Buying Repossessed Property – What Are The Benefits?

Buying Repossessed property comes with a variety of benefits that make it incredibly attractive to first-time buy to let landlords. It also has a number of potential drawbacks, however these are discussed in the separate article entitled ‘Things to Consider when Buying Repossession Properties ’.

So what are the benefits most commonly associated with repossessed property?

 1. Big Savings

Repossessed property is owned and sold by the mortgage lender, either through an estate agent or more commonly at auction. The price of the property is set to encourage a quick sale, and as a result you can often bag a repossessed property for around 25% less than the estimated market value.

The actual selling price will depend on the amount of competition for the property and at auction you may only save 15 to 20% on the market value. This still equates to a big saving though, and one that will allow you to renovate and redecorate the property if needed.

 2. No Chain

 One of the worst things about buying market value properties being sold by the homeowners is that they generally involve a chain. Repossessed property is owned by the mortgage lender though and in 99% of cases the inhabitants have moved out or been evicted before the property is put up for sale.

Depending on how quickly you can finance the purchase of the property e.g. if it is a cash sale it will be instantaneous in principal, but if you are using a buy to let mortgage it may take 14-28 days, you can take possession of the property within 3-5 days of the sale. This gives you chance to renovate, redecorate and find tenants before the first mortgage payment becomes payable (you may have to pay the first payment if a lot of work needs doing though).

 3. Try Before you Buy

Repossessed property sold at auction is advertised well in advance of the auction date via a dedicated auction catalogue. This means you can search through the repossessed properties being sold and visit the ones that interest you. You can take a builder, electrician, gas engineer and anyone else you want with you so you can get a good idea of the overall condition of the property and what work will need to be carried out.

Properties that haven’t undergone repossession generally have tenants or the homeowners living in them when you visit; a fact that makes it difficult for you to root around looking at floorboards, loft spaces, electrics etc.

4. The Potential for High Rental Incomes

It isn’t a secret that a lot of repossessed property is in need of total refurbishment before it can be successfully let. If this is the case with the property you want to purchase why not complete a few structural alterations at the same time and convert the property into a HMO? Renting a 4-bedroom house to four individuals rather than one family can triple your rental income, and it’s easy to do while the property is already in the process of being renovated (don’t forget planning permission and a landlord licence though).

Repossessed property can be a bargain, but it can also become a nightmare if you don’t research and survey the property thoroughly before buying. If you are genuinely interested in buying a particular property pay the cost of having a survey done and only then should you bid or put in a purchase offer.