Foreclosure Essay -- Real Estate

Recent setbacks in the mortgage and financing sectors of the economy have modified the process of real estate acquisitions. Specifically, entry take aim investors with un-established or insignificant credit memorial have experienced difficulty securing collateralized loans with competitive interest rates. This is not to say that a weak credit history was disregarded former to the real estate and bond market collapse in 2008, though, it has certainly become more difficult to attain financing for the acquire of real property.1Fortunately, the proposed scenario for this essay indicates that I, the investor, acquired $150,000 cash to purchase a upset property, which presents a unique opportunity from both enthronisation and financing perspectives. However, achieving the greatest return on my investment requires a solid financial strategy, which includes1. Defining my risk parameters, familiarizing myself with the process of purchasing a upset(a) property, and performing thoroug h due diligence, prior to engaging in the purchase.1. Exploring my financing options1. Estimating a potential return on investment (ROI)For this exercise, I will focus on purchasing a distressed property to generate rental income, as a long-term investment. Therefore, the following sections of this essay will discuss my financial strategy as is relates to a distressed real estate purchase.DEFINING RISK PARAMETERSA Brief Discussion of Risk Management Regardless of investment type, an investors portfolio must account for risk. Whether it relates to pack or real estate acquisitions, risk directly correlates to the returns one can expect on an investment. Accepting higher levels of risk typically indicates that potential returns c... ...ategy, given up $150,000, I chose to pursue an all-cash purchase of a distressed property, located in a generally stable area along the outskirts of Philadelphia. The property will possible be a two-story, 2 bedroom, tenant- occupied row home, pr iced between $115,000 and $125,000. The purchase price leaves approximately $25,000 - $35,000 cash, which I can use towards capital expenditures, and as a financial buffer in the event of tenant default. Additionally, from my knowledge of rental rates in the area, I am confident that I can collect $800 - $950 per month, which yields a ROI of 8% to 12%. My decisions were based on a logical and well-planned approach. Although accounting for risk is imperative, and success is never guaranteed, following my detailed financial and investment approach for acquiring a distressed property can maximize my present and future returns.