In the early 1970s, brownstone residences in Harlem sold for for less than $50,000. In the summer of 2013, the New York Daily News reported brownstone sales averaging $1.65 million. Real estate is generally cyclical -- prices go up in good times, and down in bad. Also, cities and regions fall sharply in and out of favor. Real estate is usually cheap somewhere: Harlem in the 70s, Detroit, Las Vegas and the California Inland Empire region in 2013. Finding cheap houses takes work and time, and buying them entails risk.
Begin the process of buying inexpensive housing by getting a loan approval from a lender. Before you begin looking, you need to know how much you can afford. Often, distressed housing sells for cash. If you don't have cash, you need to be able to close the sale quickly -- whoever can close the sale first usually gets the house, even when another buyer is offering more. Banks have no emotional attachment to the real estate they're selling, and they need to move unoccupied and often deteriorating real estate fast.
Find a real estate broker with extensive experience working directly with banks having foreclosed housing for sale. Buying bank-repossessed housing without a realtor with experience can be risky, particularly if you haven't done this before. A realtor with experience selling bank repos in your area, particularly one who already has direct relationship with one or more banks offering them, can give you invaluable advice. Buying a bank repo is often a relatively complicated process in comparison to buying a house from a private buyer.
Find houses both through your broker's lists, often provided by banks she's working with, and through the Web. Foreclosure websites have lists of available housing in your area. You can also find local housing databases online, and filter them to show only repossessed housing. Particularly when you're beginning your search, take your realtor with you. She probably won't have enough time to go with you every day, but at the beginning she can give you a better idea of the underlying value of the real estate you're looking at. Spend as much time as you can driving around and looking at a lot of houses before you narrow your search and make your first offer. It's better to miss an opportunity, than to pay too much.
Items you will need
- Internet access
- Private transportation
- Housing rehabilitation skills (optional, but helpful)
- Get the property inspected before you make an offer. An experienced residential housing inspector can find problems you may not. Tax deed sales -- sales by city or county governments of homes with delinquent taxes -- are another good source of inexpensive housing. When buying tax deed housing, it's particularly important to get a professional title search and, when possible, title insurance, which protects you if the title becomes disputed -- that is, if someone else claims title to the property.
- Impatience almost always works against you when you're buying and selling distressed properties. You are buying inexpensive real estate, but you are not necessarily buying undervalued real estate -- in most cases, the housing you buy will have a current market value in the general area you've paid for it. You will usually make money in one of two ways: by fixing up the property and offering it for sale at the market value after you've improved it; or by renting out the property until you a market upswing enables you to sell at a profit. Both of these processes take time.
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