As you look for properties on HUDforeclosed.com, you will find plenty of great deals. But it may also seem a bit overwhelming to see the sheer quantity of homes, areas to search through, and types of homes you can buy.

How to make a decision?

Sure, if you, your spouse and two children will be residing in the property the search becomes a lot more focused. First of all, you'll be most likely searching locally, not nationwife. Most people are tied to their jobs, the children's schools, and their local social circles. This may not apply if you're ready to relocate, but even then it will be your personal preference and your lifestyle options that will dictate the home selection.

However, if you're buying to invest, and you're searching nationwide, then you'll find this article useful. 

There are basically three specific types of homes, and three specific "exit strategies" that each of these types of property is best suited for.

The first type of home is the "move-in ready" home. This home looks like a rental. The carpets may be a tad worn (or not), and maybe one or two walls need paint touchups. But barring that, the kids can go straight on in and choose bedrooms, and Rover can go play in the back yard. You can start unloading the U-Haul and bringing in furniture. That's what we call "move-in ready." This home is ideal if you're looking to do an immediate "flip" - for example if you're doing a simultaneous closing (an instance where you've found a home, found a buyer, and basically you're just helping close the deal, and your profit is the difference of what you've agreed to buy it for and what your buyer has agreed to buy it for.)

The second type of home is the "lipstick" property. By lipstick we mean that some cosmetic work is to be expected. This could include replacing some carpet, doing some landscaping, repainting the exterior, regrouting the shower or replacing appliances. These improvements are relatively easy to do, and do not involve a permit. Lipstick properties are great rentals. You buy the home, immediately advertise it for rent, and proceed to do the needed improvements. Within a month's time you can have your tenant moving in.

The third type is the ugly duckling, the one with the boarded-up windows, the damaged roof, etc. This one is the fixer-upper, and believe it or not, the one you may end up making the most money on.

This third type of home signals that no one is committed to the property, nobody is invested in it. The property has fallen into a bad state of disrepair though carelessness or disinterest. This affords you the opportunity, simply by being the one that DOES care, to profit tremendously - through some hard work and good planning.

The repairs on this home are likely to require a permit. You may gut the internal walls completely, and start from scratch. You may need to repartition the floorplan. The roof may need replacing, a new staircase may need to be put in. Let's face it, the next two months after the purchase you won't be going on vacation, you'll be hard at work revamping this place.

But somewhere between 30 and 90 days you'll have this place ready to sell. And the profit margin on this type of property can be nothing short of spectacular.

So don't be afraid of the ugly duckling. It may turn out to be the goose with the golden eggs!