Probate investing is a strategy that involves acquiring real estate that has recently gone through probate as part of an investment strategy. The approach may involve purchasing the property with intentions to make improvements and resell the holding for a profit in the short-term, or acquire the property as a long-term holding that generates a reliable revenue stream. There are a number of potential advantages to probate investments, as well as some disadvantages that should be considered before using this method to generate profits.
In order to engage in probate investing, it is necessary to find the right types of properties. Generally, this means going through lists of properties that have recently cleared probate after the death of the owner. The idea is to identify properties that possess the features that the investor believes will make it possible to eventually earn a profit from the acquisition. Among the features to take into consideration are the location of the property, the general condition of the buildings on the estate, the current market value of the property as is, and the potential for making improvements and selling the holding at a profit. If the goal is to use the asset to create an ongoing revenue stream, all these factors are still relevant, along with considering the long-term potential of the property to hold its value.
Many investors who utilize probate investing are looking for residential or commercial properties that can be acquired at or below the current market price, make some improvements, then resell the real estate in a few months at a profit. Known as flipping, this approach to probate investing works very well when the location is desirable and potential buyers see benefits in terms of the property increasing in value over the years. Should the investor fail to accurately project the demand for property in the area, there is some risk that the property will not sell as quickly as desired, or may have to be sold at a lower price than originally envisioned. This could reduce or even eliminate any chance for earning a profit from the flipping project, and may even result in a loss.
Entrepreneurs sometimes use probate investing as a means to secure properties that can be rented and leased over a number of years, creating a steady revenue stream. For example, the investor may purchase an apartment complex that has recently emerged from probate for a price at or near the current market value. Assuming the property is in a stable area of town, the investor may spend some time remodeling the units and the grounds, enhancing the appeal of the property. If successful, the investor can increase rental rates on each of the units and secure leases with tenants that keep the operation generating profits for years, allowing the owner to enjoy a steady income over the long term.
