What You Need To Know About Repossession Property

Repossession property is a big part of the buy to let industry so if youve never encountered it then youll want to read on

. This type of property is the perfect choice for any landlord, regardless of how many properties they already own, because it offers great potential in terms of rental yields for just a little bit of work. So lets take a look at exactly what a repossession property is.

Well in simple terms a repossession property is any property that has been taken from the owners by the mortgage lender because of non-payment on the mortgage loan. Mortgage lenders dont hold on to the properties though and so sell them on in order to make back some of the money owed. Because of time restrictions most mortgage lenders chose to forgo estate agents when selling and use the alternative route of property auctions instead.

And its at these property auctions that you can buy decent repossessed property for way below their market value.

Auction prices are normally calculated according to how much is owed on the repossession property, and so with a little bit of research you can make considerable savings when buying. Most properties sell for between 60% and 75% of their true market value which means as an investor its a good market to target, but dont forget to check that there is in fact rental potential for the property youre interested in buying before you start bidding. After all, the whole point of a rental property is to make a profit and if you find its un-rentable down the line youre going to end up losing out financially.

Another benefit of repossession property is that it comes with instant equity because of its reduced price. This can then be boosted further by putting in a new kitchen or a new bathroom suite or maybe by replacing the double glazing. The more equity you can accumulate, the more money you potentially have in the future to use as a deposit on a second repossession property, so allowing you to quickly build an impressive property portfolio.

The instant equity, when combined with the lower than market value price tag and the potential for good rental yields is often enough to persuade mortgage lenders to offer a mortgage with attractive benefits. Repossession property purchases can also get you slightly better mortgage interest rates, because you dont need to borrow as much, so make sure you inform your lender that you are intending to buy from an auction.

The good points of repossession property are all well and good but occasionally your chosen property will require modernisation and a bit of TLC, which will of course cost money. It will also take time which means you wont be able to advertise for tenants straight away, and paying the bills will be down to you for a few months.

You might also find that locating a repossession property that suits your needs and your budget is harder than you think. Auctions dont happen every week, and even when one is scheduled for your area it might not include the right property for you. With this in mind you might benefit from registering with repossession property websites so you never miss your perfect property.

Even with these potential drawbacks repossession property is still one of the cheapest ways to become a landlord. You might just find you have to wait a few months to find the perfect purchase.

by: Rex Dwight

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