Foreclosures: Opportunities Are Ripe

You’ve heard the old adage “When everything turns to lemons, make lemonade.” The current real estate market provides opportunities to make good on a bad situation.

Whereas real estate deals – specifically foreclosures – used to be reserved for moderately experienced to advanced investors, the current market has provided an opportunity for everyone to bite off a little piece of the pie. As a result, the number of foreclosure deals has jumped within the past six months, and more and more people are turning out for county foreclosure sales across the country.

This is good news for people who have a self-directed IRA, as industry sources say the best is yet to come. They expect the value of properties to increase next year – especially in markets that were hot prior to the bursting of the real-estate bubble. So anyone who can acquire property now and maintain or rent it for a year could reap the rewards as early as next year.

Pre-foreclosure properties may be a bit trickier because usually only real estate professionals can identify pre-foreclosures, and even then properties can be difficult to locate. In addition, banks could be holding on to a property, waiting for the market to rebound so they can recoup more of their original investment. Listing services, such as foreclosure.com™, can serve as a source to help locate pre-foreclosure investment opportunities.

Your only other option to locate a pre-foreclosure may be to approach a friend, neighbor or acquaintance who is struggling to hang on to his or her home, and try to strike a deal that would salvage the owner’s credit and provide you with a viable investment opportunity. However, this process does call for some real-estate know-how, as the investor needs to negotiate directly with the property owner and banks, as well as have some knowledge of how to structure the deal.

At any rate, successful real estate strategies may contain elements of both foreclosures and pre-foreclosures. If you are considering foreclosures as part of your investment strategy, keep in mind that current property prices are the result of an approximately 40% drop from the peak market value (as opposed to the amount the owner actually paid for the property).

So if you’ve been uneasy about investing in foreclosures, do your research and talk to your investment and tax professionals to see if the timing is right for you to turn some lemons into lemonade.

Disclaimer: Equity Trust is a passive custodian and does not provide tax, legal, or investment advice. It does not endorse or recommend any contributor, company, or specific investments. Any information communicated by Equity Trust Company is for educational purposes only and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your legal, tax, and accounting professionals.