Getting onto the property ladder is hard, especially if you are a new investor or landlord-to-be who wants to buy a cheaper property, jazz it up, and flip it for a profit. Luckily, there is an option that means you won’t need to buy a home that is falling apart, and that is to look at properties that are for sale via probate.
What is Probate?
First, for a quick recap, what is probate? It is the legal process of distributing a deceased person’s property as well as assets to their beneficiaries (heirs) while also seeking to settle any debts that they may have had.
A property in probate is one that was owned by someone who has now passed away and is in the process of being sold, usually to pay the aforementioned debts, or to split the value of the home between the beneficiaries. It’s complex, but as a buyer/investor in a property, it is wise to seek advice on how to complete this process easily. So, what are the benefits of buying a property that is going through probate?
Save Money
When you are buying your first property, whether you intend to gut it and turn it into your own home or looking to buy rent, or sell, you won’t want to spend a fortune. Cheap and cheerful is the preferred method for many people who are buying their first home!
A key benefit of buying a house in probate is that it will likely be cheap and sold at a discounted rate. Why? Properties in probate are usually sold below market value, especially if the estate is needing a quick settlement. The executors of an estate (house) may be looking to sell the property fast, especially if the former owner of the property left a few debts behind that need to be paid. Or, it may be a way to ensure that inheritance tax is paid off.
In some cases, it may be that they simply don’t have the time to maintain the property, meaning that, on average, houses that are going through probate usually go for ten to twenty percent less than other properties. So, if you are new to the property ladder, that is a significant saving, irrespective of your goals.
It may be the case that you are looking to invest in a property to sell it on, and, if you are looking to make a profit, buying at a lower price makes that more likely.
Quick Resale
If you are a property investor, or a property developer looking to build their housing portfolio, it is worth looking into probate properties for your first purchase. Granted, it is often hard to see the value in properties that are old or require extensive renovation.
However, if you opt for a probate property that has been neglected, this will allow you to add value via redevelopment. In simple terms, you can get your hands on a property that needs some renovation for a relatively low cost, carry out the necessary top-ups and renovations, and either sell it for profit or rent it out if you wish.
You may be asking how that differs from regular flipping of properties. Buying a home in probate is an ideal way to flip the property and increase its value by up to twenty percent. This will vary, of course, based on the extent of the work being carried out and will allow you to attract higher offers from buyers, who may be looking to move into a ready home. Or, as mentioned before, this can be a reliable source of passive income for you via renting.
Fast Financing
OK, so if you are familiar with what happens when you buy a home, you will know that financing can be a long process.
However, when you are looking to buy a property through probate, especially a home that needs a lot of work or refurbishing, you will need to complete the financing quickly. For these circumstances, you can apply for a bridging loan, which is common for those looking into investing in properties and developing them. They are short-term loans that can help you to get the funding you need to purchase a home that is going through probate, and can also be used to renovate the space.
This will give you the opportunity to complete any renovations to sell or rent the property out. To ensure that they come through in time, it is advised that you apply for them when you are in the process of bidding from a property, and if needed, adjust the amount afterward.
