Buying foreclosures and renting them back to the previous owner, is one of the most best ways to make a profit in the real estate market we face today.
The number of foreclosures in this country shows no sign of slowing down for the foreseeable future and this makes it a great time for the investor, if he has the ability to secure finances or has a large amount of capital to work with.
How can so many foreclosures be a good thing for the real estate investor?This is a good question and it has many answers depending on what the investor is looking for and how fast he wants to realize his profits.
If you want to buy and hold onto your investment until the market opens up, then buying a foreclosed house at auction or foreclosure sale is a good way to go.
The market will not stay down for long, in fact experts say that it will pick up again this year.
There is however another alternative, and while it has been around for quite a while, it is just now starting to come into the limelight.
Many homeowners are looking for an investor to buy their mortgage out and then rent the house back to them for an affordable price.
Many of these people bought their homes with a sub-prime loan on the premise things would continue to get better for them, not worse.
Sadly when the first part of the mortgage that had a low payment ran out, the monthly bill skyrocketed sometimes doubling.
Suddenly their house became unaffordable, and they were left with no option but to stop making the payments.
Others have lost their high paying jobs due to layoffs and companies shutting their doors.
For whatever reason this has put a tremendous excess of homes into foreclosure and there are many people who really want to stay in their homes.
To take advantage of this situation, the investor enters into a contract with the original owner to buy the house and pay off the mortgage.
Once you have ownership, you rent it back to the previous owner at a pre-determined monthly rate, that will cover the cost of the loan you took out to buy the house, plus a margin of profit.
The other part of the deal, that makes this sweeter is that you can also sign an agreement with the new tenant that states if and when they think they are in a position to buy the home back from you, they can do so at either fair market value or a price that is set at the time of contract signing.
This is an ideal and profitable situation, for both the investor and the homeowner.
The investor gets a good return on his money while the homeowner gets to stay in his home, everybody wins.