Interested In The Possibility, But Know Nothing About It. Help A Reeeel First Timer.
Hi,
This is my first time on this site. I am saving up money for a down payment. I have a unique situation living at home without my parents present, and should have a good chunk saved by next year. Now, I don't want to get myself into financial trouble by getting in over my head. I've always been intersted in Foreclosure but I've been afraid of the baggage that can come along with it... roofs caving in, bad septic fields, water pipes bursting, etc. I need to find out what the risks are and how to avoid them. I had the thought of purchasing a foreclosure condo, as my first time purchase. Not to live in, to fix up and sell for a profit. If I had my way and the money, I would do this for a living. My thought was that the risks would be lower on a foreclosure CONDO vs. a house. Someone told me that the down payment for a foreclosure is usually 10% of what the house "should" go for.. I.E. a house that's worth $120,000 would require a $12,000 down payment. Is this true?
My other question is, if it were as easy as buying a $120,000 condo for $70,000 (or thereabouts) as a foreclosure, turning around and selling it, then why aren't more people doing it and getting very rich? I'm sure there have to be some problems preventing regular Joes like me from doing this I just don't know what they are.
My own solution to that question is that not that many people have $10,000 sitting around for a down payment, or maybe there aren't that many people willing to put forth the time and effort this type of investment might take, or, perhaps the people that DO have that kind of money just "sitting around" think this is too small potatoes.
So I hope I've made it very clear that I have absolutely no idea what I'm doing and this is a crazy idea I came up with and I'm wondering how crazy it is or if it is really not sooo crazy. 
Thank you for pointing me in the right direction! Any advice will be greatly appreciated.
Some of the reasons others aren't doing it:
Risk
Time
Up front money
There's alot to read on why you should and shouldn't buy foreclosures. Go to your library and pick up a few books.
Realize that many people are 'afraid' of doing anything that's slightly unconventional. Their fear of losing money keeps them from making money. (borrowed from RTK)
Good Luck
ok, in my humble opinion, you're in the right place to gain all the knowlege you will need. you can get all the encouragement you need, but once you learn enough to get started, you'll need courage to begin. there's risk in every venture and this is no different. consider it a 1:1 ratio. more risk = more money. no risk = no money.
i'd love to attempt to answer you, but your questions are so open (not bad questions, just very broad topics) that you'd get them answered faster by just clicking around this site. it's a wealth of info ... go to the forums button and just look at a topic, click and read. use the search tools to look for specific info.
just fyi, there is no way to guestimate or average the cost of a foreclosure, nor the amount needed as a deposit - at least in my knowlege.
when you get rich, don't forget the little people (me).
ok, first, what area are you in, I have bought foreclosures in Gerogia (Macon) where the sale is on the first Tuesday of each month and is an all cash state, day of sale by 4 pm, ( talk about competition elimination) and here in Virginia with 10% down and the rest in 10 - 15 days, ( more competitive). Depends on where you are and the local laws that apply to your area.
Second, the risk is real and imagined. Yes sometimes you get a bad deal, be diligent and research properties thouroughly and do your own research. The imagined risk is the risk of what might happen if I do this or that, well imagine what you will be like in 15 years if you don't do this. It is a great business, but as with all businesses there are risks and rewards.
Third, I have been registered nurse for 15 years, I have a JOB (just over broke), the details about the houses in Georgia, ) what a mess, can you say Probate Gone Bad- my mistake) , make no mistake, this business is work, but as I have said to my wife many times, it is the toughest, most demanding business you will ever love.
Don't be afraid, go forward, find the deals, the money will find you.
Good investing
Don
OK here's what I want to know:
I am in CT
You said that you've bought "all cash" foreclosures and also 10% down foreclosures with the rest required within a few weeks.
In foreclosures, if YOU (the investor) have good credit, you can get a mortgage, correct? The first 10% or whatever has to be in cash, but it's not an all-cash sale is it? I mean, as much as I'd love to say I have $70K to throw down on a foreclosure, I don't!
I bought some books on the subject this past weekend. I don't have that much money, I might have about $15K in savings to play with by next year. So therefore, anything I invest in has to be a small, starter transaction (hence the idea of a condo which requires considerably less to start than a house). Point being, I need to figure out what the safest course is to avoid the pitfalls, because I won't have all that much leeway.. I need the first investment to work so that I can grow my savings and eventually do bigger and better things, retire early and generally be financially free by the time I'm in my mid 30s (yeah right.)
Can anyone give me any insight into whether my idea is a good one... Going for a condo vs. a house.. and whether my instinct that that might be a little less risky is true or not?
You seem to be equating risk with amount of money at stake. As I am sure many on this board can attest to, there are extremely risky deals with a low monetary outlay and there are exteremely high dollar deals with low risk. The difference is that with more risk, less competition, less capital invested, more room for profit. Down side is that you could lose it all. Condo v. House investment also depends on whether you want to flip, rehab, hold, demographics, etc. Best of luck.
Ok here's what I'm not getting:
This is how new to the situation I am. I don't even really fully understand (yet) exactly how foreclosures work.
When a foreclosure property is sold, by the bank, they are usually selling it to collect upon the unpaid portion that the previous owner can't pay... correct?
Isn't the reason why foreclosures are usually less expensive, is because due to seizure, the property has already been partially paid off by the defaulting previous owner?
My question is... why isn't it as simple as buying a $100,000 property for $70,000 (for example), turning it around and selling it for its full value? (other than fighting off competition) I guess that is specifically the issue I'm not getting. WITH THE EXCEPTION of the property having physical damage that needs to be rectified.
For instance, if I found myself a condo that was in decent condition and didn't need a lot of work, that had been foreclosed upon. Or lets say it just needed a couple of coats of paint, a new carpet or something cosmetic... no major plumbing jobs or anything like that. Why would someone like me be fearful of a transaction like that? This is my question.
I am equating risk with probable costly pitfalls, such as major plumbing or septic problems.
This is great... I'm honing down my questions now... thank you for all your responses.. this is terrific and interesting.
I was a music and theater double major so you can imagine how much finance training I got. The first time I got finance training was when my ex husband put us about 80,000 in debt. He was an addictive spender. I was the one who paid the bills, so of course our debt was "my fault". I must be doing something wrong if we are that much in debt right? It can't be the new bmw he just bought.
To give you an idea of how I started thinking about this, after my divorce I came out of it with about 12,000 in debt and $17,000 in student loans. I paid off the 12,000 last year by budgeting myself 65$ a week gas and food money and throwing the rest of my paycheck at my debt aggressively.
Now I have a good job, only my student loans remaining, and a car loan I took out (well I had to get rid of the Hyundai with the headlight hanging out of the socket he gave me when he bought himself the Beemer.) In one year I've improved my credit score from 430 to above 650. And got approved for a brand new Honda which I've been paying on every month no problem, so that's been improving constantly.
Sorry if that's more than you needed to know, guess I needed to gloat a little.
He declared bankruptcy and his car was reposessed. He got fired. You know it's bad when your mother in law tells you your husband is cheating on you... that is how I found out, from his mom. Anyway...
This is not divorce forum.
So, I started to get interested in this field when I encountered really great professionals that helped counsel me through the worst of that, and I'm thinking of going back to school for something to do with finance. And I wouldn't mind making a buck either.