Florida Foreclosure Success: 5 Strategies to Spot Signs of a Hidden Foreclosure Disaster
As a real estate investor in Florida, you know that purchasing the right foreclosure property can yield a high rate of return on your investment. Finding a foreclosure property that minimizes repair costs and maximizes profit can be a bit of a challenge.
County foreclosure auctions in Florida offer a prime opportunity for investors to acquire properties at or below market value. However, there are potential challenges that investors face when they purchase foreclosed properties at a county foreclosure auction.
One of the greatest challenges of purchasing real estate from a county foreclosure auction is the property is sold as ‘sight unseen’. This means that investors are not able to inspect or appraise the property until 10 days after the auction.
If you are a novice investor, you may be wondering how you make an informed purchase if you cannot inspect the interior of the property. The good news is inspecting the interior of a property is not the only way to evaluate the investment potential of a foreclosure property in Florida. There are signs that indicate whether a property is a good investment or a disaster-in-the-making. Here are 5 strategies to help you spot the signs of a hidden foreclosure disaster in Florida.
Talk to the Neighbors Who Live Near the Florida Foreclosure
Before you purchase any foreclosure in Florida, you must practice due diligence. You need to conduct as much research as possible to evaluate the profit potential of a foreclosed property. Savvy investors know the importance of entering into a real estate deal with their eyes wide open.
When you conduct a visual exterior inspection of the foreclosed property, make plans to talk to the neighbors who live in close proximity to the property. Neighbors can offer a keen insight into the interior condition of the property and habits of the previous owners. You can also find out a great deal of important information about the characteristics of the neighborhood.
The thought of striking up a conversation with complete strangers about a potential foreclosure purchase may be awkward initially. However, it does not have to be an uncomfortable experience. When approached in a friendly manner, most neighbors will gladly provide you with an honest assessment of the house, the previous owners and the neighborhood.
Before you approach the neighbors, you should have your talking points ready. The first thing you should do when you approach neighbors is introduce yourself in a friendly manner. Without divulging too much personal information, you should tell the neighbors your full name, the nature of your business and interest in the property. Providing the neighbors with your information will encourage them to put their guards down and trust that your intentions are good.
After you introduce yourself and find out a little information about the neighbors, you should ask them for their permission to inquire with them about the property. The questions listed below can provide you with valuable information about the property.
- How long has the property been vacant?
- Have you noticed any suspicious activity since the property has been unoccupied?
- How did the owners care for the property before they experienced financial distress?
- Have there been any documented incidences of criminal activity in the neighborhood or the house?
- Has the house been damaged by a fire, vandalism or a natural disaster?
- Do you know of any flood issues that the house may have experienced?
- Before the owners left the property, did they sell any of the appliances or destroy the property in any way?
- If you have been inside the home recently, what is the condition of the property when you last saw it?
The list of questions that you can ask the neighbors is endless. You will be surprised at the facts that will be revealed by a short conversation with neighbors who live near the foreclosed property. In terms of due diligence, talking to the neighbors is the one of the most proactive steps you can take.
Pay Close Attention to Deferred Exterior Maintenance and the Neighborhood
According to foreclosure experts, there is a strong correlation between deferred maintenance and foreclosure. Many distressed home owners who are facing financial challenges are living in survival mode. They simply do not have the mental or fiscal resources to maintain their property. As a result, distressed home owners often put off making necessary repairs.
Even if you are purchasing a home that is listed as ‘sight unseen’, there are several exterior red flags that indicate the owner has neglected the maintenance and repairs of the property. Here are common signs to look for as you are conducting a visual inspection of the exterior of the foreclosed property in Florida.
1. Paint is peeling or bubbling on the exterior of the home. At first glance, you might chalk peeling paint up to a botched paint job. Before you minimize the importance of this hidden foreclosure disaster, you should investigate the matter further. Peeling paint can indicate the presence of water vapors underneath the paint. If left untreated, the water vapors can cause the wood around the house to crack. When this occurs, water can seep through the cracked wood and damage the drywall. Bubbling paint on the exterior of the property often indicates an infestation of subterranean termites. Unlike other types of termites, subterranean termites thrive in moist and dark areas. The surface between the paint and the wood is the perfect environment for subterranean termites. When these termites chew on the wood, it causes the paint to bubble, peel or crack. If you suspect the presence of termites on the exterior wood of the home, it should not be taken lightly. Termites can eat away at the wood and your potential profits by causing structural damage to the foreclosure property.
