Buying multi-family homes in pre-foreclosure from a mortgage company

A brief overview of considerations for buying multi family homes in pre-foreclosure from mortgage companies

If you want to start investing in real estate, one option is to purchase a multi family home. Buying multi family homes in pre-foreclosure from a mortgage company has several benefits, but there are things you should be aware of in the process.

Owners of multi family homes have been just as severely affected by the mortgage crisis and the downward turn of the economy in general as other homeowners. Saddled with more mortgage debt than they can handle, many owners are trying to prevent a mortgage company multi family foreclosure by trying to sell their properties, often for far less than the property is worth.

One advantage in working directly with a mortgage company or broker when pursuing a multi family home in pre-foreclosure is that both you and the broker will have more flexibility in terms if financing any potential purchase. While the process can move briskly, you will likely have time to arrange financing for the purchase. If you have access to cash, the purchase can be an easy one. You might also be able to work out a creative deal with the mortgage company to make up any arrears on the property and assume the existing loan.

Although mortgage broker multi family pre-foreclosures might be listed in the paper or through an online reporting service, and the property might even have a "for sale" sign out front, this does not mean that all parties have signed off on the deal. So, before a contract is drafted or money changes hands, due diligence is necessary to ensure the transaction can be completed.

First, ensure that all owners are aware of the pre-foreclosure status and eminent sale of the property. Some complexes and buildings are owned by several individuals or by a company with several owners or shareholders. Everyone listed on the current mortgage or the property title must be made aware of the property's status. A legal nightmare could ensue if an owner only finds out about the transaction after it has started or worse, completed.

Second, research the property thoroughly. If possible, learn about the rental history of the property, any complaints lodged by the tenants or the neighborhood and how long the current tenants have lived at the property. This will help determine whether the property is profitable or, at the very least, capable of covering its own expenses.

Third, request a full and thorough inspection of the property. This should include an inspection for pest infestations, fire hazards and structural problems. If possible, arrange to inspect one of the tenants' dwellings, and note if cosmetic changes need to be made such as updating carpeting and fixtures in the kitchen and bathroom. A property that needs a lot of work can require a large upfront outlay of funds, which means months of operating at a loss. However, a property which has been updated can earn more money from either new tenants or increased rent for eligible current tenants.

Finally, decide whether you want to keep the current tenants or decline to renew their leases/rents when the current ones expire. Once you know everything you need to know about the building, deciding which, if any, tenants to keep should not be an issue. Also, if you plan to live on the property, you will want to determine where and, if the space is occupied, make an arrangement with the current tenant.

Buying multifamily homes in pre-foreclosure from a mortgage company can be a very rewarding endeavor, but having the support of a qualified and experienced professional will help. RealtyNow can help you on that front by linking you with local real estate professionals who have that experience.