In theory, a property is worth what someone is willing to pay for it. As you progress with your foreclosure investments, the main question for you when considering any property is its true market value. One of the biggest mistakes foreclosure investors make is not knowing the market value of a property they are considering purchasing.

There are hundreds of books available about how to set the market value of real estate. You can be sure there are many different ways of evaluating the market value of a foreclosure investment property. You can be just as certain that the defaulted property owner will have a far different opinion from yours as to the value of his property.

One of the best ways to develop a sense of the market value of the property is to concentrate your investment area. Rather than trying to invest in properties in a 200-mile radius from your home, you are likely to be more successful by narrowing the distance. If you can shorten the radius to a few miles, you will soon become an expert on what specific home values in that area are. Sometimes it makes sense to invest only within a specific school district, county, or some other political division.

There is no reason why you cannot expand into other areas after you gain more experience as a foreclosure investor. Initially it often makes the most sense to concentrate in one small, easily defined area.

The reason is simple: The more you know, the more likely you will be to successfully acquire properties at the right price. For example, suppose that your selected investment area includes a recent townhouse development. They are mostly three-bedroom, one-and-a-half-bath units, and most sell for $150,000. With this knowledge, you know right away that a townhouse in this development with an acquisition cost of $165,000 makes no sense. One that you can acquire for $125,000 is an attractive investment.