Print ArticleProperty repossessions are not only appealing to first time homebuyers who are looking for affordable means of getting up the property ladder. Repossessed properties are also lucrative opportunities for property investors. With the number of repossessions increasing and property prices on the decline, many sophisticated investors are astutely knocking off up to 20% from the market value of homes repossessed by lenders from borrowers who are unable to keep up with their mortgage. Their main goal is to resell the repossessed property at a profit or rent the property out long term.
Fast facts: More than one million overstretched borrowers are striving to pay their mortgages. Financial regulator states that one third of the 5.7 million people who got a mortgage between April 2005 and September 2007 are at risk of going into default. Meanwhile the Council of Mortgage Lenders state that the number of repossessed properties would increase by 50% to 45,000 homes this year.
Why repossessed properties?
Repossessed properties often sell for significantly less than their market value. Property investment companies say that as a rule of thumb, you can expect to get a repossessed property at 15% to 18% below market value.
In theory, banks, estate agents and surveyors are legally bound to sell a repossessed property at the best possible price. If they neglect their obligations, they put themselves at risk of getting sued for not properly marketing the property. If the property goes to auction, the price of the property further drops between 6 and 10%.
As the property market continues to even out and house prices stabilise, more property repossessions are expected to end up at auctions at even lower prices. Some auctioneers report that they have set the guide at 20% the market value.
Repossessed properties for investments
If you´re looking to make money in property, then investing in a repossessed property is a good move. However, you have to be smart about taking on the task. First, you have to target people who need to sell their property fast rather than the people who just want to sell.
Often owners are afraid of getting their homes repossessed since it leaves a severe mark on their credit record and can be stressful and dismal. Thus they do what they can to avoid it which is to sell the property as quickly as they can. If you´re quick to act, you can acquire it for around 80% of the market value – which is impossible to achieve with non motivated sellers who are not in a distressed sale position.
What to remember
Investing in property repossessions call for due diligence on your part. First, you have to get the property off a credit blacklist by contacting credit agencies and informing them that you have no relation with the prior repossession. Second, the property may not be totally in good shape so you need to have an inspection done on it by a qualified surveyor or an experienced builder you can trust before you make a property purchase.
Property repossessions can be costly and time-consuming to renovate. Thus if you´re looking to make a quick investment and a fast turnaround, it would be a smart move on your part if you´ve done your homework beforehand.
Fast facts: More than one million overstretched borrowers are striving to pay their mortgages. Financial regulator states that one third of the 5.7 million people who got a mortgage between April 2005 and September 2007 are at risk of going into default. Meanwhile the Council of Mortgage Lenders state that the number of repossessed properties would increase by 50% to 45,000 homes this year.
Why repossessed properties?
Repossessed properties often sell for significantly less than their market value. Property investment companies say that as a rule of thumb, you can expect to get a repossessed property at 15% to 18% below market value.
In theory, banks, estate agents and surveyors are legally bound to sell a repossessed property at the best possible price. If they neglect their obligations, they put themselves at risk of getting sued for not properly marketing the property. If the property goes to auction, the price of the property further drops between 6 and 10%.
As the property market continues to even out and house prices stabilise, more property repossessions are expected to end up at auctions at even lower prices. Some auctioneers report that they have set the guide at 20% the market value.
Repossessed properties for investments
If you´re looking to make money in property, then investing in a repossessed property is a good move. However, you have to be smart about taking on the task. First, you have to target people who need to sell their property fast rather than the people who just want to sell.
Often owners are afraid of getting their homes repossessed since it leaves a severe mark on their credit record and can be stressful and dismal. Thus they do what they can to avoid it which is to sell the property as quickly as they can. If you´re quick to act, you can acquire it for around 80% of the market value – which is impossible to achieve with non motivated sellers who are not in a distressed sale position.
What to remember
Investing in property repossessions call for due diligence on your part. First, you have to get the property off a credit blacklist by contacting credit agencies and informing them that you have no relation with the prior repossession. Second, the property may not be totally in good shape so you need to have an inspection done on it by a qualified surveyor or an experienced builder you can trust before you make a property purchase.
Property repossessions can be costly and time-consuming to renovate. Thus if you´re looking to make a quick investment and a fast turnaround, it would be a smart move on your part if you´ve done your homework beforehand.
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