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Are you a real estate investor hunting for the next big deal? Distressed properties might just be the perfect prospect.
In the world of real estate investing, opportunities lie where others fail to look. Understanding and identifying distressed properties can open up a goldmine of profitable deals.
In this post, we will delve into the world of distressed properties and share ten useful hacks for finding such hidden treasures. Let's dive right in!
What are Distressed Properties?
When we talk about distressed properties, we are referring to homes that could show signs of physical distress, like it needing a new roof or lacking general upkeep, or those showing signs of being in financial distress, through things like foreclosure notices, tax delinquencies, etc. These properties, often in less-than-stellar condition, are sold below market value, providing real estate investors a chance to buy low and sell high, mimicking the dynamic strategy often used with wholesale real estate and flipping houses.
The 10 Hacks for Finding Distressed Properties
Understanding What Qualifies as Distressed Property
First and foremost, understanding the concept of distressed properties is crucial. Distressed properties include foreclosures, pre-foreclosures, REOs, short sales, deeds in lieu of foreclosure, and other situations which invoke a motivation to sell.
You can also look for physical signs of distress with the property while using strategies like virtually driving for dollars or driving for dollars in real life. You'll want to look for signs like tall grass, peeling paint, gutters or roof that need fixed, or any sort of sign that indicates a slight lack of upkeep with the property.
Searching in the Right Places
Distress often comes from hardship like job loss or divorce. Hence, look out for neighborhoods with rising unemployment rates or divorce rates as these areas might have a higher likelihood of distressed properties.
Alternatively, keep an eye on the B to C-class neighborhoods rather than the A (really great neighborhoods) or D-class neighborhoods. The B and C-class neighborhoods have a higher potential for a great ROI. However, you might still be able to find houses in the other classes of neighborhoods.
Leveraging Real Estate Agent Networks
Real estate agents have a vast network and firsthand knowledge about properties in their area. Leveraging this network could lead to valuable insights about potential distressed properties before they hit the market.
Using Online Resources and Platforms
Online listing sites, foreclosure databases, and even public records can be a rich source of information for distressed properties. Such platforms provide comprehensive property information, offering investors a jump start in their search.
Making Yourself Known to Distressed Homeowners
Working with distressed homeowners requires tact and sensitivity. Reaching out to them can be a good strategy, introducing yourself as someone who can offer a quick and hassle-free sale can just be the solution they are looking for. You can reach out to theses sellers by phone call, direct mail, door knocking, or just through your everyday network.
Attending Auctions and Estate Sales
Many distressed properties end up being auctioned or sold in tax or estate sales. Attending these events can provide a valuable source of potential investment properties. Be prepared, however, for bidding wars and properties selling “as-is”.
Studying Local Foreclosure Rates
Local foreclosure rates can point investors towards areas with potential distressed properties. Counties with high foreclosure rates could have more properties sold at a discount.
Driving for Dollars: Exploring Neighborhoods
In the world of real estate, nothing can replace boots on the ground. This strategy, popularly known as drive for dollars, involves scouting neighborhoods looking for signs of distress like dilapidated exteriors or unattended lawns. It is often capable of unearthing some gems.
Using Advanced Software or Applications like DealMachine
Using real estate technology platforms like DealMachine can simplify your search. With features like property analysis, owner contact information, and an extensive real estate database, discovering distressed properties is only a click away. Not only do you have access to extensive property information you can add leads you find driving for dollars, build lists of properties, and market to them.
Expanding the Search to Surrounding Areas if Needed
Investors should not shy away from expanding their search to nearby locations. Expanding your geographical boundaries might return a wider array of distressed properties to select from.
Read more about how to do this in our guide to investing in real estate away from home.
Finding distressed properties can be a significant avenue for profits in real estate investing. The journey involves several steps, each of them demanding due diligence and patience. And remember, the key is not just knowing where to look, but looking there with the right mindset and tools!
Learn more about the importance of mastering due diligence in real estate.
Whether you're eyeing your first investment property or you're an experienced real estate investor, these hacks can enrich your approach toward distressed properties. It's time to put these hacks into action and uncover lucrative deals others only dream of!