Purchase Distressed Property
By Pierre Mouchette | Real Property Experts LLC
Estimating rehabilitation costs can make or break a real estate investment business, and it takes years of experience for even the best rehabbers to master the art. You can, however, expose yourself to less risk and become accurate with projections by purchasing distressed properties.
What is a Distressed Property?
These are homes that are for sale not because the owner wants to sell but because of pre-foreclosure, foreclosure, or repossession. These homes are generally offered through an auction in which the highest bidder gets the property. If the auction is not successful, then the lending party, usually a bank or financial institution, will assume ownership of the property.
These houses are offered below market value because all holding parties cut their losses. So, considering the actual cost that goes into trying to sell a house for a reasonable price, lenders want to make sure they do not have to invest a ridiculous amount of money or time trying to get that extra dollar. This equates to low prices so that the holding parties get at least some of their money back. Additionally, it also means that these properties will have to have some work to be done.
Why Should Anyone Invest in Distressed Properties?
For many people, these properties may look unattractive and have a lot of problems on the surface. But superficial issues are not a real problem to overcome. It makes so much more sense to buy distressed properties than to venture into a total rehab.
Now that you have the facts, you are better positioned to start owning distressed homes in the future. Often, the difference between a successful real estate investor and a failure is not one’s better abilities or ideas but the courage to bet on his ideas, take a calculated risk and act. Most of all, it will come down to your ability to sniff out the perfect opportunity. That means the highest chances of getting your bid accepted, the right location, and having manageable renovations. All these things factor into what makes a great deal or not.