My neighbor just short sale’d his house

I’m always looking for new investment opportunities and ways to make money and real estate has always been an interest of mine. As a 27 year old guy, I haven’t had a ton of experience in this area, but I have been involved a bit. Recently, I learned about an investment strategy that involves doing short sales on properties. What exactly is a short sale and how does it work? It’s pretty simple overall.

Short Sale

When a homeowner is having a hard time making his mortgage payment, he can ask the bank to allow him to do a short sale. With this approach, the homeowner tries to list and sell the property for less than he owes the bank. If an offer is made, the bank then gets to decide whether it wants to accept the offer and take a loss on the property. The bank writes off the rest of the money that is owed and does not try to collect the rest from the buyer.

Getting a Deal

If you are an investor in real estate, using short sales can be a way to get some great deals. You can buy a property for much less than what it normally sells for. Once you secure the property, you can rent it out and bring in immediate cash flow or you can try to fix it up and sell it for a profit. If you try to sell the house right away, you might have to wait a while if you try to list it at market price.

Risk

Although getting involved in a short sale can get you a great deal, it does come with some risk. There is always the chance that the bank will not allow the sale to go through even if you make a cash offer. If the offer is below what the lender considers to be acceptable, it may opt to foreclose on the house and try to sell it that way.

If you can get the lender to accept your short sale offer, it can be a very lucrative way to make money.