Distressed Property
Definition:
A Distressed Property is real estate that is either in poor condition or under financial distress, such as foreclosure, short sale, or bankruptcy. Investors often target distressed properties because they can be purchased at a significant discount. The strategy is to renovate or resolve the financial issues to sell or lease the property for a profit.
🔍 Did You Know?
Distressed properties are often sold “as-is,” meaning buyers must be prepared to take on any needed repairs or legal complications.
Examples:
Example 1:
A real estate investor buys a distressed property at a foreclosure auction for $100,000, invests $30,000 in repairs, and sells it for $180,000 after renovations.
Example 2:
A bank lists a home as a short sale due to the owner's inability to keep up with mortgage payments. An investor purchases the home below market value with plans to either flip or rent it out.
Why It’s Important:
Distressed properties offer investors the opportunity to purchase real estate at a discount and create value through renovation or financial restructuring. However, they also come with higher risks, including legal and structural issues.
Who Should Care:
- Real estate investors seeking value-add opportunities.
- Home flippers specializing in renovations and resales.
- Lenders dealing with foreclosed properties.
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