If you’re looking for great deals in pre foreclosure investing, distressed property can be a good way to make profits. But before you commit to anything, make sure the “deal” is really a deal. Here are three things you need to consider before you invest in distressed property:
What repairs will you need to make on the distressed property? Distressed property comes in all degrees of distress. Make sure you’re aware of the problems, as well as what it will cost to fix them. Two ways to find out about the issues a distressed property has are by asking the owner, and by hiring a licensed home inspector. It’s always “worth it” to hire a home inspector if you’re seriously considering investing in a property; all the more so if it’s a distressed property.
What is the distressed property worth? The seller will tell you what he thinks his distressed property is worth. Again, it’s “worth it” to hire a professional appraiser, who will take into consideration comparable values and sales of similar properties nearby, for a realistic evaluation of what the distressed property is currently worth in the market.
What is the best price you can get the distressed property for? If a distressed property is in the pre foreclosure stage, the owner may be very motivated to sell it for less than what it’s worth. A good deal for you is when you can get the distressed property for at least 20% less than its market value.
Now, apply the three questions above: Know what the cost of repairs will be to make the distressed property saleable, and know what you can sell the distressed property for when it’s in good repair. If you can get the property for at least 20% below its market value, repair it, and still be able to make a profit by selling it at its current market value, then you gotten a great deal on distressed property.