What To Know Before Investing In “Distressed” Properties
As in most other states, Florida’s property values tend to ebb and flow with the popularity of its real estate market. Because of this, investors will sometimes look to invest in what are known as ‘distressed’ properties. Distressed properties are usually those in legal or financial difficulty, such as those in foreclosure or affected by bankruptcy. They can prove to be valuable opportunities for investors, but it is crucial to understand the risks involved before investment. The right real estate attorney can help.
Be Ready For Anything
Distressed property, by nature, carries financial irregularities, but it is imperative that the specifics be understood before going forward with investing. Some properties become distressed because the owner simply cannot afford to maintain them; others may have multiple liens on them or issues like boundary disputes. An investor must be aware of potential issues, and be ready to either accept them or turn away from the property.
The reason this is important is because so often, distressed properties have hidden costs, for which the new owner or investor is held responsible. Even if there are no disputes over the property or unpaid liens, more everyday issues like unpaid homeowners’ association (HOA) fees can still be an unforeseen financial burden. Another common ‘hidden cost’ can be bringing a property up to code, or ensuring that it complies with zoning laws, as not every seller will disclose these facts if they do not affect the property’s value.
Due Diligence Is Paramount
The most important thing an investor can do if they want to invest in a distressed property is to verify everything – even the most honest and ethical seller may make mistakes, and less ethical sellers may actively try to conceal issues from a buyer simply to make the sale. In addition to sellers’ statements, an investor must inform themselves about any potentially relevant local laws – for example, in many oceanfront communities, properties come with obligations to upgrade or maintain the sea wall, which can be expensive if put off for too long.
It is the inherent possible complexity of these transactions that make having a real estate attorney on your side a true advantage. Someone with legal experience in these matters will have a better idea of what to look for, and can help to illuminate any potential red flags before an investment or purchase agreement can go forward. Alternatively, an experienced real estate attorney may be able to help extricate a new investor from a potential financial boondoggle.
Contact A Tampa Real Estate Investment Attorney
Investing in Florida real estate can be profitable, but especially with distressed properties, it is important to be fully aware of the potential of a site before moving ahead financially. A Tampa real estate investment attorney can help – contact the Seward Law Office today to schedule a consultation.
