There are many types of foreclosures with different processes for each and this will be addressed in a future article. One thing remains constant with any type of transaction and that is making sure all costs are taken into account.

For now I want to direct your attention to what ultimately makes you money. What good does it do to find a property, work hard and end up not making any real money on the property or even worse lose money?

There are four areas of costs to consider, three are visible although not always seen and one is unseen but potentially very disruptive. Let's examine each area.

Acquisition: Price paid to the bank/seller is the largest part of the transaction but don't forget to add in the costs of closing the transaction. Costs like title insurance, proration of taxes, and a few other expenses. The real acquisition cost is the one at the bottom of the buyer's settlement sheet. Some times the bottom line is less than the purchase price depending on credits if any.

Repair Costs: These expenses would seem to be easy to calculate and they are if you don't have any unforeseen surprises. Take for example you buy a property and come to find out the front porch is shifting and the concrete porch has to be removed and replaced or it will destroy the foundation over time. You saw the buckled up drive way but the porch didn't show signs of trouble until closer inspection showed a small almost hidden crack in the basement wall running horizontally along most of it.

Was this a big replacement? Well the concrete porch was approximately 24 feet long and 2 ½ feet deep. It took a lot of concrete to replace that porch. And then there was the roof!

Holding Costs: These are perhaps the most overlooked or ignored costs of all. You may be able to buy a property with nothing down and even get the seller to pay all of the costs of closing but, what happens when the property takes six months to get ready to rent or resell? What happens when those unseen expenses crop up? If you had an hour or two I'd list them. Don't forget you have to pay for little things like the monthly payment, gas, electricity, water and a few other services.

Resale Costs: Like them or not they are a cost of doing business. Don't fight them add them into the total and see what the profit will be. No one likes to pay thousands of dollars for a real estate company to sell the property but in some cases and markets it may be necessary. So, work them in as a worst case scenario.

The Fourth Area - The Unseen and Potentially Disruptive Area - Emotions: You've heard it before and it bears repeating keep emotions out of the process. Foreclosures or Fixers have potentially large money involved and the investor can get caught up in the emotions of winning the bid, fear of forgetting something, fear of potential surprises, being pushed to make a decision because of competition.

One of the worst is being pushed by competition. You see the property, the seller is realistic on their price and there are several investors circling the property wanting to make an offer. Who cares? If the transaction is not profitable what good is it? Just because there is a lot of "room" in the deal does not mean there will be a profit. These emotions are similar to bidding on an item in an auction when the price becomes secondary and winning becomes the most important thing. Some times you have to let it go and wait for tomorrow.

Not to worry there is always another deal on the way so take your time, consider all the costs and buy the best with confidence.