Once you have purchased your first foreclosed investment property the clock starts ticking. Every month that you have to make a payment on it is eating away at your profit. Before you buy, make sure that you have a concrete plan in place as to exactly how, when, and maybe even to whom, you will sell. Soon, you will find that you have an infrastructure in place that works like a well oiled machine. You will easily be able to buy properties that become available, and it turn you will have a knack for knowing when to sell.

Understanding contract assignments is an important part of making money with foreclosure investments.  You need to know who is responsible for what aspect of the sale and what the timeline is for their portion of the deal. If not, the business of buying and selling can take much longer than necessary. Time is money and no one will be as concerned about your money as you are. It will be important for you to stay on top of what is happening and hold everyone involved in the contract accountable to their tasks. This is the only way to ensure that the transactions are completed in a timely manner.

One tool that you can use to make money by selling foreclosed properties is called wraparound mortgage. This tool allows you to create new mortgage for the buyer that includes the remaining amount on the current mortgage and the remaining purchase price amount. The new mortgage “wraps around” the current mortgage. You are still responsible for the first mortgage held by the bank. The new buyer pays both mortgages using one monthly payment.

You don’t have to sell the foreclosed properties that you buy in order to turn a profit. You can make money by holding on to the investment and utilizing the rent that your tenants pay you to pay the mortgage or use that money to invest in purchasing a new property. The properties will essentially pay for themselves. While this may not leave a lot of extra cash on the table at the present time, this is an excellent way to invest in the future, as the properties will be worth their full estimated value to you once they are paid for. One day you will be able to sell them and pocket 100% of the cash value of the property. You can’t really go wrong with this as a long term investment strategy.

Another similar option is a lease with an option to buy. This will give your tenants some incentive to stay and create a long term relationship with you. One of the most costly things that landlords face is tenant turnover. This means lost months of rent and costly renovations to meet the needs of new tenants. With an option to buy, a tenant who isn’t yet ready to buy, but hopes to be in the future, will stay long term and reduce your overhead.

If you have the cash reserves, you can also increase your  profit margin by doing seller financing. Instead of the buyer going through a bank or lending institution, you as the seller allow them to pay you over time. Of course, you are charging them interest. This means that you are not only making the principle amount of the sale, but the interest that would normally be paid to the bank will now be paid to you. If you agree with your buyer to beat the bank’s current interest rate then it is a good deal for both of you, thus earning the possibility for repeat business. This is especially true in transactions involving commercial property.

It can be a bit risky for several reasons, but some investors find short sales a profitable way to buy and sell foreclosure properties. A short sale involves a property that is foreclosed and an agreement with the lender to pay back less than the full amount owed. It can be risky because there is often no guarantee that the lender won’t seek this difference at a later date. If however, you find a deal and work with an attorney that you trust, you can turn a handsome profit by scoring short sales. This is a good way to build equity quickly.

Some foreclosure investors choose to make money, not by selling, but by buying and keeping the properties. They enter into the property management field and rely on tenants to fund their future purchases. Many properties, both residential and commercial, have great long-term property management potential.  If you own just a few this can give you a little extra income, since you’ll have to pay taxes and insurance on all the properties, but once you acquire more properties, this can be a very lucrative option.

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