When it comes to making money in real estate, there is a little known area that many people are passing right by. It’s an area of huge profit potential, yet so many agents and investors are simply passing by the opportunity without even realizing it. The potential? Abandoned properties. Yes!
Whether you notice or not, you pass by these properties on a daily basis. It could be an abandoned house in your neighborhood, that abandoned store in your community, or a building you’ve not seen yet. Why are they left? There are plenty of reasons from divorce and family disputes, to the death of the owner or just people falling on hard times. The reason why is not of your concern. These are potential gold mines just waiting for you to tap into them.
One great reason for investing in abandoned properties is the fact that you can use the best financing ever, seller financing. Typically, if a property is abandoned the seller will offer financing instead of you having to get a conventional loan set up. This means that you can work with the seller sometimes without ever showing your credit report or having to worry about dings on your credit.
When it comes to abandoned properties, your seller may have a mortgage they need to pay each month. That means they are open to some creative options when it comes to financing it as they want their mortgage paid and their credit to remain in good standings. That means you can typically work out a better deal with them instead of having to go for conventional loan processes.
One lady that had an experience with the abandoned properties went to an investment conference and shared her experiences. After the first day of her classes, she realized the home across the street from hers was abandoned. After about three months of working with the owners, she ended up getting the home, fixing it up and selling it for a profit of $58,000. How many $58,000 profits have you driven by simply because you didn’t take the time to check out those abandoned homes or buildings you see each day?
In all honesty it’s a very simple process. Drive around your neighborhoods, communities, and areas nearby. Remember that if a community or neighborhood is affluent, you’ll probably have less luck finding these goldmines. Those communities or areas that are struggling will have more potential deserted buildings than others. Look for signs such as broken windows or boarded up windows. You might find newspapers, bills, or other notes and paperwork around houses. Perhaps you even see the grass and shrubs are grown up significantly at the properties. Make sure that as you are driving around and inspecting you have pencil and paper with you at all times. This helps you keep track of addresses and areas where you visit and find potential investments.
Did you know that there is funding set aside for these type of projects? There is! There’s a government program awaiting your use called the Rental Rehab Program. This program offers a loan of 3%-5% when traditional rates are over 10%. It also allows the tenants to go into a lower monthly rent program by applying for Section 8 Housing so they can have a place to live in their budget. You can keep the property for a while, earning money on the tenants living there and then potentially sell it off down the road as the rates and market improves.
Whether you’re a brand new investor or you’re a seasoned investor looking for new profitable homes, abandoned properties are the best kept secret in the business. These have high potential for being easily financed through motivated sellers and increasing your profit margin down the road. Give them a second look instead of driving right by when you could be finding your $58,000 profit right across the street.
© 2016 Connecticut Real Estate Investors Association. All rights reserved.