When I talk to homeowners in run-down neighborhoods, I find that I’m almost always talking to hard-working families who take pride in their jobs and their homes. Their houses stand as testaments to their mindful tending, but unfortunately, the value of these properties in many areas has been depreciated by factors that are often out of the hands of the city’s residents. When the housing crisis struck, a number of residents in places like Detroit vacated, leaving behind abandoned properties to tarnish an otherwise handsome community. By no fault of their own, these empty homes have encumbered those who stayed with declining values, pests, and crime—all despite property tax hikes.

Sometimes, the best way to breathe new life into an area and revitalize your community is by making smart investments. We hear from a lot of first-time investors that they thought they’d never be able to tackle the work involved with transforming a tricky property into something that can help a neighborhood get back on its feet. Investing in your neighborhood’s abandoned houses allows you to take the fate of your community into your own hands. Instead of these blighted properties causing more plight, you can renovate and attract more hard-working neighbors into your community. The process doesn’t have to be daunting if you follow a few careful steps and keep a couple key points in mind.

How to Buy an Abandoned House For Best Investment Potential

Tracking Down The Owner

There’s some legally hazy territory that exists in the realm of abandoned properties. While the previous occupants are most likely out of reach and have long relinquished their rights to the home, the bank may be keeping it at arm’s length as well. The financial institution that provided the mortgage could be contesting ownership in court, in an attempt to push responsibility to the previous owner. This is because it keeps them from being held liable for the costly havoc an abandoned property wreaks in its vacant state, such as damage due to fire.

From fire hazards to infestations to vandalism to litter, these houses also carry an increased risk of being occupied by squatters—there are plenty of reasons for banks to dodge responsibility. An interested investor may have to dig into court filings to discover precisely who holds the hot potato. This means you’ll need to visit the Recorder of Deeds and search for records containing the property’s address, collect all proceedings, and sift through for the current name on file.

Plan some extra time for this task. You’ll need to consult multiple career clerks who are paid by the hour, not the job, negotiate a Byzantine filing system, search on old computers to find which books you need to consult in order to find which other books will actually have the records you’re looking for, decipher antique, poorly photocopied handwriting, transfer records stored in multiple formats—yes, including microfiche—then print or otherwise compile the files, which of course requires consulting additional clerks. Once you’ve tackled this Herculean task, you’ll face your next challenge: deciding whether or not to move forward with the acquisition.

Too Run-Down, Or Ready To Rehab?

Knowing all the potential issues before you purchase any property can save time trying to redress an ultimately doomed venture. To do this, hire a qualified home inspector to perform an assessment. A complete inspection should take 2-3 hours and will cost between $200 and $470, depending on the size of the house. While nobody likes paying out of pocket, this simple step can save you from losing tens of thousands on an investment that doesn’t generate a return.

An inspection will determine which essential repairs are needed, but you’ll need a property valuation tool to run the numbers. There are several options available, from old-school Excel worksheets to leading-edge software like ValueChek™. Whatever tool you use, it’s important to be able to localize the material and labor costs for the renovation so that you can know both how much you can comfortably pay for the property acquisition and what your potential returns might be upon selling.

Footing The Bill

If you are a new investor, the funds for the work may not yet be abundant in your savings. While some saved cash will go into the property, the bulk of it will likely be financed. Being an investment, it’s difficult to find a bank that will lend a cash out mortgage to complete the project. That’s where knowing the 101 on hard money lenders can fill in the gap.

High-interest cash loans come with the expectation of being paid back quickly, once the property has been renovated and subsequently sold. The rates may seem staggering, but that’s because the lender needs to make money faster, as the loan won’t be paying for long. These loans are often guaranteed by the property itself, so before you buy, have a clear marketing plan to sell the property—or else you might lose the whole thing anyway.

Help, All Along The Way

The value is there when it comes to digging into a renovation project, but the workload is considerable, and having reliable support along the way can make a significant difference. HomeVestors® is a national company specializing in buying, renovating, and selling houses, and while every franchise is independently owned and operated, the national network of resources and support is always available and ready to offer tools and expertise. This takes a huge burden off the shoulders of a first-time investor who face a real estate investing learning curve.

If you’re looking to breathe new life into the abandoned properties in your community, contact HomeVestors® to help get you on your way.


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