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Cashing In on Distressed Property

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The current real estate market is certainly ripe for picking up bargains because distressed properties can be found everywhere.  Distressed properties are those in which the balance owed on the mortgage is greater than the property’s current market value.  As such, in many cases the property owner or landlord is unable to keep up with his or her payments, which can lead to a short sale or foreclosure.

Between the rotten economy, tightened lending standards, and the dreaded “shadow inventory,” the number of foreclosures is set to reach staggering levels.  And as we know from Economics 101, when supply exceeds demand, prices drop.  And that is what we can expect to see in the overall housing market for the next year or two.

So the bargains are out there, but the question remains: how can we grab them?  Well, the most important thing you can have is access to cash.  If you can pay cash – or the equivalent – without involving the bank, you have a great opportunity to snatch up incredible bargains.  You see, when you have cash, you can close faster and there is much less risk from the seller’s perspective, which will allow you to always get the lowest possible property prices.

Of course not everyone is sitting on a mattress full of cash right now, but there are other ways you could raise capital without using a traditional lender.  For example, you could look for a partner or silent investor.  The best way to pursue this course of action is to join one or more property owners associations in your local area and start making contacts.  This won’t happen overnight, but eventually you will start to build up a bit of a network.  Then, when you come across a real bargain, you could basically present your idea to members of your network…you’d be surprised how easily you’ll be able to raise capital if you’ve found a tremendous bargain.

Another option, if you have a home, is that you could get a HELOC (home equity line of credit).  Another possibility is to leverage a self-directed IRA (this is beyond the scope of this article but you can just Google it to learn everything you need to know).  Yet another option could be hard money lenders.  Although I generally wouldn’t recommend this, if you’ve got a steal in sight and you are desperate to acquire it at any cost, this might be worth exploring.  Just be very careful and do your homework!

So as you can see, there are some options for acquiring rental property without using a lending bank.  Yes, not all of these options are available to everybody, but if you’re in the right situation you may be able to incorporate one or more of these tips into your investing arsenal.  Good luck!

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