Finding distressed properties is one of the many ways in which you can make a nice return as a real estate investor. You can negotiate and drive bargains with banks/lenders and make a nice return on your investment. Real estate investors are mostly looking for bargains especially in a sellers’ market and one of the many opportunities you can take advantage of is to buy a distressed property. You can purchase a property below market value and fix it to your desired standard (why pay the full price when you can get the house for less). Truth be told, Distressed properties do come with their own risk, but they can be an excellent investment when done correctly.
What you should know?
A distressed property is a property potentially or already under foreclosure /repossession. In most cases the owner is unable to keep up with its mortgage payments or maintenance, hence most distressed properties are usually found in a below standard condition or a neglected state. So why should you consider buying a distressed property, here are a few reasons:
- Price: There’s the obvious benefit of getting a property at a lower price. The rationale behind this is that homeowners who are about to be foreclosed are quite enthusiastic to get their debt paid off and as such you can get it for a price below market value. Banks and lenders are also likely to sell already foreclosed homes at a lower price.
- Profit: This is a result of the lower market price of the property. You can make a considerable profit after fixing and flipping the property and selling it at or above market price.
- A higher hand in negotiations: Due to the neglected state of the property, you have a higher hand at the negotiating table and you can use that to get favorable terms.
Finding Distressed Properties
Now that you understand the value of distressed properties, here’s a list of where and how you can find them:
- Property Auctions: You can easily access distressed real estate at a property auction, either at local auctions in a local newspaper or check out auction sites like RealtyTrac.com, Auction.com, RealtyBid.com, and Tranzon.com.
- Scout for Neglected Properties around your desired neighborhoods: A neglected home implies that the owner either doesn’t want to maintain the home or can’t afford to. Either way you either find a distressed property or a motivated seller
- Lenders: You can check money lender websites for property listings. Lenders who have repossessed properties are bound to list such properties on their websites.
- Delinquent Mortgage Payments: This represents potentially distressed properties. failure or inability to pay mortgages leads to foreclosure, and as such, you can give homeowners the option of selling to you at a discount to avoid foreclosure. You can access records of delinquent mortgages at courthouses.
- Check out REO Listings: Real estate-owned (REO)s are properties that have already been repossessed. Lenders will be looking to get rid of nonperforming properties, you may convince lenders to sell the properties to you at a discount.
There’s no definitive approach to finding and taking advantage of distressed properties but wit multiple approaches and an analytical mind, you are bound to make the most profit out of them.