All across the United States, millions are dealing with financial woes brought on by a pandemic that has catalyzed a recession reminiscent of the one we endured over a decade ago. If the complete shutdown of cities all over the country has taught us anything, it's that paychecks aren't reliable as a sole source of revenue. Sure, politicians were able to pass a stimulus bill for temporary relief, as well as the Cares Act which staves off evictions and repossessions into the early part of 2021. However, those measures only prove how economically imperiled the country was.
If you aren't investing-or even saving-then it's time for you to think about your finances in a different way. Even if you're already investing and feel like you're in a great place financially, there's nothing wrong with a little consideration. One of the most common ways for people to invest is in real estate, and for great reasons. Even if a property loses some-or even most-of its value, it will always be valuable, as people need places to live. Investing in foreclosed properties is a great way to get into the game if you're working with a limited budget, but keep reading to get some info you'll need beforehand.
What is foreclosure?
Even though foreclosures have been around as long as mortgages, it's a term that grew new meaning in the U.S. after the 2008 recession and housing market crash. Foreclosure is the process by which a lender repossesses a property that's in default and attempts to get what they are owed on it. In other words, it's the liquidation of a property.
Oftentimes, homeowners lose their homes in the foreclosure process because they don't even realize that they have other options at their disposal. According to Nick Thompson-a foreclosure bankruptcy attorney in Louisville, KY-your first responsibility is to yourself and your family, not the creditors and lenders.
Once your mortgage lender begins foreclosure action against you, then you need to take action yourself in order to protect your financial interests. A foreclosure defense attorney may be able to help you to get a more amicable deal in lieu of foreclosure.
Investing in property is an excellent way to diversify your portfolio.
Because of the volatility of the stock market, it's a good idea to have a diversified portfolio with different types of investments, from commodities and stocks to investments in startups and small businesses. Buying properties through a foreclosure sale is a savvy diversification strategy that could help you to build long term wealth if you stick with it.
The reason that financial advisors stress diversification in investing is that you want to have various streams of revenue and all of your wealth won't be tied into one market or investment. It's kind of like investing by the adage of not "putting all of your eggs into one basket." The wisdom behind diversification is that the more widely spread your investments are, then the more impervious you'll be to stock market crashes or other types of economic catastrophes.
You need a buying strategy.
One of the things that makes Tulsa such a great place to live is that the cost of living is amenable to just about any budget. It's a rare big city in that its cost of living is below the national average, and it has a small-town feel from a cultural standpoint. With so many people moving to Tulsa County in recent years, presumably to be nearer to work in Tulsa, it's a great place to be a real estate investor.
Even though homes in foreclosure tend to be cheaper, buying a home in foreclosure is still a far cry from buying furniture or an appliance, meaning most people can't pay for the home outright. If you can't afford to pay for a home out of pocket, then you'll have to take on a mortgage to cover the cost of your property. To get a good interest rate, the rule of thumb that you should have a credit score of 750 or higher. Of course, the higher your credit score is, then the lower the interest rate will be on the mortgage.
If you're already a homeowner, then another option you have at your disposal is using the equity in the home to buy a house in a foreclosure sale. You may not be able to get a loan that's large enough to pay for the property in foreclosure, but you'll get enough for at least a down payment.
Never make a blind purchase on a foreclosure.
Investing in a foreclosure property is an excellent way to add diversity to your investment portfolio, but that's only true if you make wise investments. One scam that has taken off in recent years with the increasing popularity of flipping foreclosures is crowdfunding distressed properties, as well as properties going through the foreclosure process.
Con artists rope people into their big real estate development schemes by telling people that they're heading up a mutual fund to either restore condemned properties or purchase foreclosures. After investors fork over their hard-earned cash, the "mutual fund manager" just disappears into thin air. There are legitimate project managers who use crowdfunding for investment and restoration purposes, but you should never invest in such a project without first seeing the property and the deed to it.
Every previously owned home is a fixer-upper.
While some homes on the market need more work done on them before they're ready for residing, any home that isn't brand new is a fixer-upper. If you want to get a high return on your investment, then you have to put in the work to make your property appealing.
As mentioned before, in recent years, there's been an influx of people into the Tulsa area because of the bustling job market, low cost of living, and friendly real estate market. However, you can't expect Tulsa to do all of the work for you. You took the first step by purchasing your investment property, but getting the highest return possible will require you to do some remodeling.
Even if you know a little bit about carpentry, it's best to leave your home renovations up to a pro, if you aren't one. The money you save by doing it yourself may eventually have to go toward undoing what you did, if it goes wrong.
Whenever you buy a home that's in foreclosure, you want to make sure it's a better place when you sell it, than it was when you purchased it. You may even want to get the advice of an interior decorator before you start repairing and beautifying the place. Remember, when remodeling an investment property, you have to put your personal tastes to the side and think like a real estate investor, meaning you're renovating with future tenets and homebuyers in mind.
Property is far from the only diversification option you have. However, before determining in which direction you want to go with your investment strategy, take a thorough look at your entire portfolio of investments. You may find that through asset allocation, you can shift some of your investments around to get the highest return possible on your current investments.
Some other common alternative investments that are great for diversification purposes are commodities like gold, silver, and oil. Before you make any large investments, it's wise to speak with a financial adviser to get an idea of the best way to diversify your portfolio-some advisers even offer a free consultation on your first visit.
