High risk property investing…
If you’re into high-risk property investing techniques that may return higher yields than the more traditional forms of property investing, then by all means consider investing in abandoned property. Since these are typically houses that have fallen into disarray due to owner neglect and ensuing abandonment over a lengthy period of time, they will not be on the market for sale. So your real estate agent will not be able to help you out in your searching. In fact, locating a potential money-making abandoned property will eat up much of your valuable time, since you’ll have to do all the search work yourself. However, if you happen to pass by areas with what look to be abandoned houses, then by all means try using these techniques to scope them out further to see if they can be potential cash cows.
Spotting an abandoned house
First, when you spot an abandoned house, simply walk up to the front door and see if there is in fact anyone living there. You’d be surprised how many neglected houses look abandoned – but are not! If you’ve made several attempts at knocking on the front door at different times of the day on several occasions, and still no one answers, it’s a good bet the house is abandoned. Next, you’ll want to run a simple search using your county’s public property assessors web site and find out who the owner is, as well as their legal address. You can then proceed to contact them through mail, or by looking up their phone number online using a reverse address listing.
Contacting an abandoned property owner
When contacting these owners, be straightforward, no-nonsense, and respectful. Clearly, they either are in the process of being foreclosed upon, or have some dire reason they have left their house in such disarray. So they may not be in the most pleasant of moods when you’re successful in reaching them. Just be prepared, and you’ll be fine. While being humble and respectful, simply offer them a way to get out of their financial bind. Remember – you’re their savior – the solution to their financial problems. If they have a mortgage, offer to pay it off as the sales price for the house. If they have an assumable mortgage, ask if you can take it over. On the other hand, if they own the house free and clear, and are wasting money on paying taxes and insurance on the property, ask for them to hold the paper on your offer. Depending on how dire their circumstances, they may be able to finance the full amount of your offer – or at least, a very large percentage. In addition, they may be very lax in asking for credit reports from you, making it easy to qualify for their owner-financed loan. You could have a tremendous opportunity.
Bracketing your potential expenses
Keep in mind, like investing in foreclosures, the house is probably going to be in just as rough shape inside as it is outside. So you’ll need to bracket your fix up costs to anticipate the absolute worst when trying to either flip the property, or rent it out. Also consider, if you’re going to rent it out, there are a number of government grants you can investigate, that are specifically related to multifamily renovating, such as the Rental Rehab Program. With this particular program, the government will require you to install section 8 tenants after renovations are completed, but it could be an excellent way to create a very positive cash flow on a currently-abandoned property.
Working with difficult locations
Your other main concern, besides locating and proper numbers crunching, will be location. Usually, most abandoned properties tend to be in poorer, more crime-riddled areas of metropolitan areas. However, if you also look at up-and-coming lower income areas that are in the process of gentrification of late, you may be able to spot several abandoned properties worthy of further inquiry with their owners. It’s worth a shot.
Always be on the lookout
Abandoned properties, whether they be abandoned properties in CT, NY CA…you name the state…are certainly worth investigating. Just keep your laptop or pen and paper handy to write down their addresses as you pass by them when driving. It’s a good idea to take photos of these houses from the street for easier reference back to them later, as you cull through the most viable ones for investment. In addition, be wary of going inside any abandoned property without permission. Abandoned property law still considers it trespassing if you don’t have the express OK from the owner to go inside.
photos courtesy of buildingmoxie.com, nakedphilly.com, holidayapartments101.com, easyinsure.ca, shouldersofgiantmidgets.blogspot.com, barnettassociates.net