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Pros and Cons of Buying a Distressed Property

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The Pros of buying a property at below market rates

One of the main reasons why properties become distressed is because the owner cannot pay the mortgages to the properties. The owner of the property tends to seek out an easy exit from the property owner and tends to seek a suitable buyer for the property. If you are looking for property investment melbourne and then you must know advantages to buying the distressed properties as has been discussed below

●       Cost

The single most advantage to buying properties in distress is that the cost price can be one of the most advantageous ones possible. There are a variety of reasons that people would be in a situation of doing a distress deal but what is most important to the buyer is that he gets to own the property at a much lesser price than what the market commands.

●       Return on money invested

When a property or real estate is bought at below market realizations, the first positive side is that the buyer is in an in-the-money situation. That is he has a positive return on capital invested right from the word go.  And once the property cycles or the property clock has taken a turn for the better, it is possible to exit out of a property at a very attractive evaluation most of the time.

With investing sums of money, no matter however small or big, one single factor is the return on investment that it provides. Thus buying a property at below market evaluations could be a sure shot way to make quick returns on investments made.

●       State of the Property

Since in most of the cases of distress sale of a property, it occurs due to sudden change in the circumstances.  Be it a divorce or a foreclosure that meant fast disposal of property, it must be noted that the old users would have had to make a quick decision and move out fast. This would ensure that the person who purchases the property the second time around gets to own a piece of real estate that is relatively well looked after. 

Most people when they do move into a new property tend to need to invest some sums of money in having it redone or spruced up. With a distress sale of a property, it does not have to be so most of the time.

Cons of buying a property below market rates

Although for the buyer of real estate property, buying a property at below the market rates might seem a win-win situation. But there need to be certain points to be kept in mind when putting through such deals.

●       The speed of deals

Most distress sales are done quickly too. That is because of the person selling needs to get out fast and the person needing to make the purchase needs to get the deal done before anyone else.  What this means most of the time, is that the customer gets little time to weigh in the options and make a correct call. Instincts come to play a strong part in such deals, which is not a good thing to do. This sort of rushed in a situation could mean that the deal might not be as sweet as previously thought of.

There are a lot of quick deals that have been found to be regretted by the buyers at a later stage. So in case of deals have to be rushed through, it must be done after due diligence of the whole process.

●       Condition of the property

There are many reasons why properties have to be foreclosed. One of the most prevalent ones is that the owners could not pay up the installments to space. If this situation has come about for a long period of time, then it is bad news for the buyer of the property. The previous owners in sensing that the cash flow is not at the best position would have cut down on routine maintenance.

In situations like these, it is common to buy into a property that had defects and faults. This can be just on the outside or still more seriously, structurally too. Thus the cost advantage that a below market purchase brought about could be nullified by the repair that has to be carried out to the building to make it presentable or even habitable.

Conclusion

Buying property below market rates has its strong points but people getting into such deals should be watchful as to what they are buying into most of the time. One of the safest practices is to have real estate evaluated by professional evaluators.  As important, a factor to a distress sale is luck and this is something that few people admit to during property deals. Sometimes it is possible to get a real bargain whereas even the most watchful of people could end up having to put up with a raw deal too.  

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Sagar Mandan Sagar Mandan is HR and Content Editor at Techssocial. He has written and share many good and informative articles on various websites and niche like technology, web design, graphic design, marketing, business, social media, search engine optimization, etc. He loves to share knowledge and experience with his friends and colleagues.
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