Buying abandoned properties can be a great real estate investing strategy. People looking to make money in real estate can start off small with one abandoned house as an income property. Even experienced real estate investors are always on the lookout for abandoned properties. They are perfect for house flipping or for implementing a rental property investment strategy. No matter which strategy you follow, we recommend investing in abandoned houses.
But how to buy an abandoned house? Are these properties listed for sale with a real estate agent? Well, no. It is not that straightforward which is why we have put together the ultimate guide to help you learn how to buy this type of investment property. This article looks into a few different aspects of investing in abandoned houses:
- Identifying abandoned houses
- What to know before buying abandoned properties
- How to find abandoned houses for sale
- How to find out who owns a house that is abandoned
- And doing investment property analysis on an abandoned house to check its potential.
What Qualifies as Abandoned Property?
Abandoned property is one that is not in use and sits empty. You can recognize an abandoned house by its unkempt yard or a broken window.
Reasons can be plenty:
- Owners got evicted by the mortgage lender and it has not been listed for sale yet
- Owners live elsewhere and do not want to rent out the property
- A death or a divorce in the family
When buying abandoned properties, you will typically come across two other key terms: distressed properties and off-market properties. It’s important to understand each one in order to know what kind of abandoned house you are investing in:
- Distressed property – this is a home in bad condition due to financial problems or simple neglect. This usually happens to single-family homes or row houses. They are harder to maintain than a condo, where there often is a property manager.
- Off market properties – these are properties for sale but the listing is not public or advertised. Some owners prefer to keep the selling process away from the eyes of the neighborhood. Others are looking for a specific type of buyer and do not want to attract the attention of everyone in the housing market.
Related: 10 Easy Ways to Find Off Market Homes for Investment
A Few Things to Consider Before Buying an Abandoned House
When buying abandoned properties, prepare to put in work and money into repairs. Sometimes the plumbing and the electrical system need replacing. There might be leaks in the roof or water damage in the walls. Probably the furniture and the appliances are outdated, too.
Yet, the pros outweigh the cons. First, there is less competition because fewer buyers are willing to invest effort and money in repairs. Some home buyers would not even consider buying abandoned properties because this would delay them moving. The sellers are also willing to make the deal fast because they want to get rid of the property.
Second, abandoned houses sell below market value so you could get an investment property in a good neighborhood without paying the full price. After some renovation, the property’s value might even exceed that of the neighboring houses. If you are a real estate investor willing to take the risk, you are in for a higher return on investment.
Related: What Is a Good ROI for Real Estate Investments?
Investing in abandoned houses is a good way to make money in real estate even if you don’t have a lot of cash, to begin with. Given that abandoned properties typically go below market value, you will not need big startup capital. You might not even need financing!
Maybe real estate investing is your side income. Buying abandoned properties, fixing them and flipping them or renting them out is easier to keep up in this case. It requires less cash flow at any given time than buying luxury real estate, for example.
Particularly buying abandoned properties to rent out makes perfect sense. While renovating, you can do some restructuring to make the property more suitable for renting out: add more bathrooms and bedrooms, make separate entrances, etc.
Related: 5 Home Renovation Ideas Worth Investing In
How to Find Abandoned Houses for Sale
- Driving for dollars – drive around a neighborhood to identify abandoned houses for sale first-hand. This approach works if you are looking to invest in an abandoned house in your city.
- Bank listings – banks usually keep online listings of properties for sale after foreclosure. This is a good way to scout abandoned houses outside of your city which can be used as a vacation rental, for example.
- The Mashvisor Property Marketplace – this is a part of the Mashvisor platform that lets you search for off-market, foreclosed or auction listings. It also lets you analyze the investment property using key metrics to inform your buying decision.
Mashvisor Property Marketplace
How to Find Out Who Owns a House That Is Abandoned
Have an abandoned property in mind but wondering how to find out who owns the house?
Mashboard can provide you with homeowners’ data and their contact details. The platform also lets you reach out to those owners directly using emails and email templates. The Mashboard covers the whole US housing market so you are able to find and buy abandoned property in any city.
Mashboard
As you can see, Mashboard directly connects you to the owners so buying abandoned properties is no longer that hard. Try Mashboard today.
Analyzing an Abandoned Property
Before buying abandoned properties to rent out, you should analyze them as а real estate investment:
- Neighborhood analysis – it is important to evaluate the neighborhood for rental income. The Mashvisor heatmap analysis tool shows you the average Airbnb cash on cash return and the traditional cash on cash return in the neighborhood. It also shows the average Airbnb occupancy rate in the area to help you choose between renting out on Airbnb or simply listing a long-term rental property.
- Investment property analysis – analyze any income property with the investment property calculator. Add it as a listing and benchmark its expected profitability based on the cap rate and cash on cash return. Such analysis is very helpful when buying abandoned properties because you have no other way of knowing how much you can be making renting it out. Usually, the sellers cannot give you rental income figures.
Mashvisor’s investment property calculator and neighborhood analysis tool make buying abandoned properties easy. To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
Conclusion
Buying an abandoned house is a smart way to get an income property in a good location for less. You might even be able to restore it and turn it into a top rental property, driving the prices of the neighborhood up.