If you want to learn How To Buy Foreclosures, make sure you know the red flags that could sink your project!
As you already know, buying foreclosures is a great way to get a house for well under market value. Additionally, since the economic crash of 2008, purchasing foreclosures has never been more popular in the real estate community.
However, not every foreclosed home is a worthwhile buy. Some properties will cost so much in rehab that you will end up losing money on the venture. Even if you break even, you will have essentially spent a great deal of time and energy fixing up a house for someone else for free.
To find out if a particular foreclosure is a bad buy, make sure you know the red flags that will sink your project.
How To Buy Foreclosures | Red Flags 7-10
If you want to learn how to buy foreclosures, make sure you read about all 10 of the red flags in this two part series. In part 1 of this series, we discussed red flags like disgruntled previous owners, unpermitted changes, ceiling stains, a cracked foundation, and a long period of vacancy. Below, in part 2, are 5 more red flags to keep an eye out for.
6. The Neighborhood Is Becoming A Ghost Town
As youâ€™ve probably heard before, one of the most important factors to consider when buying real estate is its neighborhood. House flippers will often try to find a house in an upcoming neighborhood, or even buy the ugly duckling in a good neighborhood.
However, if the neighborhood is on its way out, you should try to stay away purchasing a house within it.
What happened in many neighborhoods after the economic collapse was that a few houses were foreclosed upon and became abandoned. Then, other residents of the neighborhood started to leave, exponentially decreasing the value of each house on the street.
The fewer occupied houses in a neighborhood, the less the value on each house is. So, while you might be able to find what seems like a â€œstealâ€ on a house, you also might not be able to sell it for that much on the tail end of things.
People with families donâ€™t want to raise their children in a ghost town. Always avoid a foreclosure in an area like this so youâ€™re not stuck with a home that nobody wants.
7. Low Water Pressure
When you are assessing a house for the first time, you should always make sure you check the faucets. If there is low water pressure, or even worse, gurgling, you might have trouble on your hands.
Problems with the faucets like this could mean that the pipes are old and need replacing. New piping for a single room is usually around $1,000, and $2,000 for a wet room. Refitting an entire house with new pipes can cost over $10,000 and could leave you in a deep financial hole, without a way to get out.
In addition to checking yourself, make sure you have the inspector take a look at it as well, especially if you have any reason to believe that there could be a problem.
As a house flipper, you can never utilize the inspector enough. Get your moneyâ€™s worth out of him before you purchase a property, especially a foreclosure. Knowing how to use an inspector is essential when learning how to buy foreclosures.
8. Extreme Septic Problems
As mentioned before, a vacant property can cause...