Foreclosures

[Marialinda Contreras]

I am interested in starting off my real estate venture in buying foreclosed properties in Illinois, update them and keep them as rental units. I have yet to start and I was wondering if there was any advice (or warnings, lol) for first time foreclosure buyers? Thank you.

[Derreck Wells]

Originally posted by Marialinda Contreras:

Banks or auctions. I would like to buy properties under market value. Is that a good way to start? I am not sure. I've been reading about foreclosures and thought it'd be the best way to start

The problem with that business model, in my opinion, is that you're not getting a great deal. The bank that owns the property will send a bidder to the auction to make sure that they get what they want for it. Also to consider, people have been watching flipping shows on TV and want to get in on the action, so they go and bid up properties to the point that you can't get a great deal anymore.

"Driving for Dollars", while more work, I believe to be a more effective business model then auctions. If you don't know the term, search it above, but the short version is that you drive around looking for distressed properties, then get the owners mailing address and write them asking if they want to sell. There's no competition like at an auction or on the MLS.

Also, you can search for a local "wholesaler" who's legit. You pay a little more, ($1000-$5000 more) for the property, but you're paying for them locking down the deal. They do the "driving for dollars" or fight the crowds at the auctions. They can be quite the time saver.

You also have the option of taking on a partner for the first deal or two. If you find a local investor, you can use your funds and their knowledge of the business and share the profits. You get an education and you both make money.