- Hello, thanks for asking.
- I'm a starter investor who'd like to buy a duplex in my area where I can live in one and rent the other out. The area is fairly expensive and competitive when properties hit the MLS, so I'm exploring other options that might be available to see what might work for me. The location above is inaccurate - I'm actually looking in Chicago.
Thank you, Nicole.
Chasing pre-foreclosures is a bad idea.
Here's the thing. A seller who is in "pre-foreclosure" is almost certainly under water. If they could sell before foreclosure, they would. So bailing them out would mean overpaying for the property.
I know, it seems like, they owe $200,000 and the property is worth $250,000 - but in my experience, they haven't paid their mortgage in two years BEFORE they get the foreclosure notice, they owe closer to $250,000 with late charges, and since they've stopped caring about the property it is in such disrepair that it's really only worth $200,000.
Plus, with a duplex, you're inheriting a tenant (or two) that has come to hate landlords in general and the one who owns this property specifically, which means that you will likely have to allow the units to become vacant and bring them up to standard before re-renting them.
To my mind, you will do much better if you pursue a bank-owned property - one that has already been foreclosed on. You will receive clear title, and the price will be less than it would have been if you had tried to bail out the previous owner.
All the best,