Updated about 1 year ago on . Most recent reply
Buying Auction Foreclosures
It seems to me that there is some potential for buying foreclosures at auction. I am just starting out but I'm assuming, I am correct. But I'm also assuming there are a lot more downsides to this than I am foreseeing. Lets just say an opening bid is for $75,000 but the market value is $240,000. Even if you have to put another $75,000 into the property, that should still be a good deal. If you can rent it for $2,000 that is a ROI of 13% roughly. What am I missing? Sorry, I have tried finding this question on the forums but I haven't been able to find it. My plan would be to use cash and then finance later so I didn't have $150,000 tied into the 1 property.
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@Brenda Reems The opening bid is just a number other investors will bid up. The spread between $75k and $240k is too good to be true in this market. If you can buy it for $75k it's probably a disaster. Due diligence is everything. We know this because we're looking for a disaster property to rehab. Haven't found it yet. If that's the case you need experience, DIY skills, contractor support, and a lot of cash to get it done.
Do you have those things?
If you do attend some auctions, do the due diligence, and find the diamond in rough. If you don't run the other way. Novice investors think auctions and REO properties are winners, but most come with added risk. You will tie up a lot of cash (yours or OPM) in deals like this. Experienced investors don't tell new people to buy at auctions because it's safter to level up through cosmetic flips, BRRRR, or house-hack/value add opportunities.