Tips to buy distressed property
The desire to buy distressed property is for countless reasons. Someone may want to renovate to resell. Someone may want to renovate to have for passive income. Someone may want to dismantle the structure to build a different piece of real estate. Someone may want to live there. No matter the reasons for wanting to my distressed property, ensure you’re in the best mindset and research was done to come up with the best outcome.
Buying distressed property comes with many knowns- which should have been discovered before and during the closing of the transaction. Also, unknowns will most likely pop up. For example, tearing down a wall leads to a leaky pipe which then leads to discovering mold which then leads to needing a mold remediation company which then leads to added expense. Part of the mindset of buying distressed property is trying to see what is not there plus cushion the budget so if unexpected matters arise- such as a leaky pipe and mold issue- then the budget can support this expense. 
Also, for a great mindset, be flexible with where to increase/decrease/cut out renovation tasks. Another example is what if the kitchen was supposed to have top of the line countertops, but now with the leaky pipe issue, the countertops will be mid-grade, yet still fit the standard of the home. Most times the only 2 guarantees of construction are over budget and over the timeframe. Be in the patience mindset! Most times going over budget are from unknowns. This leads to the need to correct the issue, therefore adds time. Environmental reasons might be a debilitating blizzard (very common here in Minnesota!). Snow, sleet, freezing rain, high wind, etc. are absolutely reasons for delays and over budget. There could be an entire week of work lost since people may not be able to get to the property or just clearing out the snow and fixing up damage is required before proceeding. Therefore, to reiterate: be patient!
Any time anyone purchases distressed property, have various resources for funds readily available. This could be your own hard-earned money tucked into an account. Perhaps a Private Money Lender (PML) or Hard Money Lender (HML) is part of the transaction. Keep these people up to date with how those funds are being used. Utilizing lines of credit may also be needed. Ensure at least the minimum payments are done on time to keep the account in good standing. Chat with a preferred lender about construction loans. Need a lender? Contact Rochelle who is a real estate agent with eXp Realty and has a long list of lenders with varying loans, interest rates, and other qualifying factors. With having multiple financial resources, now the question: how much money is needed? To buy distressed property, crunch numbers. This means what is the purchase price? What are the closing costs? How much will the renovation cost? Have a buffer to the budget as well. Also contact remodeling contractors (who are licensed and insured in the same state as the property is located) to have them give an estimate or bid. The difference is the estimate is self-explanatory. The estimate will say the cost of repairs could be approximately X amount of dollars. The bid is very specific. This will be the exact cost with an itemized list of materials, that cost, the labor charge, and any other specifics. All these numbers will determine the budget, the resell price (if that is the plan) or if the property should or should not be held by the owner. Having various accounts for financial resources will help in case of emergencies, going over budget, a change was made to the plan, etc.
When determining what to do with buying distressed property, have multiple remodeling contractors look at the property. It’s always eye opening to have multiple views of the same property- especially if a contractor already knows the history of the property. A remodeling contractor may have replaced the roof or live nearby. Also, multiple remodeling contractors together will give insight of professionalism. When we at Reel Property Solutions, LLC have looked at properties with multiple remodeling contractors, here’s what has been uncovered: Contractor B and Contractor R were at a property together. Contractor B used to work for Contractor R. Turns out Contractor R owes money to Contractor B. That’s a red flag if a remodeling contractor has financial issues. Another scenario was Contractor J had been working with a different real estate investment team like Reel Property Solutions, LLC. Contractor J said based on the experience of working with the other investors, Contractor J wasn’t interested in working with any more investors at all. This is a red flag that other real estate investors were not being professional. Also ask around to friends, coworkers, neighbors, etc. who they would recommend as remodeling contractors. A referral is the best compliment! When renovating, pulling permits from the Building and Safety Office should be addressed. For example, if a property will be gutted down to the studs with new electrical wires, new plumbing, and/or taking down or putting up walls, then definitely inquire about a permit! The Building and Safety Office will have inspectors come out to ensure the structure is sound, ensure the correct codes are met, and always a great resource to ask questions.
Speaking of a great resource to ask questions… need advice, expertise, or an agent to represent your transaction when buying distressed property? Contact Rochelle who is an investor with Reel Property Solutions, LLC plus REALTOR® brokered by eXp Realty. A personal note is Rochelle grew up in a house that was constantly being remodeled because her dad is a remodeling contractor (but not in Minnesota.) Let’s set up a time to meet to discuss real estate goals, time frame, and how to proceed to buy distressed property or just chat about real estate in general!
For Reel Property Solutions, LLC to buy distressed property, we are continuously being educated by Fortune Builders who teaches people the ins, outs, and importance of how to be successful with a transaction. When others are looking to buy distressed property, we also want others to understand what they are getting into. Let’s connect to find those properties! Our contact information is:
info@reelpropertysolutionsllc.com
rochelle.markov@exprealty.com 507-358-0638
Facebook @Rochelle Markov
Instagram @rochellemarkov4
LinkedIn @Rochelle Markov
Alignable @Rochelle Markov, eXp Realty
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