While the Philadelphia real estate market may not be as hot as it was two years ago, real estate investors are still looking for properties to buy as rentals or to flip and sell. Buying a foreclosure is one way to increase your profit, by getting a cheaper property and fixing it up as a modern rental or to sell to a new owner.
As with any property purchase, you need to do your research before buying a foreclosure. So here are five tips that will help you start:
- Know the neighborhoods. Working with an experienced real estate agent will help you decide which neighborhoods to target. You want to know what comparable in up-and-coming neighborhoods are selling for and how any foreclosures in those areas stack up against those. That will help you determine what a property is worth and how much you should invest to make it a more profitable rental or property flip.
- Know your budget. Foreclosures come with necessary repairs. What will those cost? Do you have a crew to do them? How long will it take to complete the repairs so a unit can be ready to show potential tenants? Also, it never hurts to plan a budget cushion, because when doing renovations, unexpected problems often come up that need to be addressed.
- Visit the property. See the property yourself and have a private inspection. You shouldn’t buy a foreclosure property sight unseen. You want to know what it looks like, what the neighborhood it’s in is like (in daytime and at night). Having an inspector evaluate the foundation, water damage, the condition of the roof and landscaping needs will help you better know what your renovation budget needs to be.
- If the is vacant, how long has it been that way? If it’s been more than a few months, was it properly winterized? Again, having issues with cracked pipes will impact your budget.
- Do a title search. Getting title insurance will help as Philadelphia has thousands of homes where buyers find out their don’t have proper ownership titles. Again, a good real estate agent, someone well versed in buying foreclosures, will help you with this process.
Real estate transactions can be complex, so consulting with an experienced attorney before you sign any contracts can be very valuable. You want to protect your investment as much as possible.