Thursday, October 22, 2009

Money maker for those with time and skills

With the real estate meltdown of the past 18 months, hundreds of thousands of properties have been foreclosed or are in the process. This situation, while horrible for many, presents opportunity for others. Some homes - I've seen quite a few in the western suburbs of Chicago - have been abandoned and are in need of repair. These homes can be purchased either for a primary residence or as a rental property. If a rental property is desired, take a close look at what the 'market will bear' for rent rates and ensure adequate savings to cover the unexpected costs. A formal written lease is key here too with a listing of what is and is not permissible use of the property.

Many financial institutions are sitting on properties they want to eliminate from their books. Banks are not interested in owing, paying real estate taxes or dealing with the problems associated with home ownership. This pushes banks to make 'deals' in order to eliminate their headaches. Properties can be purchased for considerably less than market value at this time. The secret here is to do your homework. Work with a real estate agent that specializes in foreclosed or near foreclosure properties. Look into property auctions by counties, banks or government entities.

This money-making model is longer-term one and provides no guarantee of definite or predictable returns. This is another reason why research is so important: Research the community, the historical price trends, demographic changes in the area, the school systems and of course, if possible, the property itself. If you find a potential candidate, but can't view the property, ask neighbors about the previous owners and what they may know about the condition.

Remember that banks have tightened the lending process and a potential buyer will need to have a fairly clean credit record and probably a down payment to qualify for a loan on a rental property. Check with local banks, credit unions, and the Internet for current rates and conditions. A good site for this is

A final note: It also helps to be handy with tools and be ready to put in plenty of 'sweat equity' time!

- A.J.

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