If you believe in the investment philosophy that “profit is made when you buy property and not when you sell it,” then buying repossessed properties at below market value is the perfect investment plan for you.
In theory, you can easily gain profit when buying repossessed property (aka corporate sales) because it allows you to buy a house below the market average. After the sale, you can renovate it, then sell at a higher price margin.
But just like in every investment strategy, there are risks involved when buying repossessed properties. Honestly, I found it very tricky in the beginning, since repossessed properties aren’t always in tip top shape when sold to the public. If you’re not careful, the cost of repair can easily blow up and this will ruin your chances of turning a profit.
In order to protect your investment, you can try to do some of these checks before you agree to buy repossessed properties:
Investigate If The House Is A Real Bargain
Keep this tip in mind all the time: repossessed houses do not equate to a bargain sale all the time.
To check if you’re really buying at bargain price, you have to do 2 things. First, conduct a research on the average house price in the area. Ask around or check records if previous sale prices were higher or lower than the price being offered to you.
Second, visit the location of the house and check for any physical damage to the structure. Assess how much the repairs will cost based on the damage you see. If the total amount exceeds the average price in the area, then the house isn’t a true bargain.
Check for Vandalism and Unpaid Bills
Although it seems impossible, some homeowners intentionally refuse to pay utility bills when their home is being repossessed. In case you encounter a problem like this, be prepared to spend extra time and cash to have these utility services reconnected again. So before signing a contract, never forget to ask the seller if the utility bills are paid or not, otherwise you’ll just end up with extra work and expense to your investment plan.
Vandalism in repossessed properties is also very common. It’s normal to find repossessed houses in a state of total disarray and sometimes even robbed of bathroom fittings, boilers, copper piping, and and other furnishings! This is a big red flag, obviously, since the cost of replacing the lost furnishings is piled on to you! Remember that you don’t want repair costs to add up because it’ll just diminish your chances of turning a proift on your investment.
In conclusion, what I’m trying to say here is that buying repossessed properties below market value isn’t as easy as some experts claim it to be. The possibility of obtaining profit doesn’t just depend on how much you paid for the property, but also on the additional costs you incur when trying to restore the property in a livable state.