Some things to know buy a distressed property take a look at this

One of the most common, and most likely the most profitable, ways to make money in the real estate business is to buy older homes that have yet to be renovated. After you buy them you spend a few months, or with the help of T.V. magic, a few days, fixing the property up to drive its resale value. This is called “fixing and flipping.” Many investors start their career in this category since most of the time all you have to do is find and buy a home.

But, before you decide to take on the flipping market there are a few things that you need to acclimate yourself. For example, most of these homes are bought using bridge loan. Bridge loans are usually short term. Most are paid off at the conclusion of a sale, or a few months after the property is listed. Most hard money lenders in Texas will loan you more money if you need it, but for the most part, a bridge loan will suffice.

Now it is time for you to venture into the wild

After you have figured out where you will go to for your loan, there are some more things you need to make yourself aware of. For starters, when you begin looking for a fixer upper, one of the best places you can find a property that you can flip is an auction. Most of the time you will not have to pay an insane amount. Even though the homes may look like they survived a few wars, most investors will make great finds.

Most of these auctions are held during or after the homes have foreclosed. Often the auction is organized by a trustee. The trustee is the person that holds the note on the property; this could be someone that is related to the previous owner, or it could be a hard money lender in Texas. Some investors do have an easier time at these auctions since they automatically know what they are looking for.

If you are inexperienced with the auction platform you should go to a few dry runs before you start bidding. If you plan to go to an auction you should also note that you will not be able to go inside the property beforehand. This makes it a toss-up; you could find a diamond or a lump of coal.

If you want a better option you could try an REO

An REO, or real estate owned foreclosure, is like the nice twin of the two. Basically, it is like an auction, however, the lender actually owns the property. Say you have worked with a hard money lender in Texas for a few years and they recently acquired a new property. Depending on the strength of the relationship you could have a first look at the property.

With an REO, you are able to go through the property and look around. Usually, you would make an appointment with the lender and walkthrough. While this may seem like a better option you are essentially held over a barrel. Since the lender has some skin in the project you may have to pay full price. You should meet with your fellow investors before going through with either option.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.