Learning where to find distressed properties is a great jumping-off point, but you should know more to ensure your search is successful. After all, while distressed properties may seem like simple rehabs closing these deals can be quite different. You should have several things in place to make sure you are ready to close when you find the right property. Read through the following tips as you start your search for distressed real estate:
Choose a target neighborhood: If you don’t already have a target market in mind, selecting a neighborhood will help focus your search. Location still matters, even when it comes to distressed properties. To maximize your profit margins, the property must be in a location that could potentially attract buyers. Start with a few specific areas, and if they do not yield satisfactory results, gradually widen your search for more options.
Don’t just look for the “distressed property” label: “Distressed property” is not a common label that seller’s give to their own property. If you’re wondering how to find distressed properties for sale without actually using the word “distressed,” look for owners who are quite motivated to sell. Pay attention to how long properties have been on the market, re-listed properties, and even withdrawn listings.
Get pre-approved for a mortgage: Time is of the essence when you find the perfect property for sale. The process of buying distressed properties is smoother when you are pre-approved for a loan. If you opt to work with a private lender instead of getting a traditional mortgage, make sure you have your pitch ready to go as soon as you find a property.
Work with an experienced agent: If you have been investing for a while, you likely have quite a few real estate agents in your network. Try to find someone who has experience working with motivated sellers or working in one market for a long time. They will likely have the inside scoop on who needs to get rid of a property fast. Be careful when talking to agents, and remember that many sellers are not keen on the word “distressed.”
Get an inspection: The visible signs of neglect often aren’t the only issues with a distressed property. In many cases, there are deeper (sometimes more costly) issues that can be going on. Be aware of any repairs the property needs by conducting a thorough inspection before agreeing to purchase. This information will reveal the potential return on investment and allow you to make a more informed decision.
Familiarize yourself with the local jurisdiction: A public records search will reveal many distressed properties. That’s why it’s important to familiarize yourself with your local government. Introduce yourself to the county clerks. Learn where auctions are held, and keep a folder on your computer of any necessary government websites. Each of these steps will help maximize your overall efficiency.
Make a cash offer: It’s no secret that motivated sellers are an investors best friend. That means that there could be a little competition when it comes time to close a deal. A cash offer can give you a leg up in these situations. Many motivated sellers want to be done with the property and closing process as soon as possible. Further, in some cases, sellers will accept a slightly lower offer if it will be in cash. Keep this in mind as you look for lenders and deals.