2. The gutters around the property are filled with leaves, trash and debris. Not only are clogged gutters unsightly, they can cause major repair problems that will make a home decrease in value. Clogged gutters cause water to flow into the cracks and openings of a foreclosure property. Some of the repair issues that are caused by clogged gutters are:
- Leaky basements
- Cracked foundations
- Sagging driveways
- Rodent and bug infestation
- Rotting wood
When you see a foreclosure property with clogged gutters, do not take the issue at face value. Clogged gutters can indicate that there are more expensive repairs lurking beneath the surface.
3. The roof of the property is in disrepair. One of the most expensive repairs on a foreclosure property in Florida is the roof. In fact, the average cost of a new roof is $6600 depending on the area in which the property is located. It may be difficult for the average person to determine whether a roof needs to be replaced. With a little investigative work, you can get a good idea of the condition of the roof of the foreclosure property.
- Shingles on top of the roof are buckling.
- If you look around the yard, there are random shingles strewn about the yard.
- There are places on the roof where there are missing shingles.
- The roof of the home looks worn, dry and old.
- There is a presence of moss on the roof of the house.
- The roof is sagging.
A roof that is badly worn can cause structural damage to the home. Unexpected roof repairs can be a potential disaster to your profit margin.
4. The home has a cracked foundation. The cement that surrounds a property can reveal the condition of the house to prospective buyers. For instance, cracked and split bricks are the most obvious signs of a cracked foundation. Another visible sign of a cracked foundation is the window frame has separated from the siding or brick. Depending on the severity of the issue, foundation repairs can cost up to $10,000. To get a good return on your real estate investment in Florida, it is essential that you are able to spot potential foundation issues immediately.
5. The foreclosure property is located in a good city but the wrong neighborhood. Purchasing a foreclosure in a bad location occurs frequently among real estate investors. Sometimes a foreclosure deal looks good on paper, but the wrong location can turn a potentially good deal into a hidden foreclosure disaster. Failure to research the neighborhood and the street address of the foreclosure property is a huge mistake. It is such a common occurrence that the issue will be expanded further.
Investigate the Location of the Foreclosure in Florida
In real estate investing, the location of a property is equally as important as the condition of the property. If a home is in pristine condition, but it is located in an undesirable location, it will be difficult for you to resell or rent it. Therefore, it is not a good investment.
A property’s location is important for several reasons. Location determines the future value of the property. Prospective tenants and buyers base their decisions on the location of a property. In fact, a property’s location has a direct impact on the lifestyle of prospective buyers and tenants. Here are key location features that make a foreclosure property a good investment.
1. Properties located in good school districts attract a wide range of prospective buyers and tenants. People who have children know the best way to save money on education costs is to move into a property that is located in a good school district. In fact, many prospective buyers and tenants purposely seek out homes in well-respected school districts. A foreclosed property that is located in a less-than-stellar school district can impact the number of people who are interested in the property.
2. The characteristics of the neighborhood are equally as important as the condition of the property. Neighborhoods attract people with various lifestyles and standards. A neighborhood that is noisy and busy may attract people who loiter or create disturbances. People with these qualities may not be the best prospects for tenants. If you want to attract a more socially responsible pool of prospective tenants, purchase a property in a neighborhood with people who exhibit socially responsible behaviors.
3. Investigate the foreclosure property’s proximity to businesses, leisure and schools. If you plan to rent or sell the foreclosure, the property must be located in areas that meet the needs of prospective buyers and tenants. Foreclosure properties that are located near grocery stores, shopping malls, restaurants, bus stops, gas stations and banks are attractive to prospective buyers and tenants.
When you select a foreclosure property in Florida, the property’s location should be a major determining factor. You will always have the opportunity to renovate a property to enhance its attractiveness and features. However, you cannot renovate the features of a less-than-desirable neighborhood in which the property is located. For this reason, the wrong location can be a hidden disaster for your real estate investment.
Profitability is the goal when you purchase a foreclosure property in Florida. Properties that are situated in areas with amenities, a close proximity to shopping areas, good school districts and calm conforming areas will offer the greatest return on investment for real estate investors.
Plan Multiple Visits to the Neighborhood
The atmosphere of a neighborhood can differ greatly on the weekends, at night and during the day. Before you make a commitment to purchase a foreclosed property in Florida, it is essential that you visit the neighborhood several times to get an accurate ‘feel’ for the neighborhood.
Some neighborhoods are quiet during the day, but they are hotbeds of questionable activity at night and on the weekends. It is not enough to know what the neighborhood is like when people are not home. You can get the most accurate depiction of a neighborhood on days when most of the residents are home. Here are a few things you should pay close attention to as you observe the activity in the neighborhood.
