Flip that house!

After buying and selling foreclosed homes to fund my early retirement, I have gathered a few tips anyone in the real estate market can use when looking for a cost effective solution to getting a home or making money providing homes for others.

Know how to turn a foreclosed home into cash? To borrow a quote from the stock market: Buy low. Sell high. Sounds simple, but let's arm you with some powerhouse weapons: Auctions, reaching potential home value, REO properties and knowing how to finance.

Foreclosures up for Auction

Not all auction foreclosures should have starred in "The Money Pit". Many are valuable. The trick is figuring out which is which. Start with an auction list. While online sellers will tout huge directories, start with the auctioneer. Auction houses provide bidders with the specifics from the owner, a lender who foreclosed on the property. But don't just take the lender's word for it.

Visit the Property

Some foreclosed property will not be accessible until the day of the auction, but the overwhelming majority will be opened for bidders prior to the auction. Take advantage. You wouldn't buy a car without test driving it. Don't bid on a house you have not seen inside and out, either.

Rarely, foreclosures can be inspected by a professional prior to the auction. Literature on the house will admit if an inspection has been made since the property was vacated.

Know what you are viewing. What should pipes under the house look like? What are the indicators a roof needs to be replaced? Can you tell if a wall has been patched? What are the signs of water damage? If you haven't seen an inspection in person, it is an educating experience.

Take Notes

You need to remember all the blemishes the house has to determine how much you are willing to pay for it and how much the house could potentially be worth at resale. This is how you determine on which houses you should bid. The equation for a winning house looks like this:

Your Maximum Bid + Taxes <>

What is my "Maximum Bid"?

The opening bid is up to ten per cent less than what is owed on the foreclosed home. This ensures the lender gets most of its money back. Since you want to make money, you cannot bid up to the actual value of the foreclosed home. Your maximum bid needs to be at least ten percent lower than the current value of the home.

Is that set in concrete?

No. Some distressed homes, ones which need a lot of repair, are actually worth more in the long run. For example, 123 Hickory Street is 1,600 square feet, four beds, two baths. It is valued at $36,000 because it has not been updated since the 1950s. It needs a new roof and the carpeting replaced. A few new windows would not hurt it.

Find rest of the answer and much more!

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