All distressed properties are not created equal. Some can be rehabilitated into a healthy return on your investments, but others will cost more in the end than they’re actually worth. Here are some tips to help you sift the profitable distressed properties from the unprofitable ones.

1. Watch for early signs of distress. Properties become distressed gradually, not overnight. Find a neighborhood you want to invest in and watch the properties for signs of improper or slackening maintenance.
2. Invest in distressed properties, not distressed neighborhoods. Buying the worst property in a good area of town can lead to a profitable resale, but buying a cheap property in a bad part of town is unlikely to result in a satisfactory return on your investment. Do your due diligence on both the property and its surrounding neighborhood.
3. Estimate the cost of repairs ahead of time. A distressed property will need anything from minor rehabilitation to major renovations. It’s important to know how much it’s going to cost you to fix things up so you don’t end in over your head (or your checking account).
4. Familiarize yourself with your state’s foreclosure laws. Knowing the ins and outs of your local foreclosure laws can help you prepare yourself. The length and complexity of the process varies from state-to-state. In Colorado, it takes at least 30-60 days to start the foreclosure process and 110-125 days before the property can be put up for sale.

So how can hard money or private capital loans help you invest in distressed properties? First, it’s often necessary to act fast once a distressed property is available for purchase. Hard money or private capital loans can help you do this by closing in two weeks or less (in most situations). Second, private lenders use an asset-based underwriting process that weights the value of the property more heavily than the borrower’s credit score. And, third, private lenders can opt to use the “after-repairs” value of a property to determine its loan-to-value (LTV) ratio if it is higher than the purchase price, which can help give you additional funds to cover necessary repairs and improvements.

If you need a private capital loan to invest in a distressed property, contact Montegra today at 303-377-4181.