Distressed UK property
There will always be distressed sellers in the property market, who are forced to sell due to circumstances, and in the current economic climate the numbers of those affected have increased and diversified. Nowadays that list includes people that have lost their jobs and cannot afford their mortgage, property investors who are in negative cash flow, lenders in need of liquidity or banks.
Why buy distressed property
According to experts, distressed property represents a significant opportunity and is where the market is now.
With the prospects of the economy steadily recovering, many believe that the window of opportunity for this kind of property is relatively short. According to The Council of Mortgage Lenders the UK housing market is likely to stabilise next year, but there are still good opportunities out there.
Where to buy
When looking at acquiring a repossessed property, the criteria to follow are the same as any other type of investment property, namely location, yield, value and condition.
Those that are interested in investing in a distressed property - especially if it is for buy-to-let purposes - should be looking for a location that is safe, have shops and schools around and decent transport links, otherwise it can be difficult to rent out.
Gross yield is less important than net cash flow and high service charges in some apartment blocks can decimate this. In general, however, it is relatively easy to find good-quality property that yields between 7% and 10%.
How to find distressed properties
Finding the right distressed property to buy involves a lot of hard work, research and time.
Usually the property is bought after repossession, either at an auction or through an agent. A good starting point is searching on the internet for foreclosed or distressed properties. If the affected party is a developer it is much better to deal with him before repossession since he may be willing to offer a significant discount especially if stock is purchased in bulk.
Even though some opt for employing an expert to source properties it is a good idea to do some research and see if it is worth the money you are going to be charged. In some cases they will simply give you access to a list of properties. Some other companies offer properties which have been subject to a detailed analysis and this can be a more interesting option.
Some companies even approach individuals facing repossession and offer to buy their property at a knock-down rate and to rent it back to them.
Foreclosure properties are potentially the most profitable, but require a lot of considerations and attention to detail. But being as it is possible to buy distressed property for 50-60% below what is sold for two years ago, and achieve 10% or more in rental yield is very much worth the effort.
Questions and Answers
Distressed properties are the one which are put on sale due to inability of the owner for repayments. these are the best investment as the property can be achieved at the minimum market value.
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