Is Real Estate Investing In Distressed Property Worth The Trouble?

Real estate investors come across all types of different types of properties -- from

new luxury homes to abandoned shacks; and the sale prices will normally reflect the overall condition of the home. With so many homes currently on the market, the competition is tough in real estate as everyone wants to make a deal. There is one specific type of real estate that is often overlooked, but sometimes can be the pot of gold at the end of the rainbow. This is distressed property. While it may not be for every investor, if you find a diamond in the rough you might want to take a second look, but first ask yourself, is real estate investing in distressed property worth the trouble?

When most people look at property they take it at face value. If it's not "pretty" enough, they immediately cross it off the list of possibilities. For the smart real estate investor, the first thought that crosses their mind is "what can this become?" These can be minor things like 60's wallpaper or pink bathroom tiles or major things like in the case of a home that's been totally abandoned and the roof is falling in. The word "Distressed" has different meanings for different people, just as "it needs work," can be interpreted in a number of ways.

Will the Rehab Be Worth the Effort?

When considering purchasing distressed property, you first must determine what condition the property really is in. Minor cosmetic changes such as wallpaper or new countertops and cabinets may not be a big deal, but when it comes to electrical updates, plumbing problems, or structural issues, then you have to get out the calculator and see if it will all add in the end.

If a property is abandoned because of foreclosure, chances are there is not much work that needs to be done, but for the little house with broken windows and old shingles falling out, is it really worth it?

Before investing in any type of property, make sure you know how much it will cost in repairs -- not your calculations, but true estimates from a contractor. Everyone knows that there are often hidden problems that you don't discover until you start working; you don't want your budget to go out the window because you didn't do your homework.

This is not an impossible feat. If you can find distressed property that requires work, but is in a nice neighborhood, and you know you can make a profit, go for it. It is critical that you make certain you can afford to rehab the home, even the possibly unexpected problems. If you're confident in your decision, go for it, but if you have any doubts, hold off until you can assess the situation further. If you have unanswered questions about a particular home, turn to your peers or someone more experienced for advice.

by: Tasha Gill

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