"Housing Play the Rebound"  was the title for an article in the recent Investors Guide 2013 issue of Money magazine.  Well-written and informative by Lisa Gibbs,Play the rebound - real estate investing it reviewed the various ways that investors can profit from the American housing market, as it is unquestionably coming back.  While it may seem paradoxical, investing in foreclosures is an ideal way to profit.

 Even though the US real estate market is recovering from The Great Recession as covered in Gibbs' Money magazine piece, there are still millions of properties in foreclosure. That means there are many opportunities to profit for those willing to passively invest with a long term approach.  This is especially true in the Chicago market, which has an ideal combination of higher prices and stronger sales.

Passively investing for the long term puts time on the side of the buyer.  It is impossible to time the market, no matter what the asset class.  Research reveals that those trying to day trade or otherwise speculate almost always end up losing money.  But, over the last 200 years, real estate has created about 90% of the world's millionaires.  There is no reason to expect that change.  Passively investing in foreclosed properties for the long term will position buyers to gain from that historic trend.

To increase the net profits, the foreclosed properties can be held in a retirement account, such as an individual retirement account (IRA).  When an asset is part of a retirement account, the investment income is tax free.  So are any profits from selling the asset.  If a foreclosed property was bought and then rented out, the rental income would be tax free.  Should the foreclosed property be sold for a gain, there would be no taxes on the profit.

There is also risk management when real estate is in a retirement account.  Properties in a retirement account cannot have a mortgage.  From that, there is no chance of missing payments and losing the property. Mitigating risk like that is important in all investing.  If it had happened before, the property would never had gone into foreclosure.

But there is more to investing in foreclosures than just selling at a price higher than that paid, along with the associated expenses.  Through foreclosure investing, entire neighborhoods are revitalized.  What was once a blemish on the block becomes someone's new home, with "pride of ownership for all to see."  In this way, a city comes back to life: house by house, block by block, neighborhood by neighborhood, community by community.