Expert Investors

How Real Estate Investors Look for Distressed Properties

How Real Estate Investors Look for Distressed Properties

The rough economy has residential real estate investors looking for new opportunities in the nooks and crevices in the real estate market they haven’t explored before.

Inventory of single-family homes is still tight, so these opportunities that can be turned into fix and flip properties are going to be tough to find. Add in the fact that many traditional ways of finding homes, such as auctions and REIA events, are shut down or virtual because of the pandemic, and you find that many investors find their traditional lead sources dry up. The current foreclosure moratorium also makes it more unlikely for distressed properties to hit the market.

But if you are willing to be creative in your strategy, the rewards are there. So here are some ways to find off-market distressed properties. A distressed property is one that needs to be sold quickly—whether it’s pending foreclosure or needs to be sold for a quick move, to pay a tax bill, or because of a life change. Many distressed SFR properties are sold without ever hitting the MLS listings, and thus are sold without real estate agent fees or bidding wars. The result is lower purchased properties and thus deals that are more advantageous for real estate investors.

So how do you find them in today’s market? Glad you asked.

Potentially lower prices

You often get a better price when purchasing a distressed property—especially if they can bring a cash offer with the intention of doing a cash-out refinance after closing. Investors should be constantly looking for distressed properties, and they need to be ready to move fast when they find the right deal for their next FixNFlip project or rental portfolio addition.

Knowing where to look

Many times distressed properties are hidden in plain sight. In other words, they don’t always look dilapidated on the outside. Knowing where to look is about both having the right network of tools (you’ll need to go beyond the MLS and Zillow to look at tools like iBuyer.com designed to showcase properties in need of a quick sales) and having the right network of real estate agents, mortgage lenders, and even government employees who will share a tip when a distressed property is hitting the market. Knowledge is power when it comes to closing these deals.

Know your costs

Many distressed properties will need a lot of work—whether it’s updates to modernize, heavy rehab to add square footage, or marketing to upgrade the tenant class so you can increase rents. You need to go into every deal with a plan for how much work you need to do, how much it will cost, and how much time it will take. Without knowing these things, you won’t know if the distressed property deal will actually work for you. Here’s a primer on how to estimate and prepare for the costs of repairs to properties in order to maintain strong ROI. Remember that time matters here—every additional month on a timeline equals more spent in interest and carrying costs.

Motivated sellers

This is the big one to remember. The seller of a distressed property isn’t usually looking to haggle anymore. They want the property sold, and are ready to shake hands on a deal if you can provide asking price and a quick close. That’s why Lima One offers investors cash-out refinance options as well as line of credit preapprovals that provide options for quick closes when opportunity strikes.

What if you own a distressed property?

While many real estate investors are in search of opportunities, some find themselves with distressed properties that they need to sell or refinance quickly. Lima One offers bridge loan programs to help investors buy time with an interest-only loan that lets you hold the property in the short term while finding a preferable long-term solution.

Lima One Capital is the nation’s premier lender for real estate investors. We make it easy to finance all of your fix-and-flip projects, rental properties, and multifamily investments. As a national private lender lending in 45 states and Washington, D.C. we h provide hard money loans to real estate investors across the country. Since our founding in 2010, we have had a passion for seeing our clients succeed, and we’re ready to help you with a deal built around a distressed property or a deal you found another way. Contact us now to discover how Lima One serves real estate investors with great loan funding options at attractive rates with premium customer service.