The Pros and Cons of Buying Abandoned Property
Real estate investors are always on the lookout for good properties with the potential to generate steady income from rentals or profit from flipping. Bargain prices on vacant homes may signal opportunity, but they could also be red flags indicating expensive problems ahead. Consider the pros and cons of buying abandoned property.
Potential Advantages of Buying an Abandoned Home
Bargain basement prices are the major advantages of buying an abandoned home. Depending on how long the house has been unoccupied, many repairs may be necessary, but that means less competition from other potential buyers. An owner who has abandoned the property is likely to be motivated to address whatever financial distress drove them to leave the home vacant.
If the home is in a good neighborhood, renovation can bring its value back up to or even above local market value. As a result, prices in the immediate neighborhood can rise because the blight of an abandoned property has been resolved.
Disadvantages of Buying Abandoned Property
Determining if the property is truly abandoned can be difficult. A detailed title search to identify the current owner might be necessary, and even then, they may be difficult to contact. A bank or municipality may have taken ownership due to nonpayment of a mortgage or property taxes. In an ordinary sale, the seller would be required to provide disclosures about the condition of the home. But an abandoned or foreclosed property will sell as is, and it’s on you to pay for a thorough inspection.
Repair costs can also be significant for abandoned properties. You can expect abandoned properties to have issues with the roof, plumbing, electrical, or HVAC systems. Other defects, such as insect infestations, foundation problems, and rot, aren’t as easy to detect. Other risks of vacant properties include damage from vandalism, fire, leaks, and even squatters. You should ask for expert opinions on all potential defects in the home before buying.
Be sure to have a contingency fund in place - typically at around 10% of your overall project budget - which should help with these often inevitable unexpected costs that can arise," says James Durr of professional we buy any home company Property Solvers.
When considering buying abandoned or foreclosed properties, you should carefully consider your budget and plan. Whether your intention is to repair the home and rent it out or to renovate and flip it, you could face some nasty and expensive surprises once work begins. Time is money in these cases, so set aside sufficient funds to cover repairs as well as the estimated time to make the home livable and find a tenant or buyer.
It's possible to generate income or profit from abandoned homes. The surrounding neighborhood, the extent of repairs necessary, and the resulting appeal of the renovated home determine whether the property can generate a return on investment that makes the purchase worthwhile.
