1. Discounted Price

The sellers of foreclosed homes, who are also the mortgage lenders, are usually motivated. They need to quickly sell the property and recoup the loan balance. As a result, they will lower their prices so as to get multiple offers and facilitate a faster deal. Moreover, foreclosure properties are cheaper because they are often in a distressed condition. They are usually sold below market value, sometimes 20% to 50% lower than other properties in the same neighborhood.

2. Equity Building

Another benefit of foreclosure investing is the buildup of equity. If you buy a foreclosure below market value and the value of all the homes in that neighborhood increases due to development, you accumulate more equity than the neighbors. Of course, there are no guarantees that the value of homes will rise over the years. However, with foreclosure investing, the odds are better. Since foreclosures are bought “as is”, they also usually require renovations and repairs. After closing on a foreclosure, you have the opportunity to renovate and upgrade it the way you want. 

3. Quick Buying Process

As mentioned, mortgage lenders are usually looking to sell the foreclosure homes as quickly as possible so as to retrieve as much of the unpaid debt as possible. Therefore, if the price is right, foreclosure real estate deals tend to close quicker than the traditional way of buying an investment property. It is unlikely for the seller to back out at the last minute. You become the owner of the property once the paperwork is done. Therefore, you can start earning monthly rents much faster.

4. Lower Settlement Costs

With foreclosure investing, you can also use regular mortgage financing. If you are buying a foreclosure with a loan, you get to borrow less money since the properties are below market value. Moreover, if you are buying foreclosed properties directly from a bank, you might be able to negotiate lower down payments and lower closing costs. Down payments are typically a serious hurdle to most new investment property buyers. Due to the lower price tags of foreclosures, smaller down payments will be required during purchase.