If you are thinking about in investing in real estate, buying a distressed property is a great way to go if you have some patience – even better if you have some cash on hand as many distressed properties are cash deals. There are some definite advantages to buying distressed properties but there are some things to be aware of as well. If you are considering this option you should be sure to talk to a professional like Welfont Reviews. In the meantime, here are some things to bear in mind.
Costs
When talking about distressed properties, the first thing we tend to think about is “bargain prices.” This is generally the case, and one of the biggest advantages of buying a distressed property is that a buyer with a bit of vision and imagination can get a great deal. However, these properties are called “distressed” for good reason. Sometimes, sadly, it is the case that it is the owner rather than the property that is distressed and in this case the property may be in great shape. More often, however, distressed properties require significant investments in order to make them suitable for resale. To some degree this may be cosmetic, but a buyer of a distressed property should know that a property may require a complete overhaul in order to be market ready. For this reason, if you are considering buying a distressed property, you need to balance a fire sale price against the time necessary investment that you will need to make. If you are “handy” or have a network of contractors that you can draw on, this might work in your favor. Otherwise, be sure to get a professional evaluation before signing on the dotted line.
Financing
If the property you are considering is in especially poor shape, the chances are that you will be able to buy it at a great price. However, this same thing makes it more difficult to secure financing as most traditional lenders will require inspections according to certain standards. For this reason, the purchase of a distressed property may be most appropriate for buyers able to pay in cash. It may also be the case that the seller prefers cash as well. Normally, the ability to make a cash offer is a clear advantage – however in the distressed property market this is more the norm. This means that you could find yourself in a bidding war with other cash buyers such that the price is driven up beyond what a property might otherwise command.
Time
The purchase of a distressed property may be more complicated than the typical property, especially if the property is in foreclosure. A good deal of paperwork may be involved as there maybe multiple creditors with claims on the property. Especially if the current owner is not a willing participant in the sale of the property, there can also be complications with respect to taking possession. Anyone considering the purchase of a distressed property should be aware of the possibility that it may take longer than expected to complete.
Purchasing a distressed property can be a great way to receive a healthy return on your investment as long as you are aware of the issues that can come with this sort of property investment and are prepared to manage them.