Finding Distressed Properties for Repair in Texas
By fixing and flipping or buying and holding, you can reap great financial rewards as a real estate investor in Houston (where our home office is based), Texas, or anywhere in the country. The first step to success is finding the right distressed property. A property is considered distressed when an owner is no longer able to care for their home physically or financially. This is sometimes reflected in its appearance; it may need significant repairs, or it could be at risk of falling into foreclosure because of overdue mortgage payments or unpaid taxes. The property could be inherited and is a burden for out of area heirs.
While distressed properties are relatively common in sprawling cities like Houston, Dallas, San Antonio or other major cities, there is even greater demand and competition. Locating the right one for your next venture can be time consuming and challenging if you don’t know where to start. There are two primary approaches:
Find the deal yourself.
Use a wholesaler or real estate agent.
When searching for properties yourself, you will spend your own time and money. Many people have spent thousands of dollars and countless hours and never found a viable deal. Others have made fortunes finding the deals themselves. To be successful, you must have time, money, experience, and ability. It is not easy, and you will usually fail more than succeed in the beginning, but this approach offers the highest upside and is highly rewarding. You need to start with desire and capital survive the tough times in the beginning.
When buying from agents or wholesalers, the deals will be less time consuming to locate, and you will find more consistent deal flow. That said, you will usually pay some premium over what you might pay if buying directly from the seller. You should be willing to pay more because you are saving significant time and money from trying to find the deals yourself. Before beginning your search, equip yourself with all the knowledge you need to successfully find distressed properties.
Local Real Estate Wholesalers
Working with real estate wholesalers is usually the most consistent source of opportunities and is a great way to find deals. Wholesalers speed up the process of finding and purchasing distressed properties. They handle most of the heavy lifting, search for properties and submit contracts on viable investment opportunities. These properties are then marketed to potential buyers such as house flippers, rehabbers, and other property investors. Skipping the hassle of not only finding the distressed property but negotiating with sellers and agents is a key benefit of working with a real estate wholesaler. Most wholesalers send email blasts advertising new opportunities. By subscribing to these emails, you ensure you’ll receive a fresh selection of properties to inspect on a regular basis. It is also important to research the reputation of wholesalers. Do they have an online presence and positive reviews? The industry standard is for the buyer to pay a non-refundable deposit of $2,500 – $5,000 or more. While this is reasonable when dealing with a reputable wholesaler, this business sometimes attracts bad actors, and some investors have lost their deposits to questionable wholesalers. Wholesalers are unlicensed and there is no regulatory body ensuring fair practices. Like most industries, it is important to work with people who are referred or who have quality social media and online reputations. There are many trustworthy, quality wholesalers. Take the time to research and determine the best.
The best ways to locate them are to join local social media groups for investors, attend industry events, online searches and asking other investors for quality referrals.
Catalyst Funding Can Help You Find Distressed Properties
As a real estate wholesaler, Catalyst Funding handles the searching, negotiating, and contracting of distressed properties. We’ll help you choose the right property for your next project, and as a hard money lender, we’ll also financially support your fix-and-flip or buy-and-hold strategies. Interested? Contact us today to learn more!
Properties in a State of Neglect
Distressed properties are the easiest to identify when they’re in a visible state of disarray. If you’ve already chosen the neighborhood or region in which you want to purchase a property, then simply driving around the area can yield opportunities. Neglected residences are often marked by overgrown yards, shattered windows, or faded, peeling paint. Newspapers may litter the yard and notices may be posted on doors and windows. Whether the owner is physically unable to care for the home or does not have the financial means to maintain it, they may be open to selling as doing so will remove the burden from their shoulders.
Owners with Delinquent Taxes
Owners who are past due on their taxes, even if the amount is far smaller than their mortgage balance, can have their home foreclosed. To find tax-delinquent properties in Houston, it’s a simple matter of checking public records. The local county’s Tax Assessor’s Office or Collector of Revenue Office will have a comprehensive list of these properties. Search “tax assessor” or “collector of revenue” online to find their website and browse the listings.
Owners with Delinquent Mortgage Statements
When homeowners fail to meet their mortgage payments, they are at risk for foreclosure. Hoping to preserve their credit and avoid long-lasting consequences, these owners are highly motivated to quickly sell their homes. Mortgage-delinquent properties in Houston are listed in the county’s legal paper and can also be found by searching “legal notices” online.
Properties Legally Obligated to be Sold
Sometimes properties must be sold in the event of bankruptcy or divorce. The owners are typically eager to skip the traditional listing and selling process and instead sell directly to property investors to liquidate the property quickly. Making connections with local divorce and bankruptcy attorneys will prove beneficial. When they encounter a motivated seller, they’ll know to pass on the information to you.
Properties Whose Owners Live Out of State
Owners who live out of state may find it difficult to maintain their property. Many choose to leave the residence vacant and unused, avoiding the complications of renting out the property and dealing with tenants. An out-of-state property becomes a financial drain as the owners are not only paying maintenance fees, taxes, insurance, and mortgages on their personal residence, but they’re also paying the same fees for an unused property. Lists of out-of-state owners and their properties can be purchased from distressed property list providing companies.
REO, Bank-Owned Properties, or Government-Owned Properties
REO (real estate owned) and bank-owned properties were repossessed by lenders after the property owner could not make payments on their loan. Both the lenders and banks are eager to part with the vacant homes non-performing assets are a financial burden and take considerable bandwidth from staff. As a result, residences are offered at lower prices to entice buyers. To find these distressed properties, they are often listed on the MLS (Multiple Listing Service), or some can be located by building relationships with banks and lenders.
Government-owned properties can be found on the HUD website, which also provides links to Freddie Mac and Fannie Mae. Each of these entities has its own rules and regulations to follow when purchasing one of the repossessed homes.