Those issues are often enough to scare even experienced renovation investors away from a deal.
4 “Must-Knows” Before Taking on a Distressed Property 1.
Maybe you aren’t going to go through the full lengths a flipper would, but it still adds up—and you don’t necessarily have the advantage of leveraging a bank loan to pay for your renovation costs.
So make sure on the front end that you know exactly how you are going to make the numbers work.
Speaking of the renovation costs, handling a distressed property does take much more investment and involvement than a traditional investment property.
There are the property issues you could run into, such as mold, septic issues, asbestos, foundation problems, and any number of costly problems.
Buy and hold investors typically aren’t the ones who go after these highly distressed properties.
Again, in this scenario, an experienced buy and hold investor who targets these types of projects may already know on the front end that they can break even with a rental for a short period of time (usually two years or less) and then sell the property for a more modest return when the market allows.
But if you’re looking for long-term real estate investment, you don’t need to look for cheap properties to be profitable.
As for the original question of “are they worth it?” As a very experienced real estate investor and entrepreneur, I can attest to one recurring theme: Highly distressed properties work best for investors who have a lot of experience, capital, and talented teams at their disposal.