If you’re looking to invest in properties, you probably want to keep your costs as low as possible. After all, saving on costs early on means more money in your pocket when it comes time to sell. Buying a run-down home is perfect for investors who will fix and flip. Why spend more money on a home you’re going to rip apart anyway?
Finding run down or distressed homes saves you money and gives you an open book of possibilities when renovating the home to meet the area’s buyer demand. The key is to know which ones are ripe for investment, and which ones will end up being unsellable money pits. This is what you can expect:
What Is A Run-Down Home?
Typically, run-down homes are pre-foreclosure or foreclosure homes. In most cases, the homeowners couldn’t keep up with their financials and they stopped paying their mortgage. The bank eventually started pre-foreclosure or foreclosure proceedings, making the home available to potential buyers at a discount. These properties can represent some of the best deals available in real estate, but this comes with one big caveat.
Run-down homes usually are in poor condition, especially if the owners made it all the way to the foreclosure process. If homeowners can’t keep up with their mortgage payment, they most likely didn’t pay for home maintenance and repairs either.
There isn’t a concrete definition of a run-down home, though, so you’ll run into a variety of issues when buying distressed properties. Assess each situation individually and remember to rely on a property appraiser for a professional opinion.
How do you find the perfect run-down home for your investment needs? Try the steps listed below:
1. Look at tax records: Tax records are available to the public for free. You can check most counties ‘ tax records online today. If you find homes with unpaid taxes, chances are they are experiencing financial trouble and may be on the verge of foreclosure – a golden opportunity if everything comes together. Put the home on your radar and do other research to see if that’s the case.
2. Check MLS listings: You’d be surprised to see how many run-down homes are listed on the MLS. If you don’t know the wording to look for, though, you may run right past it or find yourself unpleasantly surprised if you weren’t in the market for a distressed property.
The most common words to look for in the listing include:
- Must sell fast
- Sold as-is
- Below market value
- Under appraised value
3. Look through bank-owned property listings: If a bank can’t sell a foreclosed home at the auction, it becomes bank-owned. This isn’t something the bank wants. They would rather get the home off their inventory fast because they aren’t in the business of selling homes.
If you come across bank-owned homes listings, you may be able to negotiate with the bank and score a great deal on a home. The less work the bank has to do to sell the home, the happier they are, so you could be doing them a favor.
4. Drive around: This may sound too easy, but it’s one of the best ways to find run-down homes. Usually, when homes are run down, they are also abandoned and are easy to spot even from a distance.
Look for the telltale signs of overgrown grass and landscaping, lack of repairs on the home’s exterior, and just an empty feeling to the home. Once you know the address, you can do some quick sleuthing to find out who owns it and/or is selling it.
5. Check out home auctions: Get on a list of upcoming property auctions and find out which homes interest you. Most banks don’t let bidders walk through the home, but you can get other information about the home just by having the address.
At the very least, drive past the home and see what you can gather about it. Then look up any records, including the tax records to see past owners, and any other information posted online about the property. You may even find it listed in the MLS from a previous attempt at selling it.
6. Work with a local realtor: Partnering with a professional real estate agent in the area who specializes in run-down homes will get you a lot further a lot faster.
Real estate agents have inside information and access to MLS listings a lot faster than you could find on your own. Plus, with a real estate agent’s networking, you may find other professionals who point you in the right direction to buy the perfect investment property.
7. Look for homes for sale by owner: Oftentimes for sale by owner homes are run down or owners in need of a quick sale. They often don’t want the expense of using a real estate agent because the profits in the home (if any) are so small.
You can tell by looking at homes for sale by owner if they’re run down or not just by driving past them. An immaculate looking home may just be an owner who doesn’t want to deal with a real estate agent, but a run-down home will have the telltale signs of needing a fast (and possibly cash) sale.
Take Your Time Looking For Run Down Homes
Don’t rush the process when looking for run-down homes. If you buy the home via an auction or as a fast sale from an owner, you may not have much time to look inside the home and make a decision.
Do as much research as you can on the home so you know what you’re getting into. If you’re going to fix and flip the home, you may not care what’s wrong with it, but what if there are major (aka expensive) renovations such as a cracked foundation or termite damage?
Take your time, do your due diligence, and make your decision carefully so you walk out of the transaction with the intended profits, and the potential to grow your investment portfolio.