Everybody – investors, fixers, landlords, wheeler-dealers, and financiers – who have taken the time to learn the business and to cultivate buying and selling skills can find a profitable niche to work in today's foreclosure market. Before you rush out to make your first million, there are some “don'ts” that you should observe if you want to avoid needless trouble and expense:
Don't be too eager to chase bargains without understanding a few maxims. The first of these is that you must understand the local ground rules and current true values for real estate in the area in which you expect to buy.
Make it a point to use recent appraisal data. Don't rely on a seller's assurance of values based upon what a “similar” property sold for in the past, or what the property is projected to be worth in the future.
Don't compare old, dirty, ugly, non-functional, property, or property owned by distressed parties with comparable sales of clean, modern, nice looking property.
Don't value houses outside your local area using values for comparable sale prices and rents for houses near your own home. Values vary widely for essentially identical houses from one town — and often neighborhood — to the next. You could pay too much or sell for too little.
Don't expect to be able to get a higher yield or price with distressed property you intend b hold for long term investment than the prior owner was able to get unless you possess special skills and financial resources he didn't have. Remember, he struggled valiantly to avoid losing it and failed. So might you too.
Don't expect to finance the property in an area with wide spread distress. Lenders may be wary of being twice bitten.
