Foreclosure Investment

Foreclosure investment means buying property from a distressed owner, at the foreclosure auction, or from the lender afterward. Each stage offers a different discount and a different level of risk, and all three feed the buy step of the BRRRR method with houses that need work.

Before the auction, an investor can buy directly from an owner who is behind on payments, sometimes in a short sale that needs the lender's approval. At the auction, buyers usually pay cash within a short window and may not see the inside of the house. After the auction, the lender sells it as real estate owned.

Auction purchases carry the most unknowns: occupants who have not left, liens that survive the sale, and repairs nobody could inspect. Rules on redemption periods and which debts are wiped out vary by state, so a title search and local advice come before the bid.

Further reading: Foreclosure Investment on Wikipedia.