has very little equity to offer can result in a substantial loss. Carrying cost can include utilities such as gas or electric. Let us cover a little more detail about the carrying cost, broker and agent, interest fees. Leaving a home without these can cost you even more in the end. Vandalism is very common in homes that are not occupied for extended periods of time.

Repairs of equipment and damages done to the home. The interest on the loan, especially with" hard money lenders" can be a significant expense to owning a pre- foreclosure. The last one, which most first time investors forget about, is the closing cost when you sell the home to someone else. Remember then previous homeowner was more then likely in trouble for this exact reason. Most agents charge between 3- 6% of the sale price as there commission, do the math. Repairs that need to be made immediately are often overlooked as well.

It is very costly to sell your home. The majority of foreclosed homes are in need of some repair. Make sure that your potential profit allows for a far amount of repairs. While some only need minor repairs that do not cost much, others require close to a complete remodel in order to get the house ready to sell. You will learn more about the extent of the repairs needed at a later time. Just remember that the preliminary evaluation is a quick look at the" potential" profit or equity in the property, some of these may be taken off the list at a later time, if the, but for now" potential" is not there it does not make much sense to research it any more. However, if the foreclosure that you are looking at does not have a substantial profit in this preliminary evaluation then you may be wasted valuable time and effort for nothing.

Investing in pre- foreclosure can yield" built- in" equity in a property, so it is vital to make sure that you have room to make some money after the repairs and carrying costs. After you contact the homeowner, you will be able to evaluate the property even further to ensure that you will not come out the" "loser" in the end.