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 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.
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:
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.
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.
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.
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.
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