Thanks to reality television, the “fixer upper” has become the most sought after hot topic of this decade. And while there is absolutely a time and place for this kind of property, we want to make sure that anyone we work with knows the ins and outs of this kind of property. Maybe purchasing a distressed property is in your best interest, here are a few things to consider!
The price of a distressed or fixer upper property is going to be significantly lower than those of ready to rent properties, or even an add value property, which is what we specialize in. Often the property is in foreclosure and therefore the seller is highly motivated to sell. You have the opportunity to buy in at a much lower price and after some renovations, you could turn it for a nice profit. The other scenario is that you could fix it up and shortly after you could turn a profit by renting it out at a much higher price point than it was previously rented for.
As we previously mentioned, lenders and banks are very interested in selling their properties, specifically distressed properties that will not increase in value without extensive work. For this reason, they’re often open to giving real estate investors better financing if they’re interested in buying their distressed properties. You could easily end up with a lower interest rate and closing costs. This is a great reason to consider investing in a distressed property.
I’m sure it is no surprise that if you are so eager to purchase a property that other are as well. And as we stated before, because of the thrill of the fixer upper, people are eager to invest in properties that need a little extra love. Buyers experience the opposite of sticker shock and want to jump on a good deal. A great deal of patience is required in these situations as your offers may not be accepted and more often than not, your deals will fall through because someone came in with a better offer.
Less than Ideal Location
One of the huge downside to properties in disrepair is that they are often in less desirable locations, which is why they may have fallen into disrepair in the first place. This may or may not be an issue for you. There is a pro to this point in that if you can purchase a property in a lackluster location, and renovate it to the point that it becomes desirable, you may be able to help boost the economy and desirability of the area. But you will have to work extra hard to make this possible. You will have to face the prejudice and preconceived ideas that come with the area.
Purchasing a property that requires a lot of work from the jump means that you may have a lot of unanticipated repair and maintenance costs. You won’t truly know until you get into it, but you could be dealing with major plumbing, foundation, or electrical issues that may not pop up until after your tenants have begun to take residence.
While we do not work on acquiring fixer upper properties, we are a commercial real estate investment firm, specializing in the acquisition of multifamily properties, specifically submarkets for B and C class assets. These assets give us the gentrification value add opportunity and operational efficiency that provide optimal cash flowing income to our accredited investors. We are true investment professionals who think “long-term”. If you’re interested in joining us, head to our contact page and leave your information. We will get back to you with our investment opportunities!