Investments Explained: Repossessed homes

The event can be a tragic occurrence for the homeowner, but also a strong opportunity for investors. Indeed, repossessed property investments are some of the most lucrative products on the market and are a popular target for many buyers.

Why? It starts with the price tag: repossessed homes are often sold below market value and BMV property gives investors the biggest chance of making a profit.

The price is reduced heavily by the lender so that the property can sell as fast as possible. For this reason, cash purchases are common to ensure the transaction proceeds quickly.

  The money from the sale will then go towards recouping the debt owed by the previous owner. (For the more troubled investors out there, this is a reassuring reminder that buying repossessed homes is a natural – and important – part of the housing cycle.)

Once purchased, the property can be renovated ready to sell on at market value. Depending on the circumstances involving the eviction of the previous homeowners, repossessed homes can often be vandalised or in a state of disrepair. In that sense, they can be like renovation properties, requiring additional work to improve the standard so the homes are habitable.

The other option is to rent out the renovated property and then earn a regular income at a potentially high yield. During times of recession, this option is favoured by many investors, who let properties out to former evictees to provide them with a place to live, while still generating a profit.

With additional factors ranging from old owners and economic conditions to unforeseen building costs and other rival buyers, investing in repossessed properties can be an unexpectedly expensive enterprise. However, if investors have the stomach for the moral conundrums and the wallet for the building challenges, it can be an extremely smart property investment.

For more information on repossessions , or to see listings of investment properties, click here .