If you're looking for a new way to invest in real estate, look into non-performing loan purchases. Non-performing loan purchases allow you to invest in real estate that has entered foreclosure. The benefit of these types of investments is that you can purchase property for deeply reduced prices. Before you purchase your first non-performing loan, here are four steps you should take. These steps will help you avoid problems with your transaction.
Understand Specific State Regulations
If you've decided to purchase a non-performing loan, do your research first. You need to understand the specific state regulations. This is especially important if you plan to purchase an out-of-state property. Those state regulations may be different from the state where you reside. If you're not aware of the regulations, you may run into trouble during your purchase. For instance, some states have a shortened purchase process, while others require additional red tape.
Consider Feasibility for Multi-Family Units
If you plan to purchase the non-performing loan on a multi-family unit, consider feasibility first. The price may be right, but that doesn't mean that everything else lines up. Before you purchase, take a look at tenant history. If the unit has a history of non-paying tenants or a quick turnover of occupancy, you may want to consider another property. Non-payment and quick turnovers may have an impact on the profitability of your purchase.
Ensure Access to Original Loan Documents
If you have your eye on a non-performing loan, gain access to the original loan documents and notes. Those documents contain information that you need to have before you purchase the loan. For instance, there may be amendments to the original loan document. Or, there may be additional signers on the loan that you don't know about. Obtaining the original documents provides you with a clearer picture of the loan you plan to purchase.
Insist on a Thorough Property Inspection
If you have plans to purchase the non-performing loan on a piece of real estate insist on a thorough inspection. There may be considerable damage to the property that an inspection will uncover for you. If you need to make considerable improvements to the property to bring it up to code, those costs may undermine the overall profitability of the purchase.
If you plan to invest in non-performing loans, do your due diligence first. The tips provided here will help you choose the right non-performing loans to invest your money in.
To learn more about non-performing loans, contact a company like DeNovus Capital.