Investing in distressed homes is a great way to purchase real estate for exceptional prices. Real estate investors can make a lot of money flipping these homes for a profit or renting them out to tenants (after renovations and repairs).
However, there are some risks involved when looking at a distressed property. If you don’t have experience in this market or invest in a home that’s in worse condition than you anticipated, you could find yourself in a sticky situation.
We don’t want to see that happen to you. Keep reading for the top four things to look for if you’re in the market for distressed homes.
Table of Contents
Water Damage and Mold
Water damage is one of the most destructive and expensive types of home damage. It can cause a myriad of issues, which include:
- Drywall rot, bubbling, and discoloration
- Ceiling damage and discoloration
- Wood and structural rot
- Mold and mildew
- And more
In many cases, excess moisture in a home will also attract pests. Furthermore, unattended water leaks and excess moisture can lead to toxic mold growth, which can be harmful to your health.
Health and Safety Hazards
When investing in distressed homes, hire a professional home inspector to identify any dangerous or hazardous issues. This can include things like weak floorboards, compromised structural supports, dangerous pest infestations, unsafe electrical issues, lead paint, asbestos, and more.
Investing in real estate with these types of issues may not be worth your time. The necessary repairs just to make the home liveable may consume too much of your budget.
Foundation Issues
During the inspection of discount homes, the inspector should verify the integrity of the foundation. Certain foundation problems can make a home impossible to repair and sell.
Fortunately, if you invest in a home that turns out to be too much work for you, you’re not out of options. For example, there are cash home buyers that buy properties in any condition. Check out www.brothersbuyhomes.com to find out more about your options.
The Current and Potential Property Value
Distressed homes are attractive to real estate investors because they are acquirable at super low costs. However, you have to plan ahead to make sure your investment pays off.
First, work with a contractor to estimate the costs of the necessary repairs and renovations. This includes anything extra you want to do that will add value and appeal to the home.
Based on these updates, how much will the home be worth once completed? Is this figure large enough to justify your investment, time, and efforts? How much revenue will you earn when all is said and done?
Remember, you also need to think about the other costs involved, which will include:
- Contractor fees and material costs
- Realtor fees
- Closing costs
- And more
If the final price tag on the home is worth your investment, you have a green light. Otherwise, think twice before buying discount homes.
Are You in the Market for Distressed Homes?
There are a lot of questions you need to ask yourself before you invest in distressed homes. As you can see, it’s easy to get in over your head with these types of properties. Follow our guide to make sure you’re making a sound investment.
And if you’re looking for more real estate advice or investment tips, you’re in the right place. Before you go, take a look through the rest of our blog to find other articles that can help you build your wealth.