Is it possible to make money in a foreclosure in the current market?

by Tom Workman
(Orlando)

In the current market there are hundreds of foreclosure signs in our area. Is it advisable to bid for a few houses and make money by flipping? What are the mistakes one should avoid?

Answer

It is definitely easy to buy cheap right now through a foreclosure sale. Although I have seen people pay more for a property in mortgagee sale than what is available in the market through a normal sale process.

The biggest problem is that you will not be able to resell the property in the current market due lack of demand. One solution is to buy a property let us say 20% below market value and then sell it for 10% below value so as to leave something for the purchaser and achieve a quick sale.

A better strategy in the current market is to buy and hold. Buy a few cheap properties now and rent them out for a few years. Once the real estate stabilizes you can sell them for profit.

I will not advice you to buy and flip in the current market if you are not an expert. You should wait for the market to start rising. Flipping is far less risky in a rising market. If you make a mistake increase in value of the property will cover your mistake.