The uncertainty caused by the coronavirus pandemic is sure to have a significant impact on consumer confidence, making people wary of committing to long-term financial decisions such as buying or selling a home. Additionally, weaker labor markets could lead to an increase of distressed properties on the real estate market.
Those who are in a position to benefit after the pandemic are buyers who have the financial well-being to remain active in the real estate market despite the situation, opening the potential for many purchasing opportunities at competitive prices and very low interest rates.
For investors who are searching for the best deals, distressed properties can be an ideal option. Here’s what you need to know:
What are distressed properties?
A distressed property is a property owned by an individual who is in default on its mortgage. During the late 2000s, transactions for distressed homes became increasingly common – from 2008 to 2011, almost a third of all home sales throughout the US were distressed sales.
Distressed properties are usually favored by many investors since they are often listed for sale for way below their market value.
Advantages of distressed properties
- Low price – One of the main advantages of buying distressed properties is their low price point compared to other investment properties. Because sellers are looking to make a quick sale, buyers have a significant advantage during negotiations, allowing them to get the best price possible. Distressed properties are also often listed by the lender, who has a vested interest in selling the property as fast as possible.
- Potential – Distressed properties often have a huge potential for improvement. In most cases, distressed properties tend to have a lot of deferred maintenance because the owner could not keep up with the mortgage payments. Most home buyers typically focus on a home’s current state – while some might see a property that was poorly maintained, investors focus on potential market value and growth instead.
Disadvantages of distressed properties
- Maintenance and renovation costs – Many distressed properties are abandoned by their previous owners, often requiring tons of maintenance to make it livable once again. When you’re in the market for a distressed property, don’t forget to factor in the money you’ll be spending to get it back to tip-top condition.
- Lots of paperwork – The process of buying a distressed property will take longer compared to a conventional home purchase. Many are owned by the lenders, who usually have a lot on their plate, making them unable to give the property their undivided attention.
As long as you have the budget for it and have zero qualms about possibly dealing with tedious and time-consuming maintenance tasks, buying a distressed property can turn out to be an excellent investment. Just remember to do your research, and have lots of patience when you come upon a property that could be a great option. As long as you plan ahead and make well-informed decisions, you’ll be on your way to a good investment.
If you’re searching for distressed properties, work with the top realtor in Charleston, SC today! Just get in touch with me at 843.568.1118, or send an email to robertjstaylor(at)gmail(dotted)com