Large Number of Foreclosures - Warning Sign or Opportunity?

[Terry Hughes]

Looking at a property in east Houston, in a small area (say 1 square mile, but is outside a flood plain), where out of 13 Zillow listings, 7 are listed as foreclosure or auction. All of the homes range in price from mid 80's to 120. For one particular property the numbers look good and the property pictures don't look terrible, would probably require 15-20k of rehab. So an 85k purchase would require say 15k of rehab plus closing cost and have an ARV of about 120. Rents are about 1250. What would you look for before moving forward? Area schools show "average". Area crime shows "low". Would one say the large number of foreclosures are due to economic hardship or something else? I guess one way to get a better picture of what's going on, is to "walk the area" and talk to people. Other thoughts?