A savvy real estate investor is no stranger to the concept of short-sale properties and foreclosures. In an ideal situation, a distressed property investment results in an excellent return. However, unsurprisingly, not every venture ends up a sound deal, and an exorbitant amount of time and money is lost. The question that often arises is twofold: Is a distressed property a good idea and is now a good time to invest in it? The answer is yes. But, it may take just a bit of homework on your end. Fortunately, there are ways to ensure that you’re making an informed decision and, hopefully, gaining a fruitful asset. At Property Genius, our specialty is collecting and compiling off-market real estate data, and we have some essential tips for quickly understanding if a distressed property is worthwhile.
1. Understand the Area of Your Distressed Property InvestmentOn the surface, a property may always seem to be a profitable asset; however, if the surrounding neighborhood isn’t conducive to your goal, your earning potential may suffer. Before signing your name on the dotted line, make sure to not only spend some time in the area, but also research real estate statistics and possible hurdles (which we will reveal to you now).
2. Check on Factors That Could Affect Your Potential Buyer PoolIt’s important for your property to be financially viable to both you and your potential buyers. It’s not necessarily as simple as buying a property, putting a certain amount of work into it, and selling it for the purchase price plus renovation costs. You want to make sure that the purchase price and subsequent improvements will be in line with the comparable sales of the area. There are a few things to think about when considering a distressed property investment:
Current InventoryWhat is your competition? How many nearby homes are active listings? Are there a lot of homes currently for sale?
Recent SalesWhat are other fixed-up homes in the area selling for?
Market TimeHow long is it taking for comparable homes to sell?
3. Examine the Possible NuisancesIt probably goes without saying that the key to an income-generating property is one that is going to attract as many potential buyers as possible. There are several aspects that could negatively influence how an interested party views your listing:
- The property is on a very busy street
- There is a significant amount of road or air traffic noise
- The property is under power lines
4. Think About How Much Work You Want to Put InIt’s not unusual for a buyer to consider a distressed property investment that includes desirable amenities. For instance, in the case of a flip, features such as a pool or elaborate landscaping may add value to your investment. But, this is not a must-do type of situation! If a renovation and listing is priced right, you could still walk away with optimal profit. Amenities are not required for success. Again, just pay attention to the statistics that show what buyers are looking for!
5. Be Prepared for the ProcessIt’s a somewhat common misconception that it’s easy to find a bank desperate to offload a distressed property. On the contrary, banks tend to do all they can to recoup as much money as possible. Additionally, locating a distressed property investment may take some digging, as some banks don’t advertise on the typical channels. What’s more, navigating the lending process can be difficult since lenders are often hesitant to fund a distressed home purchase. What’s the lesson to learn here? You may have to seek out and connect with decision makers, and you’ll need to be prepared to bring cash to the table. At this point, you may be wondering how to begin deciphering all the real estate data that is required to find the right investment. Sure, an online search can get you the information you need, but you may have to spend many hours jumping from site to site. This increases the odds of missing an opportunity. This is the problem Property Genius solves! Our end-to-end research platform gives real estate professionals the ability to easily locate off-market leads and utilize state-of-the-art tools for targeted marketing. We’ve gathered and organized a vast amount of assessor data from multiple sources and put it all into one convenient location. Our system is devised of four key features:
- An easy-to-use property search tool
- An efficient marketing suite
- A dedicated real estate CRM
- Property data tracking with up-to-date foreclosure stats
Finding Off Market Real Estate Leads: Then & Now
Tips for Choosing the Right Distressed Property Investment