Vacant properties are strewn across different parts of most cities. They are very easy to identify as almost all of them show signs of wear and tear, peeling paint, unkempt yards, and more. Many investors actually search for vacant properties because they come with a lower price tag. In this article, we talk about important factors to consider when investing in a vacant property.
Why Do Investors Look for Vacant Properties?
All investors want is to make a profit on each property purchase. That is exactly why they search for vacant properties. Such properties might be present in a very respectable part of town but listed at a lower price. An investor might hope to purchase, repair, and flip the house.
The practice can be quite profitable provided you make the right purchase decision. Here are some of the questions to ask when purchasing a vacant property?
Why is the Property Vacant?
There can be multiple reasons why a property was abandoned by its owners. Neglect is a very plausible answer. Maybe this is the secondary property of a family that cannot afford repairs and has let it go to ruin. Chances are they may not be willing to sell it, and even if they do, they could be overcharging you for it.
There can also be legal issues involves, such as property ownership claims. The untimely death of the owner and no heirs or inheritors is another plausible reason. Ask the locals and they may tell you the property is haunted. Such negative connotations affect the future sale prospects even after you renovate it.
What Will the Repair Cost Be?
Second, you must run a cost analysis on the house. Get an expert to assess the condition of the house and provide you a quote. Take that into account as well as the asking price of the property. Do keep in mind that such properties often come with surprises, and you may discover mold or bad insulation when you start the renovation process.
What Will Be the Estimated Market Value After Restoration?
Once you’ve completed a cost analysis, determine the potential market value of the house. You can do so by taking in the measurements of the house and its features and ask the market price for similar properties.
Of course, you can add additional features such as environment-friendly and energy-efficient materials and windows. Such fixtures and upgrades can help raise the price of the property, but they also raise the cost. Make sure you conduct a proper cost-benefit analysis before you purchase a property.
Is It Worth it?
If a property has been on the market for a very long time, and the house is in terrible condition, you may be able to get a very good deal as the longer the property is on the market, the lower its value will get. Such properties do come with substantial repair requirements.
However, you will have to assess the costs, set a repair budget, and find out the market value of a newly refurbished house in the area before you make your purchase decision. If it all pans out, investing in a vacant property can definitely be worth the extra trouble and time.