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  • Fenix Property Group

The Pros and Cons of Investing in a Distressed Property

Updated: Jan 10



There are countless strategies that can be used for real estate investing. At Fenix, we concentrate on distressed properties. We believe in their value, and our experience has taught us that they provide the best ROI.


Distressed properties are in disrepair or otherwise not up to par with the other homes in the area. In today's market, these properties can be a great way to get fair price on a home with the expectation that a varying level of work needs to be done. But before you sign on the dotted line, it's essential to weigh the pros and cons of this type of investment.


Here's a list of the pros and cons of investing in a distressed property:


Pros


There are a lot of benefits to buying a distressed property. It can be a way to get into the market at a lower price point for first-time home buyers. So if you're thinking about buying this type of property, here are some of the pros you can expect while working with us:


Lower Purchase Price


One of the most significant advantages of investing, that most of our clients get in a distressed property, is the significantly lower purchase price. This is because there is often a lot of work to bring the property up to par, and many people are simply unwilling to put in the time or money to do so. This provides an opportunity for investors like you who are willing to do the work themselves or hire local contractors to do for them. The importance here is factoring in these costs and making sure the final number is lower than what would be paid on the open market once complete.


Because these properties are often sold off market and if the previous owner was motivated to sell, there's a good chance to snag one for below market value.


With that goal in mind, working with us will give you access to the latest listings, especially in the Philadelphia area, and our expert advice on what to look for when purchasing a property. We will make it easy for you to find the right property at the right price!


More Negotiating Power



Given that the seller is motivated to sell, you may have more negotiating power regarding price. This could allow you to buy the property at a lower price than you would otherwise be able to get it for.


However, even though this could give you the opportunity to buy it at a bargain price, it is important to be aware that motivated sellers may also be more likely to take a hard line on negotiating terms and conditions. Properties like this are often sold as-is without contingencies.


Before we make an offer on your desired property, we will do our research to confirm that you are in a strong negotiating position. With our expertise, we guarantee you will get the house you want at the price you deserve.



Potentially Higher Returns/ The Opportunity to Add Value


If you're handy or have some experience flipping houses, investing in a distressed property could allow you to add value and sell it for a profit down the road. Of course, this is only possible if the property requires repairs within your scope.


Remember, our goal is to add value to the property without breaking the bank. Keeping your renovation costs low and choosing strategic repairs increase your chances of selling the property at a higher price than what you paid initially. In addition, if you decide to rent out the property, you can charge premium fees due to the location and/or amenities that come with the unit. It’s important to understand your neighborhood and demographic to ensure that you’re adding the right improvements to the home.


And regarding real estate profit, Philadelphia is a market with many potentials–and we specialize in that area. Our experienced team at Fenix Property will work with you to develop a customized strategy that maximizes and ensures your returns on your investment. We'll help you find the ideal property, whether a fixer-upper or a brand-new development.


A Sense of Satisfaction


Finally, helping someone out of a difficult situation can be its reward. Yes, there is potential financial gain, but helping someone in need should also be a factor in your decision-making process. This is also one of our reasons for specializing in distressed property. We ensure that we’re doing it for the right reasons.


Plus, you have the opportunity to create something beautiful. One person's trash is another person's treasure, as they say. With a bit of imagination and creativity, you can turn even the most dilapidated property into something special that reflects your unique style.


Cons


While there are certainly some great deals on distressed properties, it's essential to understand the risks before you make an offer. Here are the biggest cons to consider before you make an offer on a foreclosure or short sale that can be avoided while working with our team.


There may be hidden damage



While it's certainly possible to find a bargain on a distressed property, there's also a chance you could overpay if you're not careful. Remember: just because a home is being sold at a discount doesn't mean it's automatically a good deal!


Suppose the previous owner was less than forthcoming about the property's condition. In that case, severe underlying issues could need to be addressed before it's livable (or sellable). Chances are, the repairs could be more than you bargained for—and more than you can handle financially.


With that in mind, be sure to get a thorough inspection from a qualified home inspector—otherwise, you could end up being stuck with costly repairs that eat into your profits (or worse, leave you underwater).


It sounds scary, but don’t worry! That’s why we are here. We can get the home you've always wanted without all the hassle and ensure all those hidden damages are taken care of.


Tough Neighborhoods


In some cases, these properties are located in tough neighborhoods that can be difficult (and even dangerous) to manage. Another risk involved is difficult tenants. If the previous owner could not keep up with repairs, chances are that they were also unable to screen their tenants properly. As a result, you could end up with problem tenants unwilling or unable to pay rent on time, if at all. This can obviously lead to financial difficulties. Sometimes, a neighborhood can change in value from street-to-street, so it’s crucial to understand where you are investing.


This will not be your problem once you work with us. With Fenix Property, you don't have to worry about your property value going down because of bad neighbors. We conduct thorough research on neighborhoods to ensure you're moving into a safe and welcoming community.


A Lot of Work and Time



Finally, it's important to realize that investing in a distressed property is not for the faint of heart. Restoring a distressed property to its former glory takes time--lots and lots of time. It will likely require a lot of work (or on the part of your contractor) to get the property into shape before it can be rented or sold.


And unless you have extensive experience in construction or real estate, it's best to leave this one to the professionals–and that is where we come in. We'll provide you with all the information you need to make an informed decision. From finance to inspection to moving day, we've got you covered!



Final Thoughts


While it's no secret that flipping houses can be a great way to make money, it can be more complex than it looks on TV.


To be successful, you need to have a firm understanding of the market and the potential risks involved. By being aware of both the pros and cons of investing in such a property, you'll be better equipped to make the right decision for you—and your wallet!


And if you're in the market for these properties, Fenix Property Group is the perfect company for you! Finding the ideal property can be challenging, but we're here to help. We'll work with you to find a property that meets your needs and budget. Once you've found "the one," we'll help you get it at a great price.


Don't put off contacting us any longer! We would love to help you set up your search for the perfect distressed property. Reach out to us through our website's form or call us. Today is always the best time to start!

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