Creative Real Estate Investing
Creative real estate investing is a different way of obtaining real estate than traditional methods. Most buyers will obtain a mortgage from a bank and provide a down payment. Some buyers will pay cash but most buyers don't have a lot of money laying around.
One method of creative real estate investing is an option. This is when the property is being sold to a buyer at a specified price or strike price during a certain period of time. The owner will sell the buyer an option before a determined date. On the determined date, the buyer can complete the purchase of the option or sell it to another buyer. This will depend on the value of the house. An option is used to buy a house with little cash.
The sandwich lease is a method of creative real estate investing that occurs when a tenant wants to leave their unit without having the option to leave written into their lease. To get out of their lease, the investor would find a replacement tenant who becomes their tenant and not the landlord's tenant. The replacement will pay the rent to the investor who pays the landlord and keeps the profit. The new tenant will contact the landlord if they have problems with the unit. At the end of the lease, they will notify the landlord and not the investor. Their next lease will make them a tenant of the landlord.
A wholesale is when an investor buys large quantities of real estate from the bank and sells them quickly for a small profit. Distressed buyers will make a deal with the bank who will sell to the wholesalers. After buying the house from the bank, the wholesaler can make a quick profit by selling the house at markup.
A tax lien or deed is when the state sells a property after the taxes have not been paid. The owners of the property are given a certain period of time to pay their taxes. If the taxes are not paid in this time, the state will sell the home. Some states sell the tax lien at an auction. Depending on the state, the investor can obtain the property for the amount that is owed. Some states will start the auction at that price. The investor will own the property free and clear. Other states will sell the deed at a public sale. The investor can still get a great price and many have the convenience of buying the properties online.
There are many ways for creative real estate investing that are within reach.
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Bank Owned Foreclosures
A bank owned foreclosure is also referred to as REO, or real estate owned. This is the terminology banks usually use when talking about bank owned property, so if you are approaching a bank to ask about their real estate holdings, it is best to ask to talk to their REO department. Fortunately, you probably won't have to talk to the bank to find out which foreclosed homes they have for sale.
The easiest way to find bank owned foreclosed homes is to contact a real estate agent. Most banks list their properties with an agent just like anyone else who has property to sell. This makes it easy to locate most REO foreclosed homes. Just search the MLS listings on your favorite real estate website. Many of the lower-priced foreclosed homes are likely to be REOs.
Most banks have a certain real estate agent they use to list their real estate. If you can find out which agent handles a bank's listings, you can let him or her know that you are interested in bank owned foreclosure houses so that he will contact you whenever there is a new listing.
Another way to find properties that are owned by banks is by checking their websites. Banks often post lists of foreclosure houses that are available. You can sometimes search by state or city, but depending on the bank you might have to wade through hundreds of listings to find what you are looking for.
Make sure you have the bank owned property you are considering purchasing professionally inspected. These homes are more likely to have problems due to neglect by the former homeowner and by the bank itself. Homeowners who are facing foreclosure often don't have the funds to keep up with repairs, even if they wanted to, and banks are notorious for letting homes sit without any type of maintenance at all.
With this information, you should be able to find a bank owned foreclosure to purchase, whether you are buying it for your own use or as an investment. Bank owned properties are often cheaper than other real estate in the same neighborhood, so regardless of how you plan to use the property, it's possible to get a really good deal if you're careful.
Foreclosures and bank owned properties are an excellent way of starting to invest in property. Beware though - much of the stock has been on the bank's books for some time now and an inspection is vital. The amount of bank owned property is still growing, and will be a source of income for many over the next few years.