Many cities are undergoing difficult times, with declining tax bases and populations that leave behind numerous abandoned properties. City governments and taxpayer organizations encourage the resale of these properties at extremely low prices. Buying and rehabbing them can be profitable, but the process requires patience, capital, determination and, perhaps most important, caution.
Items you will need
- Abandoned property lists
- Pre-approval letter from your bank
- Money for deposit and down payment
Determine your financial resources before beginning your search for abandoned property. Purchases of distressed properties, including abandoned properties, are cash transactions. You need to know how much you can put down as an earnest money payment to hold the property pending your loan approval, how much more you can pay as a down payment and how much you bank will lend. You need a pre-approval letter from a lending institution that spells out how much they'll lend you. Obtaining the pre-approval letter is a process similar to a loan application.
Select likely purchases from online lists of abandoned properties, some available without charge. Go to your county assessor's office and ask for their lists of tax delinquent properties, some of them abandoned. Some states, California for example, have a statewide abandoned property database that you can access online. An AOL Real Estate article notes that some cities -- Detroit and Philadelphia for example -- have lists of abandoned properties available to qualified buyers for as little as $1.
Qualify the property. Once you've located a property, have it inspected by a trusted contractor or inspection service. Many abandoned properties have serious repair issues, and you need to know, before bidding, how much they'll cost to repair. Consult with a real estate attorney about title and other possible legal issues. Make your bid "subject to financing and clear title," or ask your attorney to help you write up an offer that protects your interests, including your right to get your earnest money back promptly if the sale doesn't go through.
- Buying abandoned property isn't easy -- it takes a lot of work at every level, whether locating properties, qualifying them, determining how much you need to purchase the property for to make a profit, finding good workers to make necessary repairs and even protecting the property from thieves and vandals as you begin the rehab process. Be realistic about the time, money and expertise you have to succeed.
- Be cautious when you're getting the pre-approval letter -- banks sometimes bring up a new credit or financial issue before the closing that either delays or ends the process. When filling out the pre-approval application, make sure the bank is aware of any potential credit or financial issues that could be a problem later. It's better to have the pre-approval denied than to have your loan application turned down after you've made an offer, causing you to lose your earnest payment.
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