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One of the really hot button topics out there in the world of real estate right now is foreclosure. Foreclosures as real estate investments generally fall into two main categories: pre-foreclosure and REO or bank owned property.
Regardless of how a foreclosure deal is secured, the profit centers are very comparable to other kinds of real estate deals. Foreclosures can be wholesaled (although it is harder to do this with REO properties because of bank restrictions on contract assignment), rehabbed and sold, lease optioned, or held for monthly income. It all depends on the numbers and an investor who really wants to capitalize on the bad economy would be remiss to ignore foreclosures as a part of their investment repertoire.
How does the concept of foreclosure fit in with apartments, which is really the niche within the business of real estate that I most favor? Well, it stands to reason that if a single family home can be mortgaged and foreclosed if the mortgage does not get paid, the same sort of thing can also happen with larger pieces of real estate, including apartments.
Just as there are great deals to be had with single family homes in foreclosure, either by short selling the loan with the bank or picking up the property at a discount from the lender once the property has been repossessed, the same reasoning holds true for apartment buildings. The seller or banks motivation are still high in both these cases. The only thing that changes is the size and value of the property in question.
Imagine being able to pick up a 30% discount on a property in foreclosure. Sounds pretty good, doesn’t it? For a single family home valued at $300,000, the amount of the discount is $90,000, which is nothing to shake a stick at. Now, imagine the same percentage discount but for a $3,000,000 apartment building. The discount here is nearly a million dollars so you can see yet another example of how zeros can really benefit you in apartment investing!
Maybe you learned the business of real estate in the context of single-family homes. This is pretty common for real estate investors so there’s nothing wrong with that if it’s true for you. What I want you to see is that every technique you’ve learned, with respect to investing in single-family homes, can also be applied to apartments.
Apartments are just bigger deals; the strategies for uncovering opportunity largely remain the same. Can you visualize this? Once you do, the opportunities you’ll experience are limitless.
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