Have you ever driven by a rundown, boarded up house and thought to yourself “I bet I could get that place for a steal!”? We’ve all seen those dilapidated old homes that look like they’ve been forgotten for ages, with overgrown lawns and peeling paint. There’s a good chance many of them are abandoned.
While the idea of scoring an absurdly cheap property may seem enticing, you probably assumed buying an abandoned home required having lots of cash on hand or getting bank financing. But what if I told you there are ways to acquire abandoned properties with little money down? In fact, it’s possible to purchase abandoned homes without any money at all in some cases!
In this guide, we’ll walk through the process of identifying abandoned properties in your area and learning how to buy abandoned homes with no money down. You’ll learn how to find abandoned homes, evaluate ownership status, get creative with financing, make offers, and finalize purchases. With the right strategy, you can land deeply discounted properties and flip, rent, or renovate them into income-producing assets. Sound too good to be true? Let’s dive in!
Finding Abandoned Homes
The first step is identifying potential abandoned homes in your target neighborhoods. But how exactly do you spot an abandoned property?
An abandoned home is one where the owner has moved out and relinquished all property rights. This differs from a vacant home which is unoccupied but still has an owner. Both abandoned and vacant homes will often show signs of neglect like overgrown landscaping, structural damage, or boarded up windows.
Drive around areas you’re interested in investing and look for obvious indicators the home is vacant. No cars in the driveway, accumulating mail, or exterior disrepair are good signs. You can also check online foreclosure listings and contact your county clerk’s office to get lists of properties in distress.
Ask your mail carrier if they’ve noticed any consistently vacant homes on their route. And don’t be afraid to knock on a neighbor’s door and politely ask if they know whether the run down home next door is abandoned.
Check for local listings of government-owned and bank-owned (REO) properties which are often sold at a discount at auction. You can find foreclosure auctions through sites like Auctions.com and RealtyTrac.com.
Real estate agents are invaluable for helping you identify abandoned homes before they hit the MLS. A good agent will leverage their local market expertise to point you to deals.
Once you’ve identified a promising home, it’s time to confirm it’s truly abandoned by researching property ownership records.
The county tax assessor’s website will provide the name of the legal owner. If no owner turns up, or the records show an out of date mailing address for the owner, check with the local municipality. They’ll know if a property has been seized due to unpaid taxes or condemned for being uninhabitable.
A title search will also help uncover any liens against the property. You don’t want to unwittingly take ownership of a home saddled with debts you’re now responsible for.
Take the time to verify a vacant home isn’t just in disrepair but completely abandoned. The process for purchasing truly abandoned properties can be much simpler.
Coming up with financing poses the biggest hurdle when buying abandoned homes. Traditional mortgages usually won’t work because the homes are uninhabitable. Even if you could qualify for a loan, the property likely wouldn’t appraise.
This is where you need to get creative:
Loan assumption allows you to take over the mortgage of the previous owner. This requires their approval along with the lender’s. It only works if the loan is assumable, meaning it can be transferred.
Government programs like FHA 203k loans provide financing for fixing up distressed properties. Down payment assistance programs could also help you buy abandoned homes if you qualify.
Home equity loans leverage the equity in a property you already own, essentially providing a cash-out refinance to use toward your next purchase. The home equity covers your down payment on the new abandoned home.
Hard money loans are offered by private lenders who’ll fund deals traditional banks won’t touch. The catch is the high interest rates and fees – often 8-12%.
In rare cases, you may find a motivated seller willing to owner finance the purchase themselves if it means avoiding foreclosure. Don’t count on it, but don’t rule it out either.
Making An Offer
Before deciding what to offer, you’ll want to inspect the property thoroughly to estimate needed repairs. Calculate the after repair value (ARV) minus your rehab budget to arrive at the maximum you can pay.
Aim to purchase the home far below market value – at least 30% less than comparable fixed up homes in the neighborhood. The lower the offer, the more upside when you eventually sell or rent the property after renovations.
Remember to budget for repairs, financing costs, taxes, insurance, fees and some contingency. It’s better to be conservative in your projections. Abandoned homes often have hidden issues that get uncovered during renovation.
Closing the Deal
If you come across a truly abandoned home being sold at auction, the process is straightforward – just enter the winning bid. Otherwise, make your offer to the identified owner and finalize a purchase contract.
You’ll need to obtain financing if you aren’t paying cash. Work with your lender to get approval and submit paperwork to open escrow. The title company will handle closing and preparation of all required documents.
Once everything checks out legally, you pay any associated fees and the home is yours! Now the sweat equity work begins…but we’ll save that for another article.
Tips for Success
- Act quickly when you find a good lead because competition from investors is stiff
- Hire an experienced real estate agent, contractor, lender to help guide you
- Be prepared for costly surprises – have contingency funds
- Research laws and timelines – foreclosed homes can’t always be purchased directly
- Getting a great deal requires patience and persistence
Buying abandoned homes with no money down takes creativity and grit. But with the right approach, you can build a portfolio of affordable investment properties to fix, flip, or rent out. Always carefully vet any property and consult professionals to avoid costly missteps. The rewards of abandoned home investing can be huge.
Abandoned homes offer the ultimate discounted real estate investment if you know where to find them and how to buy them creatively. Now that you understand the process of identifying and purchasing abandoned properties with little money down, you can start looking for potential deals in your local market.
With some hustle and smart leverage of financing programs, you may be able to acquire an investment property for pennies on the dollar! Just be sure to do your due diligence and adequately budget for repairs and expenses. Abandoned home investing takes work, but the payoff can be well worth the effort.