Articles: Foreclosure

Foreclosed homes create an opportunity for investors to not only personally profit, but can breathe life back into neighborhoods. Here's one scenario: an investor buys a foreclosed house and then makes necessary repairs and/or updates on the property. That investor then can either sell the house at a greater profit because he made the repairs, or he uses it for rental property and makes money every month that it is rented. This helps the surrounding community because the repair/update of the house beautifies the area, helping to raise the value of the other homes there. A neighborhood where the homes are attractive and occupied is more warm and inviting as a whole.

Investors of foreclosed homes can also help the economy of the community. Let's take the same scenario that we started above. The home the investor purchased is now generating money for the city or county by means of property taxes. This helps increase the tax base for road repairs, trash services, police and fire services, etc. The repairs that were completed on the property increased business for the goods and services that were used, such as home building stores and contractors.

Along with the repair process for the property, think about the foreclosure sale itself. The investor is required to use the services of title companies, real estate agents, as well as the lending institution itself.

After the sale of the foreclosed property to the investor, the lending institution will reduce their real estate owned (REO) liability. They also have the possibility of becoming the financer of a new loan.

Finally, in this scenario, when the investor sell that property or rents it to someone, there's another person(s) or family that is able to enjoy living in that property and who will increase business within that area. They become invested in the community. A beautiful neighborhood increases community pride and makes for a healthier community. A good deal for everyone.

Another thing to consider, particularly if you are in a high tax bracket, is using foreclosed property as a tax shelter. One way of doing this is the charitable donation of a conservation easement. You give the development rights to a property conservation organization, such as the Sierra Club. The organization has the right to develop it, but you still own the land. However, these type of organization don't want to develop; this is what they want to prevent. The development rights have some value and you are entitled to a charitable contribution deduction on your taxes for the value of the donation. Property taxes would most likely lower, as would the value of the property for estate taxes.

The land is being used for conservation purposes, you get tax breaks and still own the land. Good for the environment and your bottom line.