What Buying a Repossessed House for Investment Really Means

Buying a repossessed house for investment purposes is a great strategy with lots of upsides. At the same time, there are plenty of pitfalls if you pursue this sort of strategy recklessly. Real estate investing requires a good understanding of the rental market, a dependable source of financing, and the ability to see the long-range potential of any property that you might purchase.

When used wisely, repossessed property presents investors with the following benefits:

  • the opportunity to buy property at a bargain price
  • above average rental returns for keen investors
  • the opportunity to add value to properties with proper renovations
  • a greater yield than most other types of investments
  • residual income that can be passed on to children and grandchildren.

Repossessed town house

The idea behind this type of investment is to buy houses cheaply in order to get a higher rate of return through rentals. It's a better investment than purchasing homes through an estate agent because the potential yield is greater.

Know How to Buy a Bargain

Before you dive a fully into this type of investing, make sure you know how to buy a bargain. There are plenty of pitfalls that can get you in trouble, including:

  • incomplete legal documents
  • refurbishing costs
  • other hidden costs associated with traditional sales

The potential pitfalls of real estate investment often determine winners or losers from an investment standpoint. That means the more you know about the houses you're buying, the better off you're going to be.

What to Do after the Purchase

Once you find the properties you're after, you need to decide your post-purchase strategy. Some investors choose to refurbish homes and sell them as quickly as possible in a process known as flipping. This is one way to make money. But it's not the only way.

The other strategy is to hold properties with the intent of using them as rentals. This is a long-term strategy based on collecting rent for years into the future. The residual income makes this a more attractive investment for several different reasons.

Rentals Are the Proper Strategy

We believe rentals are the proper strategy for the current environment. Our assessment is based on the fact that real estate prices are still down more than 20% from their high point some six years ago.

Investors who look for distressed properties with the intent to sell right away need to sell at a price 20% to 30% greater than what they paid. However, that's rarely attainable because repossessed properties for sale typically need tens of thousands of pounds worth of repairs and upgrades.

On the other hand, buying a repossessed house with the intent to make it a rental property gives the investor a lot more financial flexibility. When properties can be found at prices substantially below market value, immediate equity is established with the completed transaction. Even with upgrades and repairs, an investor is still likely to be ahead by the time a property is ready to rent.

What It Means for the Investor

Real estate rentals as an investment strategy require a very specific mindset. That mindset begins with understanding what it takes to purchase a distressed property and get it ready for rental. This includes learning how to assess a property's current condition, what it's likely to yield based on location and features, and the type of tenants it is likely to attract.

Next, buying a repossessed house that will prove to be a wise investment requires a willingness to work with a broker with a proven track record. Far too many investors believe they know the real estate market well enough that they do not need the advice of an experienced broker. That's a good way to get yourself in trouble. A broker like Fruitful Property offers clients the expertise needed to ensure wise investments.

Lastly, residential real estate investments require a mindset of long-range returns. This type of investing is not a program to make one rich overnight.

At Fruitful Property, we know that residential real estate makes a great investment with high yield and long-term income. However, we also know that it takes the right properties in order for you to be as successful as you want to be.

With a combined 30 years of real estate experience, we have sourced hundreds of distressed properties, all massively undervalued with high rental yields. We specialise in finding only the best properties for serious real estate investors. If you are interested in buying a repossessed house to convert into a rental property, we are ready to help you find the property you're after. As soon as you contact us, we can get working for you.

Google+

Nick Hopkinson

by Nick Hopkinson - Property Investment commentator and Fruitful founding director.

ACT NOW
What Next
Rich Dad's Cashflow Quadrant

Rich Dad's Cashflow Quadrant

by Robert Kiyosaki

a compelling explanation of the core financial principles of behind being successful in work, business and investing.

Nick Hopkinson

Winning!

Winning!

by Sir Clive Woodward

exciting and practical insight into the business skills and sports psychology behind how England won the Rugby World cup in 2003.

Nick Hopkinson

The Art of the Deal

The Art of the Deal

by Donald Trump

like him or loath him, Trump shares his story and the drive that created a self-made billionaire, mainly from property.

Nick Hopkinson

FT Weekend Money supplement

FT Weekend Money supplement

essential weekly reading for UK investors wanting to know the best ways to invest and protect their money.

Nick Hopkinson

Renting Out Your property for DUMMIES

Renting Out Your property for DUMMIES

by Melanie Bien

straightforward advise and practical checklists for managing all aspects of your UK rental property.

Nick Hopkinson

Steve Jobs

Steve Jobs

by The Exclusive Biography

inspired stories and life lessons from the man who created Apple and then changed the world twice!

Nick Hopkinson

Winning

Winning

by Jack Welch

sage advice on business and leadership by the arguably the greatest business leader of the 20th Century.

Nick Hopkinson

Previous Next

Fruitful investor, Nick Kendall is on course to reach his personal equity target from his existing properties by 2014, ultimately giving him financial freedom. Here’s how he did…

Nick Kendall

As a Management Consultant and former Banker, you’d think Jonathan Fryza and his wife Ruth, a Risk Manager at RBS, with over 50 years’ experience between them, would be able invest…

Jonathan Fryza
read more

got a quick question?

We're here to help! Just fill in the form below and we’ll get right back to you.

Access off-market, high yield investment properties.

Act now. Profit from a recovering UK property market.

Are your investments working as hard as possible?

Earn 15% annual return on your money with off-market bank repossessions.

Fruitful Property Investment
Intrigued call us now
+44 (0)20 7148 5858