The moment when you find that hidden gem of a deal, it’s as if everything has aligned just right for you. The numbers work out, you’ve done your due diligence, and have an exit strategy in mind for it. While all deals aren’t like this, there are a few types of properties that are favored when deciding on an investment property.
The key to a good property to invest in is a good, motivated seller. Sellers who want or NEED out of the home are more willing to take a lower offer. There are 3 types of homes that almost always involve a motivated seller.
– Vacant Properties
– Distressed Properties
– Properties in Probate
In most cases, there’s no emotion connection to the property. There are various reasons why it’s now vacant but the point to make is that the property is costing the owner money (and obviously not creating cash flow or a roof over someone’s head).
Vacant homes lead to the next type of property, which is a distressed property. The longer a home is vacant, the more likely it is for it to be distressed. Without routine maintenance and upkeep, it’s a big unknown of what’s falling apart and what needs repair.
If a property is distressed, there either isn’t enough money to maintain it or there isn’t enough care and love invested in the property. Distressed homes can be in need of extensive repairs or could possibly just need cosmetic updates. On distressed properties, in particular, make sure when you walk through the home, you get a feel for how much repair is needed. When in doubt, give yourself a buffer on repairs for unexpected costs that might arise.
When walking through the house, if you are with the seller, get a feel for what they’re expecting in terms of an offer and explain that the extent of repair and your highest offer you can do, with the house in the condition it is. Have backing to your reasoning and be sympathetic during your conversation. While you’re looking to make a profit, they’re most likely going through a rough patch in their life. You can be their solution if the numbers work for both you and the seller.
Properties in Probate
Properties in probate have to be held in a sensitive manner. In many cases, you’re going to be talking to a family member who just lost a loved one. You have to be understanding and compassionate. Some people will want to sell off the property quickly while others might take a few months to come to terms with selling. This is when direct mailers can be efficient so that your name stays in front of them without being overbearing.
Depending on the situation, the family member in charge of the estate might not live close to the property and don’t mind taking a low offer so that the property is out of their hands and something they don’t have to worry about anymore.
What Else Matters?
In addition to having the right type of property, the fewer eyes you have on it, the better. With the market as hot as it is right now, properties on MLS or being advertised to a ton of people have a good chance of receiving multiple offers. Getting your hands on a property that was just listed or hasn’t been actively marketed yet can give you the opportunity to have your offer considered.
That all being said, every market is different. These 3 types of properties can be found in all markets if you look in the right spots but there may not be a huge amount of each in your area. Do your research, know your numbers, and make smart investments.