Top 10 Things to Avoid When Investing in Repossessed Property

Buying repossessed property is one way to get a real bargain on one or more houses you want to add to your investment portfolio. These types of properties offer a great return on investment; in some cases, a better return than you'll get from certain types of securities.

That said, home repossession is sticky business. There are just as many ways to find yourself in a money pit as there are to turn a tidy profit. Whether you are new to the business or a seasoned veteran, we would like to offer you the top 10 things to avoid when investing in repossessed property.

1. Get Rich Quick Mentality

The very wise people behind the Investopedia website make it very clear that real estate investment is not a way to get rich quickly. Especially when you are dealing with residential real estate. While buying distressed properties certainly offers a great return on investment, it takes a while to get there. Be patient.

2. Buying Anything and Everything

Buying a repossessed house for the purpose of renting means someone else will be living in it eventually. Try to look at properties as though you planned to be the resident. This will make you much more selective in the houses you choose to buy.

3. Limiting Purchasing Channels

Without a doubt, repossessed property offers bargains you are not going to find through traditional sales channels. Nevertheless, do not limit your options. Look for houses through qualified agencies in multiple areas. The more opportunities you look at, the greater the selection of properties.

4. Making It Personal

Unfortunately, every repossession has a story behind it. There's nothing you can do about that. Do your best to avoid making such transactions personal; rather, count yourself lucky that you are able to find such great bargains and leave it at that.

5.  DIY Transactions

Conveyance solicitors are experts at what they do. Do not try to handle these sorts of transactions on your own. Find a solicitor with plenty of experience in both real estate investment and repossessions.

6. Inadequate Financing

Before you dive in, make sure you have your financing in order. If you can pay cash for a repossessed property, that’s great. If you are going to require financing, make sure you get commitments ahead of time. Repossession sales tend to happen very quickly because banks want them off the books.

7. Too Many Houses

Making residential real estate pay dictates investors know their limits. In other words, do not take on more houses than you can handle. Remember that rental properties require maintenance and upkeep, good landlord-tenant relations, appropriate insurance and so on.

8. Property Surprises

When a bank sells a repossessed property, they are under no obligation to offer disclosures. Do not assume the condition of a distressed property when offering to buy. If you don't inspect it for yourself, you're taking a risk.

9. Renting As Is

New real estate investors have a bad habit of thinking they'll be able to purchase a home at a bargain price, sweep the floors and wash the windows, and have a tenant move in a week later. It doesn't work that way. Most repossessions require some upgrades and repairs before they're ready.

10. Slow Decisions

As previously mentioned, banks usually move quickly once they are ready for a sale. Furthermore, a glut of bargain priced homes has invited many new investors into the market. You cannot afford to make slow decisions. Once you find the property you like, you are going to have to act quickly to make it yours.

Nick Hopkinson

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

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