Buying Auction Foreclosures

[Brenda Reems]

It seems to me that there is some potential for buying foreclosures at auction. I am just starting out but I'm assuming, I am correct. But I'm also assuming there are a lot more downsides to this than I am foreseeing. Lets just say an opening bid is for $75,000 but the market value is $240,000. Even if you have to put another $75,000 into the property, that should still be a good deal. If you can rent it for $2,000 that is a ROI of 13% roughly. What am I missing? Sorry, I have tried finding this question on the forums but I haven't been able to find it. My plan would be to use cash and then finance later so I didn't have $150,000 tied into the 1 property.

[Cole Bossert]

You’re thinking in the right direction, but foreclosure auctions come with a few big risks that can eat into those numbers fast. First, many auction properties are sold as-is, meaning you can’t inspect them beforehand. If there’s major structural damage, liens, or unpaid taxes, those become your problem. Second, there’s competition—bidders with deep pockets can drive up the price, making it less of a deal than it initially looks. Lastly, if the property is occupied, you may have to go through eviction, which adds time and cost. If you’re going this route, make sure you dig into title research, understand local auction rules, and have a solid plan for hidden costs. Have you looked into getting access to off-market deals before they hit auction?