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Constructing a diverse real estate investing portfolio creates more opportunities to build wealth and open doors for additional investments. One challenge in real estate investing is finding properties to purchase. This is true whether you’re looking for a long-term investment, like a buy and hold, or short-term investment, like a fix and flip.
Probate properties generate another way to locate and buy properties for your real estate investing business. Because many real estate investors don’t know about or understand probate properties, there is less competition to buy.
Probate Properties Defined
The probate process manages the distribution of any remaining assets of an estate after a death. Each local municipality handles the probate process. Also, the process many differ slightly in different locations. However, in general, the probate process evaluates the deceased person’s assets and outstanding debts to determine asset distribution.
During probate, the court identifies and pays the debts owed by the decreased before the heirs receive the remaining assets in accordance with the will. Part of the assets include owned real estate properties. If the deceased has outstanding debts, the state sales the owned property, like real estate, to cover those debts. In other cases, the heirs may not want to take possession of the property and instead opt to sale.
This opens the door for an investment opportunity for real estate investors. The real estate investors may purchase probate properties from the county or the property’s heir depending on the specific probate circumstances. While probate properties offer a solid investment opportunity, remember the process involves a death. Stay professional and sensitive throughout the process.
Probate Property Timeframes
Probate properties usually do not move quickly. Investing in probate properties requires patience to navigate the legal procedures. Debt collectors and heirs have defined timeframes to make a claim to the estate.
In addition, you don’t want to seem too pushy when dealing with a grieving family. Even if no heirs exist, you want to maintain a good reputation with the local officials managing the estate. Patience builds that positive reputation and future opportunities.
Probate properties are a good source for investments, but they do tend to move slower. Combine these longer timeframe deals with shorter term options, like wholesaling, to keep your business on track.
Probate Property Profitability
The reason probate properties make a solid investment isn’t just because they locate new investment opportunities. They also often sell for less than the actual market value. This is true for other types of properties sold by the courts, like tax delinquent and foreclosure properties. However, the properties are sold “as-is” and may require repairs.
Probate properties work well for fix and flip where you can buy low, renovate and then sell for a profit. They also often work well for buy and hold to use as a rental property. Many possibilities exist. You decide how each probate property works best within your portfolio. Regardless, if you manage the deal well, there’s room to make a profit.
How to Work a Probate Property Deal
First, read up on the process for probate properties. Contact the municipality where you want to buy and ask about the procedures and processes for their specific county. Determine whether the county has an online list of properties. If so, probate properties offer a path to virtual real estate investing.
The record includes the detailed information about the property, like the address, name of the deceased, probate administrator and benefactors. Review the probate list regularly to find properties that match your investment strategy.
When the property details list an heir, you may reach out to the heir directly. However, use compassion and respect in your communication. Offer your condolences before you ask to buy the property. Remain patient. Probate deals aren’t the time to push aggressively to close the deal.
Make the process easy for the seller. Highlight that you’re willing to buy as is or for cash, if that’s the case. Position yourself as an easy choice for the seller to work with.
Probate Property Benefits
A high percentage of probate properties don’t have a lien. This means there’s no mortgage to pay off as part of the closing process. A clear title is a clear benefit of probate properties! While many times the probate process takes time, sometimes the heir wants to sell quickly. With a clear title, this is more likely.
As mentioned, probate properties often sell for below market value. Many times, the seller doesn’t want to make repairs, clean out the property or meet the requirements of an inspection. They will take a lower price to reduce their burden and effort.
In addition, probate properties have often been off the market for years, if not decades. With a probate property, there’s potential to upgrade the property to current market standards. Probate properties create the potential to build wealth through a higher sale price or monthly rental income.
As an investor, finding properties at the right price to make a profit presents a challenge. Probate properties reduce that challenge. Since there is less competition, you have a greater chance to find more great deals.
Take a Chance on Probate Properties
Deepen your portfolio and increase your wealth by investing in probate properties. Once you figure out the local process, probate properties are a great resource to locate new investment opportunities.
