Is Investing in Distressed Property Worth It?

There are many ways to invest in real estate, but in the end like all investments it is about the return on investment that you expect to make later that should decide if the investment is worth it or not. With the current state of the real estate market a lot of properties are worth less than they were previously valued a few years ago. Some of these properties can be run down due to being vacant such as in the case of a foreclosure and in some instances the previous occupant just may have not taken care of the property like they could have. This is what is referred to as a distressed property.

If you are looking to invest in distressed properties be forewarned that there may be underlying problems that could end up costing you more money than it is worth. You can go ahead and expect to possibly put in a considerable amount of time and money into fixing the property up for resale or rental. If you have money to spare and enjoy the satisfaction of accomplishment when finished fixing things up then a distressed property may be a fun and rewarding investment for you.

If you do not have the time or don’t have handy man or handy woman skills you could always hire someone else to do the dirty work for you. One business that is becoming more popular in this distressed property market is property preservation companies also called foreclosure cleanup companies. These companies will come in, fix up the property and get it ready to go back on the market.

Before you jump head first into a property make sure you do your due diligence. Consider the surrounding market conditions, are things selling, or are they holding steady? Are properties nearby increasing in value, or depreciating? Zillow can be an excellent resource and give you a quick idea on this. Also consider the demographics of the area. Is this location an area with a steady workforce and jobs? You want to make certain that there is no shortage of jobs in a given area. This is important for keeping property occupied with tenants in the case of passive income on rental property. It could be a blow if an area’s job market dried up and people no longer desired to live there. If you were depending on that cash flow from rentals you would not only have a hard time getting new tenants, but try selling a property in an area that no one wants to live and see what happens.

How is the crime rate in the area? I personally wouldn’t want to invest in an area that was attractive to criminals. You can contact the local police for this information which is public record. You might have to submit an official public records request and they may charge a small fee for the research but, it could save you a headache later if you can avoid a high crime area.

In the end what it all comes down to when investing in distressed property is will doing so meet your investment goals? If not then it would not be a wise investment. If you are smart about it and are able to obtain some good properties then distressed property could become a profitable and important selection in your real estate investment portfolio.