1. It’s hard to find abandoned houses.
2. It’s hard to find the owners of abandoned houses.
Sure, it takes a little leg work and they’re definitely not as easy to find as foreclosures or pre-foreclosures are… but that means there is very little competition with abandoned houses because nobody really specializes in finding them.
If you are savvy and resourceful or if you know how to work your way in and find these houses, you potentially could be sitting on a gold mine. The profit margins on abandoned houses are usually higher than what you find with the REOs, MLS properties, postcard deals, out-of-state owners and the like.
Plus, the lack of competition means you will have an easy time putting an abandoned house under contract at the lowest possible price.
This Is Why You Should Consider Abandoned Houses
When you are dealing with abandoned houses, it will most likely by easier to negotiate as the sellers are not emotionally attached to the property. They often agree to very low earnest money and selling prices, which means you get more money in the end.
More often than not, these home owners have code enforcement harassing them, so they’re even more motivated to sell. They want to get rid of this problem. And you’ll be the one to take their headache away.
Another problem with homeowners who have abandoned houses could be that their insurance has lapsed. That makes their mortgage company very unhappy. It also prevents the homw owners from making any claims that will allow them to fix it up.
As a real estate investor, you can enter the picture and try to help these guys solve their problem while making money yourself… That’s what we call a win-win.
The market for abandoned houses is always resilient. People always abandon houses for various reasons. Although there are many more abandoned houses in an economic downturn, such as 2008-2009, this type of property is a lead source that will never dry up.
Come Out, Come Out Wherever You Are: Finding Abandoned Houses
Abandoned houses exist in every market – old neighborhoods, new ones, middle-class, low-income, war zones… anywhere.
As you dive deeper into this industry, there will be a lot of houses that you will come across. They’re not necessarily completely run down and usually don’t scream, ‘Hey, I’m abandoned!’
Sometimes the owner could still be maintaining the house or the neighbors will cut the grass and park their cars in the driveway.
On the other hand, there will be obvious signs of neglect on some of these houses:
- Overgrown grass and shrubs
- Broken or boarded up windows
- Stickers and/or flyers on the door
- Mailbox open with mail inside
- Piled up newspapers on the driveway
- Tarps on the roof
- Weeds in the garden or bushes
- The house is on the market for a REALLY long time. (Whether the house is abandoned or not, this is definitely a lead.)
And pay attention to blinds and curtains… are they closed all the time?
Be sure to look out for the absence of a welcome mat, shoes, chimes and bells on the front porch—stuff like that
Visit the house on trash day. Is the trash ever put out? If not, you may have an abandoned house.
Why Would Someone Abandon a Perfectly Good House?
Here are some of the major reasons why people abandon houses:
1. Family Problems
Most investors usually don’t want to deal with this kind of D.R.A.M.A. Hey, I get it…
But, dealing with it might actually only take 10 to 15 minutes of talking with a seller before making a deal.
There is also a scenario where people have no idea what to do with a house they inherited. Most of the time, they’ve never really owned a house themselves and they are immediately faced with the due dates of taxes and insurance.
2. Damage to the House
Another reason could be because of massive (or even minor) damage in the home, such as fire damage, water, mold or even AC problems.
If the homeowners let their insurance lapse, they may have no way to pay for the repairs.
3. Sudden Illness and Debt
Think of this unfortunate possibility: Someone in their family gets diagnosed with a serious illness, and they have to go back and live with their family members.
This situation often leads to the next factor – liens, bills, high debts and the like.
Or, consider if the homeowner gets fired – the bills may be piling up.
Divorced couples, who had bought a house together while married, usually end up selling the house because they can’t usually handle the payment under one income.
Or, they need to split the proceeds from the sale, if there is any equity.
5. Job Transfer
If a person gets transferred or finds a job in a new city, they would most likely want to sell the house quickly.
Many times, their company pays for their move and the owner is not as emotionally invested in the home.
6. Code Enforcement
Code enforcement is the government department that inspects buildings and residential homes for code compliance under building permits or as a result of complaints.
Some house owners who need to sell the house as soon as possible will sometimes start adding a porch or closing their carport and turning it into a room. When code enforcement drives by they’ll see – and those things may not be allowed depending on the neighborhood regulations or their project just isn’t up to standard.
7. Behind on Taxes
When owners fall behind on their taxes and can’t afford to pay the sum, they’ll eventually start receiving letters from the tax folks threatening to auction off their home.
I know, there are some harsh parts of this business, but that’s real life, folks. I just want to provide you with all the possibilities so you’re better equipped to succeed.
8. When Someone Goes to Jail
This scenario is similar to the divorce situation…
When the owner of the house or the spouse goes to jail, they’re now down to one income plus they are facing legal bills.
Getting Abandoned Houses Under Contract (3 STEPS)
There are 3 simple steps in obtaining an abandoned house:
1. Get their attention. The owners who abandoned their houses may feel as if they have no way out. And that’s where you come in. You have to get their attention.
2. Offer them hope. Be the easy button to their problem.
3. Solve their problem. You are going to solve their problem. Generally, the bigger their problem the bigger your profits.
Remember that just because the house is abandoned, does not guarantee that it’s a deal.
Time is money and no matter how you look at it… everybody’s time has a dollar value on it. Your time is the most valuable asset that you have, so you do not want to waste it by chasing deals that aren’t deals. In fact, there are plenty of abandoned houses that lack the potential to become a deal.
You obviously need to investigate all the abandoned houses you find to know if it’s a deal or not. Pay close attention and analyze the property.
Don’t waste time on bad deals. That way you can move on to the juicier, bigger, fatter, paydays.
How You Can Get Started TODAY!
- Drive around your neighborhood. Look for signs of abandoned houses around your neighborhood. Connect with the neighbors, ask them questions.
- Identify the reason why the house is abandoned. It is very, very important to find out why someone abandoned the house. By identifying the reason, you can devise a way to solve their problem.
- Build a relationship. Build rapport, ease into negotiating and get the house under contract. While you’re doing those things, continuously work on the relationship by trying to solve their problem while building trust.
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Got any hard-learned lessons, falters, or good ‘ol fashioned mistakes to warn others about? Share below! We’ll take the best ones and write about them in a future post.