Tips for Finding Distressed Properties for Hard Money Loan Investments

There are several types of real estate investment strategies for investors to explore. For instance, you can buy investment properties to rent, invest in vacation homes, or even buy distressed properties to fix and flip. However, finding distressed properties isn’t as simple as buying a home that’s immediately ready to rent. As such, investors will have to research to find the best properties to buy and figure out the best way to fund their investments. So, read along as we go over tips for finding distressed properties and how hard money loans can be an excellent financing solution.

Contents of This Article: 

• What Is a Distressed Property?
• Tips for Finding Distressed Properties
• Financing Options for Buying Distressed Properties
• Why Use a Hard Money Loan for Your Investment?
• Get Funded With Maryland Hard Money Lenders

What Is a Distressed Property?

A distressed property is a type of real estate asset in a state of financial or physical distress. Usually, the owner of a distressed property cannot maintain or pay the mortgage, or the property is deteriorating due to neglect or damage. As such, these properties are often sold below their market value, making them attractive to real estate investors looking for bargains. 

That said, real estate investors look for three main types of distressed properties, including the following. 

• Foreclosures- When a homeowner fails to make mortgage payments, the bank or lender may take legal action to repossess the property. As such, the property becomes a bank-owned or real estate-owned (REO) property that the bank tries to sell to recover its losses.
• Short Sales- In a short sale, the homeowner owes more on their mortgage than the property’s current market value. They negotiate with the lender to sell the property for less than the outstanding mortgage balance.
• Fixer-Uppers- Fix-and-flip properties require significant repairs or renovations due to neglect, damage, or age. That said, fixer-uppers can be distressed in terms of physical condition but may not be linked to financial difficulties or foreclosure.

Investing in distressed properties can present opportunities for investors to acquire properties at a discounted price. Then, they can increase their value through renovations or holding onto the property until the market improves. However, it’s crucial for investors to thoroughly research the property’s condition and potential costs before making a purchase. After all, distressed properties may come with hidden issues and additional, unexpected expenses. 

Tips for Finding Distressed Properties

Finding distressed properties can be rewarding for real estate investors looking for bargains or projects to take on. However, knowing where to look and what type of properties you’re looking for is important. Here are a few tips for finding distressed properties quickly and efficiently. 

1. Online Real Estate Platforms
2. Public Records and Auctions
3. Drive Through Neighborhoods
4. Look at Your Local MLS
5. Check Distressed Property Websites

Online Real Estate Platforms

One of the simplest ways to find distressed properties is by utilizing online real estate platforms. Often, they’ll have filters that allow you to streamline your search for the properties you want to buy. Additionally, websites like Zillow, Trulia, or Realtor.com may have dedicated sections for foreclosures and short sales. 

Public Records and Auctions

You can always check public records for notices of default or foreclosure filings. Typically, you can get this information at the county recorder’s office or through online databases. Additionally, in-person and online foreclosure auctions can be a valuable source for finding distressed properties to invest in. So, consider attending foreclosure auctions to acquire properties at potentially lower prices. 

Drive Through Neighborhoods

A simple yet effective way to find distressed properties is by getting in the car and driving through neighborhoods. So, spend time driving or walking through neighborhoods that you’re interested in investing in. Look for visual cues of distressed properties, like overgrown yards, boarded-up windows, abandoned buildings, or signs indicating foreclosure. 

Look at Your Local MLS

If you can access the Multiple Listing Service (MLS) through a real estate agent, ask them to set up a specific search for distressed properties.

That way, they can use various filters to find properties that fit your criteria. Additionally, using the MLS can give you more detailed information about properties, like the condition, history, and any potential issues. With that, you can make more informed decisions about your next investment. 

Distressed Property Websites

Some websites and services focus on providing information about distressed properties in specific areas. These platforms can streamline your search and provide valuable data for nearby distressed properties. So, aside from mainstream real estate platforms, look at websites dedicated to listing distressed properties. However, keep in mind that some distressed property websites may require subscriptions or memberships to access their full database. 

Financing Options for Buying Distressed Properties

When it comes to financing a distressed property, it can be more challenging than buying conventional properties due to their potential risks. 

• Cash Payment- Paying with cash is the most straightforward option for buying distressed properties. So, if you have the funds available, a cash purchase can give you a competitive advantage. After all, it eliminates the need for financing approval and can lead to quicker transactions.

• Private Money Lenders- Private individuals or companies may be willing to lend money for distressed property purchases. Kind of like hard money lenders, private money financing may offer more flexible loan terms. However, interest rates and terms can vary based on negotiations.
• Hard Money Loans- Hard money lenders provide short-term loans for real estate investments, including distressed properties. These loans are typically asset-based, meaning the property itself serves as collateral. Maryland hard money loans are easier to qualify for than traditional bank loans, but they often come with higher interest rates and shorter repayment terms.

Why Use a Hard Money Loan for Your Investment?

Using a hard money loan for your investment can be beneficial in certain situations, especially when dealing with distressed properties or time-sensitive real estate transactions. For instance, some of the reasons an investor may choose a hard money loan include the following. 

1. Credit Issues- Traditional lenders may hesitate to approve your loan application if you have a poor or less-than-perfect credit history. However, hard money lenders are more concerned with the property’s value and your ability to repay the loan, and usually, they’re more willing to overlook credit issues.
2. Property Condition- Traditional lenders may avoid financing properties that are in poor condition or require significant renovations. On the other hand, hard money lenders are more willing to finance distressed properties, making them an attractive option for investors looking for fix-and-flip projects.
3. Quick Approval and Funding- Hard money lenders generally have a streamlined approval process compared to traditional lenders. For instance, they primarily focus on the value and potential of the property rather than the borrower’s creditworthiness. As such, the approval process is faster, and funding can be obtained in a matter of days, which is crucial in competitive real estate markets.
4. Flexibility- Hard money lenders are often more flexible in their loan terms and requirements. For instance, they can tailor the loan to suit the specific needs of the borrower and the property. This flexibility can be useful when dealing with distressed properties that may not meet the strict criteria of traditional lenders.
5. Non-Owner Occupied Properties- If you’re purchasing an investment property and not planning to live in it, traditional lenders may be less interested in funding the purchase. However, hard money lenders will look at the property’s potential and usually only fund non-owner-occupied properties.

Get Funded With Maryland Hard Money Lenders

There are several benefits to finding distressed properties and investing in them. For instance, if you’re a fix-and-flip investor, you can buy a run-down property, renovate it, and sell it for profit. However, these projects often move quickly, forcing investors to make quick decisions. So, if you’re an investor looking to fund a distressed property, you may look for a local hard money lender.

Maryland Hard Money Lenders offers fast and flexible loans for investors near the Baltimore area. So, if you need help finding someone to fund your next distressed property investment, contact us or fill out a loan application today.