Investors searching for rental homes in the Greater D.C. region might look for distressed properties because of the value they can provide. Distressed properties are often attractive to investors because they’re undervalued, which could increase your profit margin both while you rent to tenants and when you ultimately sell.
A distressed property is a home at risk of falling into foreclosure. This label means the current owner isn’t keeping up with mortgage payments and the house is in a state of pre-foreclosure. Property owners in this situation may look to unload the home at a reduced rate to escape their financial burdens.
The main issue is that distressed homes sometimes aren’t physically maintained by the owner and, therefore, could require significant repairs before moving in tenants and collecting rent. You’ll need to put some work into the home before it’s ready, which could scare some investors away.
Learning how to find distressed property that suits your needs can lead to some highly profitable real estate deals. You may be asking yourself “How can I find distressed properties near me?” You’re in luck because this guide explains the process and provides tips on closing the deal.
A Look at Distressed Real Estate Buyers
Purchasing distressed real estate is relatively straightforward, but you should be aware of your competition. These homes can come at reduced rates, so many people with the time and know-how to fix them up could be in the market. Those buying distressed real estate include the following:
Entry to the D.C. real estate market is challenging, as the typical home costs over $1 million in 11 towns and cities in the metro area. The result is many families end up in condos and apartments after relocating to D.C. Those searching for a single-family home in the region could look to distressed properties for the cost savings they provide.
Real estate investors are always digging for a good deal, and distressed properties could provide some cost advantages. Picking up a single-family home at a low price, fixing it up, renting it out for a few years, and selling it is the ultimate goal of many investors, and distressed houses can provide that opportunity. The result can be a greater return on their investment.
Real Estate Agents
Most real estate agents understand the advantages of buying distressed properties and could purchase any that look like a reasonable deal as an investment or a new residence. These agents also know how quickly the D.C. real estate market can move and have a good idea of the characteristics a profitable distressed property might have.
Distressed properties could have less competition, but multiple buyers could be interested in a home you uncover. You’ll want to be ready to make an offer as soon as you find a distressed home in a desirable neighborhood because there will be others looking for the same thing.
Seven Ways to Find Distressed Properties
Locating distressed properties and making an offer early in the process gives you the best chance of success. You’ll want to be proactive because experienced buyers will be all over properties offering significant value. Tips on how to find distressed property include:
1. Focus on One Neighborhood
There are hundreds of homes for sale in the D.C. area at any given time, so selecting a neighborhood and narrowing the search from there is advisable. Identify the part of the city you want to buy in and search for homes for sale. You can then narrow that search by price and attributes to help identify distressed properties in the area.
2. Go Beyond the Distressed Label
Sellers typically don’t tell buyers the property is distressed because it could depress their sale price. You won’t likely see the word “distressed” on the listing, but terms like “motivated seller” could appear. Other attributes of a distressed property include a lengthy period on the market or multiple re-listings.
3. Look at the Condition
Perhaps the best telltale sign of distressed property is its physical condition. Distressed properties could have peeling paint, broken windows, and poorly landscaped yards because the owner can’t afford these expenses or has given up on trying to maintain the home. You could also see mail piled up outside or unread notices attached to the home’s exterior, potentially meaning the property is uninhabited.
4. Search Tax Records
Public records can inform you of properties with delinquent taxes, which could indicate the owner is experiencing financial problems. Owing taxes could also motivate the owner to sell, leading to a lower sale price. This process will take a bit of work because you’ll have to look at available listings and compare them to the tax records.
5. Check for Delinquent Mortgage Payments
Local public records also have information on missed mortgage payments. Owners who aren’t making mortgage payments often want to unload their properties as quickly as possible to minimize their losses and avoid foreclosure, and savvy investors can take advantage.
6. Evaluate Probate Opportunities
There is potential to find distressed properties in probate court. Homes are sometimes left behind following divorce or death in the family, particularly when the person inheriting it doesn’t want or can’t afford the home. Investors can purchase these properties at reduced rates, and the seller is happy because they don’t have to deal with making listings and fielding offers.
7. Search Online
Online tools are your friend as you search for distressed property in the D.C. area. A good starting point involves using Google Street View to see a recent photo of the home, which can offer insight into its current condition. There’s a better chance of the house being available for a bargain if these recent photos show neglect.
Following a few tips can prevent you from missing out on some distressed property deals in your desired neighborhood. You’ll have to be proactive, but the effort could result in an excellent investment for your future.
After You Buy a Distressed Property
Purchasing a distressed property could put you on the hook for repairs and maintenance before moving renters into the unit. You’ll also have to vet these tenants, collect rent, and maintain the home moving forward. Working with a property manager can help.
Nomadic Real Estate offers property management services in the D.C. area. Our experienced team will help ensure your tenants are content while handling any day-to-day issues that arise along the way. Contact Nomadic Real Estate to learn more.