- Is there ample parking for guests and visitors?
- Do the residents of the neighborhood follow the parking rules?
- Are people loitering in the neighborhood playground or on the street corners?
- Do the streets in the neighborhoods have street lights?
- Do the street lights work properly?
- Do the neighbors play loud music?
- Are people obeying the traffic laws in the neighborhood?
- What are the conditions of the other homes in the area?
- Do the neighbors have large dogs that bark constantly?
- Do the neighbors own illegal pets such as exotic pets that are prohibited by Florida state law?
A foreclosure property in Florida and its neighborhood are a package deal. You cannot purchase a property without the neighborhood having a direct impact on your bottom line. Getting an accurate picture of the neighborhood can prevent a hidden foreclosure disaster.
Research Criminal Activity in the Neighborhood
An investment property that is located in a Florida neighborhood that is prone to criminal activities can waste your time and money. You can eliminate the hassles of purchasing a property in a crime-ridden neighborhood by researching the crime statistics before the county foreclosure auction date.
A convenient way to research the crime statistics of a neighborhood is by conducting research on the internet. Popular online sites such as Family Watchdog and CrimeReports can give you up-to-date information about sex offenders, robberies, break-ins and violent crimes.
Another way to find accurate information about crimes in prospective neighborhoods is to contact the local police station in the area. Law enforcement officers can provide you with information about the latest crime statistics near the Florida foreclosure property. Many local police departments maintain websites that provide current information about crime data and statistics.
The neighbors who live near the foreclosure are good resources for information about criminal activity in the neighborhood. In some instances, they can provide you with information about crimes that has not been reported to law enforcement officials.
Nothing contributes to a hidden foreclosure disaster like criminal activity in a neighborhood. You can prevent an investment nightmare by diligently researching information about the prospective neighborhood.
Overview of Foreclosure Investments in Florida
There are many advertisements on radio and television that tout real estate foreclosures as a surefire path to untold riches. Although investing in foreclosures in Florida has the potential to create long-term wealth, it is not a get rich quick project.
As a real estate investor in Florida, you must be focused, patient and knowledgeable. If you do not develop these essential qualities, you will surely miss the obvious signs of hidden foreclosure disasters because you will focus your attention solely on making a profit. If you approach real estate investing as a get rich quick scheme, your investments are not likely to meet with much success.
One of the tools you must have to become a successful real estate investor in Florida is knowledge. At this moment, there are millions of dollars in foreclosure inventory on the market in Florida. With each foreclosure transaction, there are regulations, profit margins, rules of engagement and strategies that need to be followed.
It is not enough to have the desire to prosper at real estate investing, you must know the rules. You learn the rules by reading books, collaborating with successful real estate investors, attending seminars and keeping abreast of the changing foreclosure landscape in Florida.
Another tool you need to have is an eye for determining potential returns of Florida foreclosures. Many novice investors rely too heavily on the price of the property to determine whether it is a good deal. In the investment industry, this is called the ‘shot-gun’ approach.
A foreclosure deal is multi-dimensional. Factors such as location, unique qualities of the foreclosure, repair costs, and long-term return on investment must be factored into the investment equation. Develop the skills necessary to view each transaction from its own unique perspective.
The final tool you must have if you want to avoid hidden foreclosure disasters is a plan. You may possess all of the money in the world to invest in Florida foreclosures. Without a strategic plan, your chances of being successful are slim.
Your foreclosure investment plan must account for all of the steps of the foreclosure process. From the time you investigate the property to the moment you rent or sell it, you need to have specific procedures in place. In addition to your initial plan, you need contingency plans because nothing ever goes exactly as planned with real estate transactions.
As you are creating your plans, consider the following questions.
- What will you do with the property if the Florida real estate market adversely changes while you are in the process of acquiring the foreclosed property?
- What is your plan if the property is not able to be sold quickly?
- Do you have enough financial resources to pay the expenses related to the property if it is not sold or leased in a timely manner?
It is great to be optimistic as you are investing in foreclosed properties in Florida. However, you need to develop strategic steps in addition to your optimism in order to thwart hidden foreclosure disasters.
Investing in real estate foreclosures in Florida requires a huge financial risk on the part of the investor. It is never a good idea to engage in a real estate transaction without researching the foreclosure property before you submit a bid for the property. By implementing these strategies, you can easily spot the signs of hidden foreclosure disasters.