7 Distressed Property Buying Tips Investors Need to Know

Experienced real estate investors know that distressed properties often offer the best returns. New investors, however, can be reluctant to purchase these properties because of the risk involved. If you’re new to the world of real estate investing, use these seven tips to learn how to purchase distressed properties with big profit potential.distressed-property.jpg

  1. Set a Budget & Stick to It:

    You can make or break your future success by making budget mistakes right out of the gate. To give yourself the best chance of success, determine your budget long before you make your first property offer.

    Make sure that you look carefully at your full financial picture and consider any cash you have on hand, your credit worthiness and your financing options. Then, determine the amount of capital you can afford to spend on a distressed property and stick with it, no matter what temptations arise. 

  2. Learn Local Laws:

    Knowing local laws and familiarizing yourself with how foreclosure sales are handled in your county are critical steps in becoming a successful distressed property investor. Make sure you study and understand current foreclosure laws. Also, make an effort to stay up to date on any impending changes that could affect the purchase or sale of distressed properties in your area. 

  3. Look for Early Signs of Distress:

    Properties rarely become distressed overnight, and it can often be relatively easy to spot homes that are headed towards bank ownership. If there’s a particular neighborhood you’re anxious to invest in, watch carefully for any properties that aren’t being properly maintained. They may be slated for foreclosure, affording you an opportunity to snatch them up. 

  4. Cultivate Mutually Beneficial Relationships:

    Trusted mortgage lenders, home inspectors, county record clerks, zoning authorities, title agents and general contractors are critical to your long term success as a real estate investor. Network and make an effort to cultivate strong relationships with well established real estate professionals in your area. Offer ongoing business to top-notch contractors or to your favorite lender to secure discounted rates. Doing so will not only save you time and money, it will make every investment you make safer and easier than the last. 

  5. Carefully Consider the Neighborhood:

    Do your research! When looking for properties to invest in, remember to look for those that have fallen into distress in neighborhoods that are not declining. This will allow you to reap a better return on your investment. Some things to watch out for are failing businesses, bars on nearby windows and high crime rates. 

  6. Find a Trustworthy Inspector:

    A quality home inspection performed by a reputable inspector that you trust is your best defense against purchasing the proverbial “money pit”. Insist on inspecting the home, at your cost, prior to making an offer whenever possible. Most , be prepared to walk away from the deal, should the report reveal issues that fall outside your budget. 

  7. Be Ready to Jump on Hot Properties:

    One of the biggest frustrations of new investors is getting beat to the offer table by an all-cash, big wig investor. If you live in an area where inventories are limited, it’s not uncommon to have multiple offers submitted just one day after the property hits the market. How does this happen?

    Savvy investors know where they want to invest and they’re ready to pounce on properties that fit their criteria. Sometimes they’ll even put in an offer pre-inspection, because they know they can always back out if escrow turns up major issues. 

    To mitigate this challenge, you need to learn all the ins and outs of the offer process, understand all the details listed on your county’s offer form, familiarize yourself with common terms and be ready to pounce on hot properties.

Use these seven proven distressed property buying tips to elevate your real estate investing strategy!


Tip #8 – Don’t Pay Agent Commissions:

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