Real estate investors everywhere are on the hunt for distressed properties. The demand for investment properties has decreased the supply to the point where they can be challenging to find. It’s a good idea to understand the role distressed properties play in the real estate marketplace and have a few tools for locating them.
What are Distressed Properties?
Simply put, a distressed property is not being maintained by its current owner. It may be in physically poor condition. It may be in good condition, but the owner is in danger of foreclosure. There are many reasons a property may be in pre-foreclosure, such as divorce, the owner’s death, or a poor economy that results in job losses.
Resources To Find a Distressed Property
A distressed property can be a real bargain for the savvy real estate investor. Finding one can get a little tricky due to all the competition. However, there are a few resources that any investor can try, including:
- Tax Records: Delinquent property taxes are a matter of public record. An owner who can’t pay their taxes may be happy to sell.
- Delinquent Mortgage records: You can find these records at your local courthouse. Owners behind on mortgage payments may want to unload the property.
- Probate Court: This is where you find the real estate that no one wants to inherit. You can approach heirs about selling the property at a lowball price.
- Bank-Owned Listings: When the bank repossesses homes, they are usually eager to get rid of them for a fair price.
- Multiple Listing Service: The MLS is used more often for traditional property listings, but distressed properties are also sometimes listed there. Look for short-sale properties or listings that have been on for 90 days or more.
- Drive-By: Pick a neighborhood you’d like to invest in and drive around. Look for houses that show signs of neglect, such as overgrown yards and peeling paint.
Visiting a Distressed Property
You can’t visit all distressed properties. Some are still occupied, typically pre-foreclosure homes, and the owner may not want you traipsing through. At a minimum, you can drive through the neighborhood and park on the street for a look.
If it is unoccupied, you may be able to walk the grounds. If a realtor lists it, you can tour the inside. However, if you are scouting for distressed homes that are not yet listed, you will likely have to purchase without seeing the property’s inside.
Pros & Cons Of Buying Distressed a Property
The obvious advantage to purchasing distressed property is the price. You can often negotiate a great deal well below market value. This gives you a high potential for a nice profit when you flip the property.
The cons are numerous and include the following:
- You may have to buy the property sight unseen.
- The repairs may be much more significant than you estimated.
- It may sit on the market for a long time before it sells.
- The fix and flip market is competitive.
Fixing & Flipping A Distressed Property
To have a successful fix and flip experience, keep a few key things in mind. First, choose a neighborhood that buyers want to live in. Second, know how much it will cost you to borrow the money for the purchase and the renovations beforehand. Third, get inspections if you can, and at the very least, look in the windows.
Lastly, be prepared for the repairs and renovations to go over budget. Distressed houses can be neglected for years or even decades. You might find severe problems inside the walls. Be generous with your repair estimates. Hire contractors who are experienced in older and distressed home repairs.
Buying a distressed property takes more work and due diligence, but the financial rewards can be tremendous. With help from companies like BatchLeads, you can take steps to begin your real estate investment journey.