Do you own your next local bank?

Not a day goes by lately without hearing about the real estate market and bank-owned homes. Homes in this category can offer the buyer or investor the opportunity to purchase a home that may have been out of reach in the past. Banks are in the money business, not the home ownership business, and they don’t want to own these properties. His expertise and focus is on borrowing and lending money. Anything that distracts them from their core business could be detrimental to their overall financial health. Because of this, their asset managers are often quite eager to remove these assets from their books. If you plan to enter this market, you must be prepared for the risks involved.

Researching the real market is a priority. Is the market at the bottom? Is it currently in free fall or showing signs of rebounding in a time frame acceptable to you and your overall strategy? Is the house solid or does it need significant improvements to live in or resell? These are just some of the questions you should consider before embarking on your journey to owning a bank-owned home. If it is a short-term investment, the stability of the market may be more important than the physical condition of the home. A house can lose a significant percentage of its value in a short period of time, so make sure you understand the general market forces that will not only affect the price of the house, but also the ability to sell it in the period of time you have. calculated. Make a list of all the costs associated with selling a house. Transfer fees, permits, legal fees and commissions must be taken into account. Taxes and other expenses, such as homeowners association dues, are examples of other profit drains. Short-term investing has the potential for the greatest reward as well as the greatest risk.

If it is a long-term investment, you may be able to mitigate losses from a short-term downtrend. If you don’t plan to sell the house in the near future, you’ll miss out on these market fluctuations and be able to weather short-term financial storms. The value of your property can be affected not only by time, but also by location. If you plan to occupy the house for a long period of time, the risk is further mitigated because you get the benefit of the house providing you with the shelter you need. Depending on the market, you may be able to rent the property during times of economic downturn. However, be prepared to take on the responsibilities and costs associated with homeownership. The same financial struggles that are taking place in the general market could affect your renter’s ability to pay.

One of the best ways to take advantage of a bank-owned home is to have the experience to fix the property yourself. If you have the ability and resources, you can buy a fixer-upper well below market value. Depending on the extent of the repairs, you may be able to reside in the home during the renovation. Keep in mind that obtaining financing for a home in need of extensive repairs comes with its own challenges. Money lending regulations and self-imposed limits are now stricter. You will need to prove to your lender that you have the means to handle the financial obligations in order for them to lend you the money. Like any investment, you shouldn’t stretch yourself beyond what you’re willing and stand to lose.