A foreclosure occurs when a borrower defaults on a mortgage loan. As the process begins, the lender often gives the borrower ample time to repay the back due portion of the loan. However, when the borrower doesn't repay, the lender takes possession of the home. The borrower must then vacate it as they have given up all their interest in the property. Since foreclosures can often be purchased by another individual at a much lower price, investing in them can be very beneficial.
In 2005, 23% of all homes sold were investment properties, according to the National Association of Realtors. There's no question that investing in real estate can be lucrative, but it's important to choose your properties carefully to make sure you don't end up getting burned.