Foreclosure Property Types

Foreclosure properties that you should buy and avoid.

Standard or custom home as foreclosure property

In general, the following types of properties will give you better return:

"Standard size" homes (three bedrooms and two bathrooms) are the most popular.
"Custom-made" houses will be more profitable than houses with similar features.
- The value-added will be limited in a standard home, while potential is greater for a custom-made home.
- You cannot raise the price of a standard home no matter how much you have invested. You can hardly justify a higher price.
- Avoid over-investment in a standard home

Remember: Your potential buyer will not pay more than what comparable properties in the home neighborhood sell for. The only exception is a custom-made home that may not be comparable. So, don't buy a foreclosure home that does not give you a very comfortable margin over the average price of homes in the neighborhood.

Apartment buildings as foreclosure properties

If you buy an apartment building composed of 4-6-8 apartments, your profit potential goes up proportionately.

You will have more to fix up.
Savings in volume will be at work. You can probably buy and fix 2-3 sinks, ovens, etc. at a time.
- You may save money when you buy.
- You may save time when you install fixtures and appliances.

Check the following if you are buying an apartment building in foreclosure:

Good neighborhood: your rewards or risks multiply depending on the neighborhood.
Good roof, electrical, and plumbing system: these features may affect all units. Good inspection is more important in apartment buildings.
See how other apartment complexes are operating. Are they fully occupied or suffering from high turnover or vacancies?
If there are not that many apartment buildings in the area:
- Investigate and find an answer: Are apartments not popular there? Do local authorities prohibit conversion?
- Check people’s preferences. Which areas are good for apartments?

Condominiums and cooperatives (Co-Ops) as foreclosure homes

Condos and co-ops have some restrictions on buying and selling.

They have lots of rules for the residents. That’s why their values do not go up as much as single detached homes.
Check the homeowners association (HOA) fees before you buy. Some fees are prohibitive (especially those with a secured entrance, and pools).

Co-ops have more responsibilities for their owners. All other owners share the liability of one owner. Reason: Everybody owns everything!

Condos offer individual ownership where everybody has a separate mortgage. This makes it easier to buy and sell a condo. You can fix up and remodel your condo. Such activities require approval of the board in co-ops.

In general, condos and co-ops are in good shape physically. They are painted and maintained by homeowners’ association (HOA) staff and contractors.

Soundproofing, security and services are important in condos.

If you really want to buy a foreclosure condo or cooperative home insted of a single-detached home or townhouse, you will have better chances of making more profit in buying a foreclosure condominimum.

Commercial/Industrial buildings as foreclosures

This is a different ball game for real estate investors.

Property values are higher and, therefore, risks are higher.
Once you learn the basics, this may be the way to go for higher profits. You need to do more research and have more experience in buying and selling homes before pursuing this avenue.

Unless you have good experience in buying and selling commercial properties, it is a good idea to stay away from forecloosure commercial and industrial building and offices.

Stores, strip shopping centers as foreclosure properties

Investment in these types of properties may yield higher returns while posing higher risks when not leased.

It takes more experience and research to be comfortable in such investments.
Neighborhood is important in commercial locations.
Stay away from foreclosures in deteriorating commercial areas. Check crime statistics and illegal activities.