Adventures of a Renegade Real Estate Investor

How to Profit From Investing in Distressed Housing

How to Profit From Investing in Distressed Housing

By on Dec 20, 2013 in Latest News |

How to Profit From Investing in Distressed Housing

There’s money to be made in distressed housing, but how do you go about acquiring a profit on distressed housing? Check out these tips on doing just that:

Do you wanna get dirty? Well, do ya?How to Profit From Investing in Distressed Housing

When investing in distressed housing you should first ask yourself, “do I wanna get dirty?” If you have building skills or the ability to manage contractors well, you could acquire a cheap fixer upper, rehab it and then sell it or rent it out.

However, it’s a little more difficult than it sounds. A good idea is to pay a general contractor a couple hundred dollars to do a walkthrough of a property that you’re serious about buying. Take their estimate, factor in other costs such as taxes and then add in another 20% for anything unexpected that’s sure to pop up.

If you plan to keep the property and rent it out yourself, that takes quite a bit of time. However, if you plan to hire a property manager, that could eat up about 10% of your profit.

Keeping your hands clean:

If you don’t have the time to supervise renovations or renters OR simply don’t want to, consider “turnkey” property investing. Purchase a property that’s already been renovated and perhaps even already has renters in it.

Picking the right property:

Look for areas where property prices have hit their lowest yet jobs and population are growing. If you want to manage it yourself, look for these areas close to home.

Think about using a real estate agent that works directly with the bank. A good one probably knows how to handle paperwork on distressed deals and may have access to properties not yet even listed for sale. Also, check out foreclosure auctions and estate sales.

Also, don’t buy properties just because they’re cheap, but also make sure that they would attract stable tenants. Is the property close to schools with easy access to parks and major roadways>

Taxes and Insurance;

When you become a landlord you have new legal risks and tax complications. Acquire a limited liability company to hold your investment property…. you don’t want your assets at risk should an accident occur! You’ll also need to pay for “dwelling” insurance if you won’t be living in the building yourself. This insurance covers property damage. You’ll also need a policy for liability.

Hire a tax pro, at least in the beginning, and be aware that in the early years you’ll probably suffer a tax loss with depreciation and out of pocket expenses.

The bottom line:

Buy an investment property at the right time in the right market and you could see returns of 8-12% plus appreciation. Buying a property directly is where you can get your most financial gains but also your biggest financial losses.

Give me a call if you want to learn more about rehabbing a property and selling for a profit!