Owning a rental property can be a great real estate investment. The monthly rent paid by tenants often covers home expenses and the surplus becomes profit for the homeowner. This makes renting out a property especially profitable if you can purchase a home at a low cost. Some of the most affordable homes are foreclosures. If you can find a good foreclosure at a decent price, this can be a smart investment over time as you can offset your mortgage costs with rental income. If you are interested in turning a foreclosure into a rental property, here are some ways to increase your potential profit.
Steps For Making A Foreclosure Rental Ready
- Find A Good Area
It’s a good idea to know which areas of the city make the most financial sense for rental investment before you start looking. Because you are renting the property out, you’ll want to find a home in an area where lots of people want to rent. For example, foreclosed homes near post-secondary institutions will be in high demand from students. Areas near business hubs or downtown will appeal to young professionals not yet ready to own. Areas close to major transit routes are a good investment for appealing to future renters. An area close to entertainment and amenities is ideal for most renters, but especially for families. Wherever you end up purchasing, ensure there is a major draw that you can use to market the property.
- Research The Market Conditions
When attempting to rent out a foreclosure you will need to research the market twofold: you need to examine the home buying and foreclosure market as well as the rental market. Ideally, you will want to buy the foreclosure during a buyer’s market, although foreclosures often tend to be more affordable than other properties at all times. You will also want to rent your foreclosure out for a good price. This will take some research into the prices of rentals in the area as well as the quality of the foreclosure itself.
- Inspect The Foreclosure
Sometimes you will have the chance to do an inspection of the foreclosure before you purchase it, but not always. Foreclosure sales move fast and inspections before purchase are not always an option, but try to at least see the foreclosure before purchasing. At some point, either before or after purchase, you will want to get the foreclosure inspected so you can know of any non-superficial repairs that are needed. Sometimes foreclosures can sit uninhabited for a while and it can cause damage to the property. Before you can rent out your foreclosure, you must ensure it is up to the standards of the Alberta Building Code.
- Renovate
After the foreclosure is purchased and inspected, it is time to make it appealing for renters. This might be as simple as adding a fresh coat of paint, making sure the locks are all brand new, and ensuring that all drains are cleared, but it could mean larger renovations as well. Make sure the home is safe and that you’ve taken precautions to make the house last. You may want to ensure the windows have a good seal, there are no faucet leaks, and that no pests can get into the home. Beyond these renovations, take steps to help market the home to the demographic you are hoping to attract. For example, if you are marketing to students, you may want to keep the home finishes simple and durable for a variety of students who will be moving in and out over the years and you should keep the home fairly neutral to appeal to the widest audience; consider painting the walls a natural tone (like ivory) instead of bolder colours. If you are interested in appealing to higher-end renters, you should invest in higher-end or luxury features. If you are hoping to attract families, you may want to focus on safer features, such as rounded corners on counters. Renovating the property you are renting out gives you the opportunity to cater to your desired market.
Finding a good quality foreclosure at a good price can be tricky. Learn How A Foreclosure Specialist Realtor® Can Help You Find The Best Deals On Houses For Sale In Calgary here.
Buy A Calgary Foreclosure With The Help Of A Calgary Realtor®
Partnering with an experienced Calgary Realtor® will ensure that you are up-to-date on the market conditions for property purchasing as well as the rental market. A Calgary Realtor® will also give you real estate advice that can help you navigate all of the legalities that come with foreclosures. To partner with Calgary’s leading foreclosure Realtor® groups, contact the Mel Star team. With over 40 years of success and experience as well as some of Calgary’s best foreclosure knowledge, the Mel Star team can help you find a foreclosure that can become a profitable rental income property. To partner with the Mel Star team or to learn more about foreclosures, call 1-403-861-9944 or fill out the online contact form.
FAQ
Typically there are two types of foreclosures. Bank owned and Judicial Sales. If you would like to find out more information about how they work and the differences between the two, feel free to contact us anytime or read Is It Better to Pursue a Judicial Sale or a Bank-Owned Foreclosure?
A pre-foreclosure home has not yet been foreclosed, but it is going to be. If you are purchasing a pre-foreclosure home, you will be buying it from the homeowner instead of from the bank. These properties can often be very affordable, as the seller has a short time frame to sell the house. Ask one of our Calgary Realtors® about the different options of bank foreclosures versus pre-foreclosure homes for more information and the pros and cons of each.
A foreclosure property is a bank-owned home that is for sale. The previous owner was unable to meet their mortgage payments, therefore the bank repossessed the home and is selling it to recuperate the money still owed against the mortgage. To learn more about foreclosures and how to earn a profit from them, read Do Calgary Real Estate Investors Need To Hire a Foreclosure Specialist?
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