Making a distressed real estate investment can be a lucrative endeavor, but it’s not without risk. Before you decide to invest in a property that is facing foreclosure or has been through a short sale, it’s important to understand what you’re getting into. In this blog by professionals at GCG Real Estate, we will teach you everything you need to know about succeeding with distressed real estate investments.
Distressed Real Estate Investments: What You Need to Know
So whether you’re just starting out in distressed real estate investing or you’ve been at it for a while and are looking to take your investment portfolio to the next level, this blog is for you! You can give GCG Real Estate a call, and we can further discuss how we can assist you in flipping properties through decades of professional experience accumulated by our experienced workers in US real estate.
What is Distressed Debt?
In order to understand distressed real estate investing, you must first understand what distressed debt is. Distressed debt is defined as a financial obligation that is at risk of default.
This can be due to the debtor’s financial situation, the terms of the loan, or other factors. When a debtor is unable to make payments on their distressed debt, they may be forced to sell the asset (in this case, the property) in order to satisfy the debt.
A distressed mortgage is a type of distressed debt that occurs when a borrower is unable to make payments on their mortgage. When a borrower defaults on their mortgage, the lender will begin the foreclosure process.
How to Find Distressed Properties
There are a number of ways you can go about looking for distressed real estate investments. If you’re wondering how to buy distressed real estate debt; the most popular methods that investors use are listed below:
Search on the MLS
The MLS is a good place to start your search for distressed properties. You can search for properties that are in foreclosure or have been through a short sale.
Real estate agents will generally walk you through the multiple listing service. GCG Real Estate suggests that you try to find properties listed for 90 days or longer as those are the sellers willing to negotiate the most!
Another great place to find distressed properties is through the tax delinquency list. This list will contain all of the property owners in your area who have not paid their taxes.
You can access this information through your local county assessor’s or treasurer’s office. Anyone who isn’t paying their property taxes is at the risk of being foreclosed and is more than likely motivated to sell their property.
Reach Out to a Bank
If you’re having trouble finding any distressed properties on your own, try reaching out to a bank. Banks are always looking to get rid of their non-performing assets (NPA).
They may be willing to sell the property at a discount in order to get rid of it quickly. Bank-owned properties (REO) are the very first to be put up at auctions. You can visit websites of different banks and find REO properties through various listings.
The best way to find potential distressed real estate investments is to drive around different neighborhoods and look for For Sale by Owner (FSBO) signs, or houses that are in disrepair. Many times, these properties will be the ones that have been foreclosed on or have gone through a short sale.
Benefits of Investing in Distressed Real Estate
There are a number of benefits that come with distressed real estate investments. Purchasing an REO property will not only allow you to diversify your portfolio but provide the potential for higher returns.
However, your seller will be the bank, and that’s not necessarily a disadvantage as the bank will more than likely clear any tax discrepancies from their end.
Distressed properties are generally a haven for flippers. If you invest wisely in renovation (which can be more depending on the condition of the property you purchased), you can definitely profit more compared to the more conventional methods.
If you’re thinking about investing in distressed real estate, make sure to do your research and due diligence first. There are a number of risks that come with this type of investing, but if done correctly, it can be very profitable. Contact GCG Real Estate to have professionals in the industry handle it for you!