Should I Invest In Local Distressed Properties For Sale?

If you’re thinking about buying a home in your area, chances are you’ve seen some distressed properties for sale. A ‘distressed property’ is a property that for one reason or another is being sold by the financial lender and not the owner of the property. This is likely due to foreclosure, and the owner/inheritor of the property cannot afford to pay the mortgage or other financial obligations. 

Distressed properties are attractive to buyers because they are typically priced below market value. This allows people who wouldn’t be able to afford to buy into a neighborhood an opportunity to do so. 

Here’s the thing: buying distressed properties and making them beautiful homes is not all that simple. If it was, everyone would do it! 

In this article, you will learn about the challenges of buying a distressed property. This blog will help you make a better-informed decision before jumping into a big real estate commitment.

What Does “As Is Where Is” Mean For Me?

The term “as is where is” is a clause that most would be unfamiliar with unless you’re involved with real estate, or real estate law. In real estate transactions when the buyer is purchasing ‘as is where is,’ they are acknowledging the sale is dependent upon the seller not making any improvement/modifications to the property. 

The condition the property is in is how the buyer agrees to receive it. This is one of the reasons distressed properties are sold under market value. The seller or lender may wish to offload the property quickly and not invest money into it. They do not want to invest capital to make the property attractive to homebuyers on the real estate market. 

If you’re looking at a home and one of the conditions of the sale is that you accept the property ‘as is where is,’ be ready to put lots of work into the property to get it to a liveable state.

Thinking about buying a fixer upper? Read our blog to understand the 4 Things You Need to Know About Buying a Fixer Upper!

If I Buy A Distressed Home, What Do I Need To Know About Home Renovation?

If you do plan on moving into the distressed property in question, or desire to make it desirable enough to flip on the real estate market, you will need to have a basic understanding of home renovation. 

It Is NEVER a good idea to purchase a distressed property without any idea of how you plan to renovate or develop it. First, you’ll need a holistic view of the complete financial commitment and risk you’re making when buying a distressed property. Second, you’ll need a strategy for either renovating the property or developing it for sale.   

It is not advised to invest in a distressed property without consulting an expert to give you advice on the unique property situation. 

What Risks Should I Consider When Looking At Distressed Properties For Sale?

When considering buying a distressed property, consider the following questions before taking the plunge:

• Can I Afford To Do This?

It’s remarkable how many people underestimate the financial requirements of investing in property. It’s hard to blame them, all you see on TV now is home renovation and home improvement reality shows! Spoiler alert! It’s not as simple as they make it look on TV.

You’ll need to consider the costs beyond the closing price. There are taxes, fees, lawyers, municipal responsibilities, and all of that is before any work is put into the home! Unless you purchase through an off-market sale.

You”ll need to have an air-tight financial plan before purchasing a distressed property. There is much upfront investment involved, and lots of UNFORSEEN investment needed. 

• What Is My Goal For This Property?

It’s not enough just to want to own property. Before investing in a distressed property, you need to reflect deeply and ask yourself “What do I want this property to be to me in 1 year? 2 years? 20 years?”

Are you buying this property to flip on the real estate market? Do you have the financial backing to wait for it to reach a profitable selling price? Are you prepared to invest enough in the property to make it attractive to hopeful homeowners? 

Are you buying the property to make it into your future home? Do you have the skills and knowledge to make the property your dream house? Would you need to hire a contractor to get the house to a place where you desire to live in it? Can you afford to invest money and sweat equity into the property?

These are VERY important questions you should be asking yourself before even humoring the idea of purchasing a distressed property. 

• When Things Go Wrong, Can I Handle The Stress?

The goal here is not to instill fear into those who wish to purchase a distressed property, but make them aware that acquiring a property always involves risks. 

Something will inevitably go wrong. Ask anyone who has ever purchased a property or home — there’s no such thing as a perfect real estate transaction. But that’s ok. The question becomes “Am I confident enough in myself and my resources to handle the difficulties of transitioning a property?” 

If you are willing to put in the work, time, sweat, and yes sometimes tears, then a distressed property can be a blessing. 

Growing Edge Properties specializes in helping people comprehend their unique property situation and help make the best decisions to transition the property effectively. 

Please contact us with any questions.