House prices in 2009 may not be showing much movement upward in places like California, Nevada, and Florida, but they are starting to stabilize too. That, along with a special first-time home buyer (courtesy of the Federal stimulus package), may mean it’s a good time to look at buying a home. Even if you don’t live in these areas, some great deals can be obtained through investing in home foreclosures, which are at a record high. Just be sure you understand that this isn’t an investment without a downside. There can be some substantial risks, as well as benefits, when you choose to invest in a foreclosed home.
The first obvious risk is that the market may not have bottomed out. However, this can be offset by the fact that you can receive up to $8,000 credit on a first home through the stimulus package. If you buy the foreclosed home as a rental, rather than a primary home, you will not be able to take advantage of that credit. Be sure to understand what it takes to qualify so that the money you spend is not later eaten up in lost equity, should prices take another dive.
A foreclosed home cannot be guaranteed to be in good condition. If you don’t understand the market, the neighborhood, or the signs of a poor buy, it’s best to leave that to someone who does. It’s a very easy thing to swoop in a think that buying a home at $1,000 is going to make you rich. Instead, it could land you with unpaid back taxes, city fines, outrageous repair or replacement bills, and more. Don’t just buy because the price is right. Make sure to do your due diligence.
If you are confident and experienced enough to take advantage of the fallen house market prices, you can stand to make a small fortune. Even if you don’t sell right away, if you buy in a good neighborhood, you can rent out the homes until the market improves, generating a positive cash flow from a small down payment.