Challenges of Investing in Bank Owned Camden Country Real Estate
Investing in Camden County real estate is an excellent way to diversify your investment portfolio. Purchasing bank-owned or foreclosed properties can often yield a substantial savings, making rental properties and flips more affordable. Additionally, real estate is an excellent option for investors who need something tangible to work with.
Because people will always need a place to live, there will always be a need for rental properties. You can offset most risks associated with investing in real estate with smart management and better understanding of your local market. However, investing in real estate is not easy. Like all investments, there are challenges. Bank owned and foreclosed properties in particular offer their own unique set of challenges. If you are considering investing in foreclosed or bank owned properties, you will fare better if you approach the investment fully aware of the challenges:
Little or no financial information: When you purchase a bank-owned property, you may have to deal with little to no financial history on the home. Bank owned properties are homes or complexes that foreclosed and returned to the bank. If you are purchasing a foreclosed investment property (homes used for rental, duplexes and apartments), it is likely that the property was taken back by the ban because it was not performing well. However, you may not have all of the financial information you need to see the how, what, when and why because the former owners may not have turned over all of the documents.
Working with a Camden County real estate agent can help ensure that you get the most information possible, but many times the financial records are incomplete. You can overcome this with a lot of hard work and community research, but it may take time.
Longer, more complicated process: Even the best real estate agent Camden County will tell you that purchasing foreclosed and bank owned properties takes more time than a traditional purchase. If the home is in foreclosure, you may have to attend an auction or place a bid and hope your bid is accepted.
When you purchase a bank owned property, you have to negotiate directly with the lender. Hiring a Camden County realtor can make this process a little easier. While banks want to get some money, any money, for the property, they want to make as much of their investment back as possible and they can be rigid negotiators. If you plan to purchase a home directly from the bank without the help of a realtor, you should consult with an attorney to ensure that your contract process moves as smoothly as possible. Real estate agents often have relationships with banks, which can make the negotiation process a bit easier.
Purchasing REO property or foreclosed properties is a great way to save money on real estate investment, but it requires patience. It can take several weeks to negotiate a contract. Do not be surprised if you feel rushed to turn in your documents, down payment and other information only to wait for weeks for closing.
You need more money: When you purchase a foreclosed property or a bank owned property, you will need a larger deposit than if you purchased an investment property in good standing. Purchasing investment property in good standing often allows for a good-faith deposit. Purchasing an investment property that is owned by the bank or in foreclosure often requires a larger deposit.
Expect to pay up to 5 percent of the total purchase price towards the deposit. Depending on the bank you work with, this deposit may be nonrefundable. Talk with your realtor in Camden County and review the paperwork thoroughly before signing to ensure you understand the terms of your deposit. A hard deposit (non-refundable) is designed to lock you into the purchase. This means that if you change your mind about the purchase after the investment, you bid a fond farewell to the money you already handed over. You can avoid losing your deposit by trying for a refundable deposit and/or working closely with your real estate agent to find lower-risk properties.
Condition of the home: Purchasing a foreclosed or bank owned property often means you purchase the property as is. It is important to understand that many of the homes will have at least some damage and other issues. If you accept the fact that you will need to do at least some cleaning, repairs and remodeling of your investment property you will be able to plan accordingly.
One popular investment method is flipping. This involves the purchase of property, remodeling (sometimes gutting) of a home and a resale. Even if you plan to purchase the property to rent out, you will need to ensure the home is clean, safe and healthy to maximize your return and to meet state standards for housing. Agents selling homes in Camden County can help you find the perfect investment property. If you are willing to put a little more money into a home, you may be able to find property in a great neighborhood, allowing for maximum returns on your investment.
While investing in bank owned and foreclosed properties can be a scary decision, it can also be very rewarding. Many people find that the income they earn from rental properties provides a sizable return on their investment. Contact a real estate agent in Camden County today, to learn more about how we can help you find the perfect investment property.