Single Homes Best for Foreclosure Investment

QUESTION: I was at a party where people were talking about investing in foreclosed commercial buildings and apartments. How would I go about finding foreclosed houses to buy for investment?

ANSWER: You are wise to forget about buying foreclosed commercial buildings and apartments. Unless you have successful experience with such properties, you could be asking for trouble.

Single-family houses are much easier to buy, finance, manage and profitably resell. However, if you are to earn profits you’ll need a profit plan, such as buying run-down foreclosed houses so you can fix them up and profitably resell them. Don’t just buy foreclosures because you’ve heard they are a bargain. That’s true. But you’ll need to know how to earn a profit once you’ve acquired the foreclosed houses.

In most communities there is a legal newspaper or private newsletter that lists foreclosure properties coming up for sale. Ask your county recorder or other official, or a local real estate attorney, for the name of the appropriate publication.

Reluctant to Lend on Vacant Land

Q: There is a 12-acre parcel of land for sale about an hour’s drive from our home. I think it will be a good investment because the adjoining highway will be upgraded and a freeway interchange will be constructed nearby. I can afford the down payment for this land, but have not been able to find a mortgage lender. Any ideas?

A: Most lenders refuse to make mortgage loans secured by vacant land. The reason is the risk is very high as is the probability of default. Virtually the only finance source for vacant land is the seller.

Just to break even, land must appreciate between 15% and 20% a year. This considers the costs of holding the land, such as for property taxes, mortgage payments, liability insurance and lost down payment opportunity costs. Lenders are doing you a favor by not lending you the money.