If you’re considering real estate investing as a way to build real and lasting wealth, I’ve got a piece of advice for you – consider investing in distressed properties. Now I know what you may be thinking… “I don’t want to buy someone else’s headache.” But consider this; distressed properties can be a great value. And that’s what we want to look for when we’re investing in real estate – the best values.

So let me tell you a little bit about the kind of distressed properties you might come across, and how to know which ones are real values, and not value traps. First off, investing in distressed properties can mean a couple of different things. There are distressed properties that are burdened by financial problems, but that are otherwise in great shape. Then there are those distressed properties that have been neglected and need work… sometimes a lot of work.

So let’s take a look at some of the advantages and then disadvantages of investing in distressed properties.

Advantages:

• Downside risk is often limited when buying a distressed property, since it is already discounted compared to others in the area (below market value).
• Can usually realize instant equity if a financial burden is removed. Also, if the property requires work, sometimes even a small improvement can lead to a great increase in value.
• If the property was acquired at a deep enough discount, it can usually become a cash-flow positive rental right away.
• Sometimes just removing a distressed property from the open market can lift the values of the other properties in the area – immediate increase in the value of your property.

Risks:

• If you’ve underestimated the costs of rehabilitating the property, it may not be as good a value as you believed.
• There may be other, undisclosed claims or problems with the property. Do your research carefully and use a Realtor or other expert at distressed property sales.
• The comparable rentals in the area may not be what you expect and your investment might be cash-flow negative for a time.
• There are often other financial burdens and fees associated with buying a financially distressed property. Carefully assess all claims, attorney fees, encumbrances, etc.

The appeal of buying distressed properties has made them very popular in recent years. There are real estate investors who specialize in nothing but these types of deals (I have been one of them). If a distressed property has been on the market for a while, be especially wary. Ask why it hasn’t been gobbled up already. The more you know about the reasons a property is distressed, the better chance you have of getting a great deal on an underpriced property.

For more information on how you can escape the rat race for good and create lasting, generational wealth with real estate, download my FREE ebook, “How to Find Underpriced Properties: Secrets for Creating Wealth with Real Estate in ANY Economy.”  Visit: http://StreetWisePropertyInvesting.com/Ebook.