A question that is often asked by first time investors is how one can make money from distressed house sales.
Thoroughly do your research on legalities and ensure that the property doesn’t come with large arrears rates, taxes and levies, which you could be liable to pay.
Rael Levitt, CEO of Auction Alliance, says there are essentially two main ways. ‘’One way, is to buy at auction from a sheriff or insolvency at below market rates, and sell it at market value or above. Alternatively, you can set up an additional stream of income by buying distressed properties and renting them out, providing you with annuity income.’’
Is it that easy though? Can you just waltz along to an auction, pick up a property for peanuts, and start making money from it? If you are going to make money from distressed auctions you have to have a plan.
Levitt has the following advice for would-be investors:
‘’First and foremost, don’t think you’re the only person who has had this bright idea. If you’re going to get good deals, you’ve got to ensure that you are constantly ahead of the game and ahead of the competition.
He says buyers should be vigilant, and keep an eye on auctioneers’ websites, where the notices will go up before they have appeared in the newspaper. Alternately, he suggests using a recognised house listings we site, which is updated at least on daily basis.
‘’Remember what they say – the three most vital things to look for in a property are location, location and location, especially if you want to make money from the property.”
Location is a far more important factor than the condition of the property, says Levitt. “In fact, if you want to make money from distressed auctions, buy the worst property in a good neighbourhood, never the best property in a bad neighbourhood.
“Bear in mind that you can improve the condition of the property, but you can’t change the location. The factors you should be checking on in the neighbourhood include safety, schools and transport links.’’
Thoroughly do your research on legalities and ensure that the property doesn’t come with large arrears rates, taxes and levies, which you could be liable to pay.
‘’Do the existing owners or tenants still live there and, if so, are you going to be faced with costly eviction proceedings? Also be aware that with some tenants, the process to evict them if they are not paying the rent may be lengthy and tricky,’’ adds Levitt.
‘’Distressed auctions provide individuals with the platform to makes serious money, and in over 20 years in the auction industry, I have seen investors make killings.
“However, it doesn’t just drop into your lap, and it’s not an instantaneous get rich quick scheme. If you go about it in the proper way, and work with the right auctioneer, you’ll find it to be a highly profitable and lucrative form of investment.’’
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