Is buying a repossessed property a good investment?

Is buying a repossessed property a good investment?

Property Investment

If you know what you’re doing, then buying a repossessed property and selling it on can be a great way of getting a good return on your investment. However, just like any investment you undertake, it pays to do your due diligence first otherwise it may not be the bargain you thought it was.

Many inexperienced investors have come unstuck when it comes to investing in repossessed properties. They see an absolute bargain at an auction, get excited by the potential opportunity it represents, then leap in without doing the necessary homework.

Buying repossessed properties requires consideration so here are a few factors that you need to take into account:

Due diligence – the nature of repossessed properties is that the lender is keen to move them on so that they can get their money back asap. The original owners have defaulted on their payments and now the lender wants to get recompensed. This means that that they like to push the process of selling the repossessed property swiftly and from the buyer’s point of view it can all seem a bit rushed. Don’t be hurried into making your decision. Carry out your due diligence like you would with any property purchase and don’t let the vendor rush you into making a purchase until you are satisfied with all aspects of the transaction.

The cost – you may have been attracted to the property because of its bargain basement price but you need to read between the lines. It’s often the case that repossessed properties are not in good condition and need significant refurbishment. You need to weigh up whether the cost of renovating the property will be worth it in the long run and whether you’ll get the financial rewards later when you sell it on.

Location – another feature of repossessed properties is that they are very often in run-down areas with a poor reputation. Even when refurbished to a good standard, properties in poor areas can be difficult to sell. In light of this, make sure that you know about the area you’re buying into and how the property market is performing in that area before you exchange any contracts.

Legal advice – the documentation that is available with repossesses properties is often limited so don’t enter into a transaction before getting good legal advice. Shop around for a good solicitor and make sure that you get advice from them before agreeing to any purchase.

Repossessed properties are and always have been attractive to property investors. With a bit of research, due diligence and taking your time, great opportunities can be discovered and excellent returns can be made.