People pass by abandoned properties every day. You know the type: no one lives there, no one works there. Weeds take over, windows are broken or boarded up and everything falls into disrepair. I am not talking about the run down parts of town either. Every day real estate investors can look in many neighborhoods where the last thing you would expect to find is an abandoned home and yet, right there in the middle of the block is a home with weeds three feet tall and pieces of colored paper taped inside the windows. Those are the notices that the water has been turned off or that a management company has been contacted to look after the property.
Abandoned homes can be found in all cities and in all neighborhoods and the real question becomes, as a real estate investor, what do I do with them? Are abandoned homes a good buy or do they come with their own special set of problems? The answer to all of the questions is going to lie somewhere within each investor and their ability to pick the gems out of the pile of rubble.
Houses are abandoned for any number of reasons. Some would call abandoned homes eyesores because they can have a negative impact on a neighborhood in terms of property value. However, real estate investors shouldn’t overlook the potentially lucrative investment opportunities offered by abandoned properties. You just have to know how to dig a little.
The Pros
The owners have no emotional attachment.
It’s always easier to navigate a business transaction when emotions aren’t in the mix. The home has been abandoned, so it’s evident that emotional attachment is nonexistent. Any feelings owners have left are likely negative and related to why they left in the first place.
The owners likely just want to get rid of the property.
Similarly to a foreclosure scenario, owners may want to be free of the property. One strategy is to offer to pay the amount of their remaining mortgage. The owners will be able to pay it off and avoid having foreclosure on their credit record, and you’ll have scored a good deal. In many cases, owners will leave room for negotiation and creative deals just to get the property off of their hands.
Abandoned homes are often eligible for government loans.
Look into government rental rehab programs. They’re out there and will often be an enormous help in rehabbing an abandoned property with interest rates far below the norm. There are government loans and grants that many real estate investors are unaware of. The savings alone make such programs well worth a little investigation.
Good positive cash flow and flipping opportunities.
If you snagged a good deal on the price of the property, that means it’s a lot easier to break even and make a profit. Abandoned houses turned investment properties are great for generating income. They’re also excellent for flipping and selling for big profits.
The Cons
Tracking down the owners can be difficult.
It’s abandoned, so it may be hard to find the owners. There are some things you can do to help track them down when you suspect a property is abandoned.
- Verify that the property is abandoned. Don’t waste time skulking around and trying to figure it out for yourself. Go up to the door and knock to see if the owners answer.
- If the property is indeed abandoned, poke around to find what you can find. Look in the mailbox (without removing any mail — that would be illegal!) and see if you can find the owner’s name.
- Ask the neighbors to see if they know anything. At the very least, they may be able to give you a name.
You may have a lot of repairs to make.
The longer a property has been abandoned, the more likely that it is in need of extreme repairs. That cost can mount quickly and outbalance the good deal you made in buying the property. Before buying, do your best to find out what the condition the property is in. Like with any property, you don’t want to wind up neck-deep in renovation expenses.
Real estate investment is a business of many facets. There are plenty of ways to invest and countless types of properties that offer you opportunities for positive cash flow. Abandoned houses are often overlooked, but don’t ignore the unique investment opportunities they offer. They can be a win-win situation for everyone.
Have purchased an abandoned home before? Share your experiences with us in the comments.
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