Finding right properties is the key of real estate investing. Many experienced investors know all the advantages of purchasing an abandoned property – and you should learn them, as well!
If you are looking to find affordable investment properties, you should consider purchasing an abandoned property. Sure, abandoned properties likely require a lot of rehab and you can’t just instantly resell or rent them, but they can end up being very profitable.
There are numerous reasons why a Milwaukee property can end up abandoned. Owner death, divorce or bankruptcy are just some of the reasons why a house may end up vacant. Abandoned properties are usually easily noticeable due to overgrown vegetation, broken windows, or even some other damage on the outside of the house. These properties usually remain vacant until the owner or the mortgage lender sells it.
If you are having second thoughts about investing in an abandoned property, here’s why that might be a good idea.
1. They Are Affordable
On most occasions, no one plans on keeping an abandoned house, and an average person doesn’t have the time or the money to rehab it. At the same time, owners probably don’t think they’ll ever be able to find a seller for it. This is why they are willing to give it to you at a lower price. Even if that wasn’t the case, the rules are simple: The worse the state of the property is, it’s has less market value. If you can afford to invest in it, an abandoned property can bring you high return of investment.
2. You Know Exactly What to Fix
When you purchase a property that seems to be in a good condition, there are high chances you might miss fixing something. With abandoned properties, you can typically easily see all the things that are wrong with it and you can calculate the expenses ahead. Since no one maintained that house for a while, there is a small chance some major issue has been hidden. Sure, there will be many expensive repairs, but at least there will be no surprises and you will be able to plan your expenses ahead of time.
3. The Satisfaction of Repairing It
If you are a creative perfectionist, this advantage alone might be enough for you. There is nothing that can make you feel as accomplished as when you look at a brilliant, new house that was in ruins before. The results of a good makeover can truly be astonishing. Not only that, but if you manage to pull it off, the before-and-after images can have a great positive impact on your entire portfolio and you will be the talk of the neighborhood. And who knows, your newly rehabbed home might even raise the value of other properties in the area!
On the Other Side…
Buying an abandoned property isn’t a good idea for the investor who doesn’t have the time or the money to invest in it. Also, some vacant houses may be a true pain in the neck to repair and the process itself may cost you more than you can afford. The problems aren’t always physical, sometimes there are legal issues regarding the property. For example, you may find a clear title or path of ownership, or the owner might not be willing to sell it just yet. If the house is too rundown, sometimes even the professional inspection can’t notice everything that’s wrong with it at a first visit.
Checking up on the background of the property is always important, but this is especially true when you have an abandoned house in your hands. It isn’t rare that you purchase a house, rehab it, then realize there are some titling issues that prevent you from selling it. This can end up costing you thousands on holding costs.
Also, the inspection needs to be more detailed compared to standard homes. It isn’t rare that the foundation or the structure of the property is damaged. Before making the right offer, insist on ordering a professional inspection so you can count in the repair costs before making an offer on the house. On some occasions, it isn’t rare that the repairs end up costing more than the house itself. Unpredictable expenses are also common, so you should count that they’ll happen. If you’ve calculated the expenses, add 15% to 20% more on top of it, in case you end up needing to act quickly. Only then you can calculate the true value of the property.
Investing in an abandoned property is difficult, and not everyone can do it. However, if you have the finances and the will to start from the square one and create a dream house, you should definitely go for it. The satisfaction of selling a house that you have brought to life can hardly be measured with anything else. If you are looking for a great fix-and-flip deal, investing in an abandoned property is a great idea – just remember to keep your eyes wide open!