Foreclosure investing remains a highly profitable market as long as you know what you’re doing. When you do it correctly, online investing in foreclosures opens an enormous market where you will find the best deals. Many of the online sellers are big investors that bought foreclosures in bulk. They are wholesale flipping their inventory. It’s not uncommon for many of these to sell for as little as $10,000 to $20,000.

Being successful at investing in online foreclosure property means knowing and managing the risks. You’re bidding sight unseen on these properties other than the hand chosen pictures the seller serves up to you. You need to factor potential and real problems into your bidding strategy.

• The property is sold “As Is”. If the roof leaks, you can’t go back to the seller demanding repairs.
• Many states have a redemption period anywhere from 10 to 700 days. Hardly anyone ever redeems their foreclosed property but you might not be able to take possession until the redemption period expires. The most commonly redeemed property is farmland when the farmer is able to buy the property out of foreclosure when the crop comes in. Don’t bid on farmland and know the redemption laws in the state you are investing in.
• Another strategy around redemption periods is buying the redemption rights from the previous owner for a few hundred dollars.
• Know what you are bidding on. Some online auctions are selling the mortgage or liens rather than the property itself. It doesn’t make much sense to buy a mortgage that is in default unless you plan to foreclose on it.
• Previous owners become bitter when they are foreclosed on. It’s common for them to strip the house of everything including the kitchen sink.
• These aren’t courthouse step sales that require full payment in as little as 24 hours. However, you aren’t going to have much time to find financing after you make the purchase. You need to have it lined up before hand or risk losing both your deposit and the property.

Here are some things you want to do to reduce your risks before bidding for online foreclosed properties. Do some research of the business conducting the auction. Go to the “About” page to learn as much as you can. How long they’ve been in business and if they have a street address or use a P.O. box?

If they require an up-front deposit, make sure it’s with a reputable escrow company rather than with the business running the auction.

Start your research as far ahead of the auction as you can. Know the real estate prices in the market you are considering investing. Because the foreclosure process is complete, no one should be living in the house. You may want to have it inspected before the auction is held. Also, do a title search to make sure the seller has clear title.

Add up all the expenses you can identify it will cost for you to turn your investment into a profit. Definitely have an exit strategy before you buy. Are you going to flip it to a rehabber? Turn it into a rental? Repair it yourself and sell it for retail? If you don’t know how you’ll make your profit, you can’t calculate your expenses. Only when you know how much you will profit can you determine how much the property is worth to you and what your maximum bid will be.