Savvy Investors Profit from Rise in Foreclosure Rates

Foreclosures experienced a startling rise this year—up 72 percent since the beginning of 2005, according to RealtyTrac. The increasing foreclosure rate is unveiling a different breed of real estate “flipper” looking to turn a profit on investment property purchased up to 20 percent below market value.

“In the midst of a slowing real estate market, rising interest rates and salaries that are not keeping pace with standard of living increases, we have seen a dramatic increase in foreclosures nationwide,” said David Nilssen, CEO of Guidant Financial GroupTM. “This is not great news; however it does create opportunities for savvy investors looking to obtain properties at below market value.”
Nilssen cautioned that the foreclosure-investing process can be risky. “A great deal of research should be done to ensure that the investment is sound and clear of additional encumbrances that could affect the deal.”
Information about foreclosure properties is found in many places including foreclosure websites, legitimate third-party foreclosure listings, educational websites, private banks, auction houses, and local tax-collection agencies. The number of foreclosure listings increases every day, with the rise forecasted to continue. Foreclosures are non-traditional investment options that can provide profitable rewards when proper research is conducted.

More foreclosures emerge as interest rates climb and the 30 percent of loans that were originated with adjustable-rate mortgages significantly increase. Those faced with increasing mortgage payments are attempting to liquidate in a market where housing inventory is increasing and the buyer pool is shrinking. The softening market and the rise in interest rates and accompanying payments may spell disaster for many people who could be forced to sell at a loss out of necessity. Yet, as with most cases in investing, one individual’s loss is another’s gain. As homes become available at up to 20 percent below market value, large profits can be realized by savvy investors.
As the real estate market shifts gears, a growing number of investors are learning that they can utilize their IRA or 401(k) funds to make these types of investments. Based on IRS law [IRC § 401 (M)] it is perfectly legal to use retirement dollars for these and many other types of investments within an IRA – all that is needed is someone to setup the structure to do so. Once the structure is established, investors can gain checkbook control of their retirement funds and begin making investments that yield higher and more secure returns than those typically yielded within the stock market.

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