Distressed Property - What Is It And How To Find One?

Distressed Property – What Is It And How To Find One?

 

If you’re looking to invest your money in real estate, then you’ll be faced with an array of various options at your disposal, which may leave you confused and overwhelmed. One of the most beneficial and popular areas of investment for many real estate investors is a distressed property. Whether you are brand new to the world of real estate or are a seasoned investor with several years of experience in the game, distressed properties are a very lucrative investment for professionals.

 

It is worth noting that many real estate investors purchase and sell distressed properties these days as they are well aware of what benefits these properties can bring. Buying a distressed property could be very profitable for you if you know what you are doing.

 

If you have not heard of distressed property or distressed real estate investing in the past, now is the time to learn. This is because distressed properties serve as the main source of many of the best deals to be had on the real estate market.

 

Distressed Property - What Is It And How To Find One?

 

What is a Distressed Property?

Distressed real estate or distressed property means a property that’s advertised for sale by its mortgagee or under a foreclosure order. These properties are usually homes whose owners cannot afford to maintain them. In most cases, a distressed property fetches a price that’s much lower than its market value. Distressed homes, as the name suggests, are often in a dilapidated state and need repairs and renovation.

Distressed homes represent especially attractive investment opportunities, which is the reason they are so appealing to many real estate investors. Not only can distressed properties offer you with wider profit margins compared to traditional real estate deals, but they also represent comparatively less competition in the market.

How to find a Distressed Property?

It is worth mentioning that all distressed properties aren’t created equal. You can rehabilitate some distressed properties to produce a healthy return on your real estate investment. However, others may cost you more in the end than they are really worth. This is why it is important to choose a distressed property carefully. The good news is that finding distressed properties for sale is not that difficult. Here is how you can find distressed properties.

1.      Auctions

Auction websites are easily one of the best avenues to find distressed property listings. In case of local sales, you can easily check the daily newspaper as well. This is because, in many states, lenders are legally obligated by relevant laws to post notice of an imminent foreclosure sale. You may check several auction listing websites, like Auction.com and Tranzon.com to look for distressed properties in your area of interest. Then you can place your bid on the specific income properties that you like through the website.

2.      Check Tax Records

This is another smart way to look for distressed real estate. It is worth noting that delinquent taxes are often public record and may suggest that a homeowner is in legal or financial trouble. Keep in mind that people who cannot pay their taxes due to financial or other problems may also not be in a position to pay their mortgage. So, those with delinquent taxes might be motivated to sell their property.

3.      Drive for Dollars

One great way to find distressed properties in a specific neighborhood is to choose a particular neighborhood and then drive around and eyeball the properties there. All you have to do is drive around and look for homes that stand out from others.

Some of the telltale signs that you should look out for are:

  • Homes where the lights aren’t turned on at night
  • Properties that look different from others because they are in a state of neglect
  • Homes with yards that are overgrown with weeds
  • Faded, chipping and peeling paint
  • Broken shutters and windows in need of repair
  • Notices post on windows or doors
  • Uncollected mail and newspapers

When you come across these types of properties, make sure to note down their address so you can start digging for more information as soon as possible. Also, do not forget to speak to people who may have useful information about these abandoned properties. Neighbors, for example, can be very valuable sources of reliable information about both the property and its owner.

4.      Multiple Listing Service (MLS)

As a real estate investor, you should learn how to find distressed real estate on the MLS. While the functionality of MLS tends to differ from one state to another, investors should never overlook this important resource when looking for distressed properties.

Actually, people who know how to find distressed real estate on the MLS often easily find unique investing opportunities. However, keep in mind that only individuals with a real estate license can access the MLS. But, you still have an opportunity to work with people who have a license, such as property managers. These listings can be coded with status like short sale or real-estate owned, and this can help signal a distressed property.

5.      Probate Opportunities

In many cases, homes become distressed because of legal problems. This is why probate courts are yet another creative space to easily find distressed properties. Probate properties, or properties that are left behind because of a significant life event—such as a divorce or death in the family—often represent an excellent opportunity for investors.

In some cases, those inheriting the property might not want it. And you can take it off their hands for a good price. Also, note that networking with probate attorneys and lawyers in your target area is likely to give you an idea about folks who want to sell their inheritance.

Final Thoughts

Distressed real estate or properties are often a great deal for savvy investors. Offered at a discounted and reasonable price, these properties give you a great opportunity to add to and diversify your real estate portfolio while accumulating capital for future real estate purchases. Whether for flipping, wholesaling, or rental income, distressed properties usually offer lucrative investment opportunities in the real estate market. By combining one or more above strategies for targeting these properties, you can increase your profits.