“Flip or Flop”, “Property Brothers”, “Million Dollar Listing” etc. are really entertaining TV Shows that make buying a distressed property easy and exciting. While there is definitely opportunity out there in the real estate market, it is far more difficult than it looks like on TV. Here are a few suggestions if you are considering this type of buying a home.
- Try to find an off-market listing. If your uncle or friend from church might be selling see if they will sell to you first without listing it. It is in the best interest of the seller to list it on the MLS to “open the market” and expose it to the highest number of people. However, some sellers don’t want that exposure and you may be in position to buy a property like this at a lower cost.
- Become friends with a contractor. When those personalities on TV go in a home they either have knowledge themselves of contracting work or they have a contractor that they deal with directly. This knowledge of home repair is imperative because while you might have the imagination to look at a home and say what would look good, you also need to know the costs. A contractor can help you know your costs before you buy so you know if you can afford the work necessary or not.
- Buy cash. This may be the biggest challenge for the average buyer to come up with $500,000 or so of cash to purchase. However, in order to get the best opportunities buying cash allows you to have great buying power and get the best deals. This doesn’t mean that you can’t get a loan to buy a distressed property but two things become more challenging: getting your offer accepted and getting a loan that will approve buying a house with many faults. Basically, the easy way to make a large profit is if you can buy all cash like on TV but you can still do it with a loan it just becomes more challenging.
- Waive contingencies. This is HIGHLY risky, however, it is very attractive to sellers if a buyer says they will buy the home “As-Is” no matter what is wrong. This means that even if there is a major fault, like a broken septic tank or foundation issues, you, the buyer, must take on all costs for repairs and fixing the problem. Once again, if you have a contractors background that can handle all issues then waiving contingencies may not be a big problem. But if you are an average buyer this may not be advised.
There are many more but, the above recommendations are what most of the TV shows are able to do when they are buying homes which makes it look easy to the viewer. The reality of these “reality” TV shows is often not what it seems. The average buyer can still find good deals, but a strong dose of research and advice is advised before they jump in.
Let me know if you would like to discuss this investing any further!
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