Tips for Rehabbing a Distressed Investment Property

Distressed properties are similar to fixer-uppers in the sense that they need work, but the difference is the amount of work required to make a distressed property viable. Whereas a fixer-upper might require new paint, new floors, and other cosmetic upgrades to increase its value, a distressed property might need structural fixes, have fire or water damage, or be suffering from years of neglect.

As such, a distressed commercial property can demand a much greater investment. But if you can purchase the property for way below the possible future value, there is a potential for a great investment opportunity. If you are considering rehabbing a distressed property, here are some tips to help you through the process.

Look Beyond the Problems to the Potential (if There Is Any)

It’s important to assess the property based on its potential as well as its current state. For instance, if you buy a distressed home in an area with high crime rates, low employment rates, and no schools or amenities, then it may end up being more difficult to make your money back through rental income or from selling. On the other hand, if the price is right and the potential is there, then the property may be worth considering.

Hire a Professional Home Inspector Before Purchasing

Any commercial property can look great during a walk-through but be riddled with unseen problems, and these are multiplied in distressed properties. The best way to know what you're getting into is to hire a professional who can assess the property and give you a good idea of the type of work you'd be looking at to get it back into shape.

Have a Plan in Mind

Distressed properties require a great deal of maintenance, renovations, and repairs to get them into a rentable or sellable condition. It’s a good idea to have a plan for the property so you know what kind of work needs to be done, what materials will be needed, what contractors you might have to hire, how much of an investment you'll need, what permits you might require, and in what order the work should be completed. Here are a few examples of what you might need to tackle:

  • Foundation and structural repairs

  • New roof

  • Plumbing or septic upgrades

  • Electrical improvements

  • New floors and subfloors

  • Mold remediation

  • Asbestos removal

  • Cosmetic upgrades like paint

  • Window and door replacements

How to Get Started with Your Renovation

Once you make the decision to purchase a distressed property, the first thing you'll want to do is secure it by replacing locks, boarding up broken windows, and taking other steps to prevent trespassers from accessing the building. After that, you can start removing waste and debris from the property, both inside and out, to ensure you have a clutter-free space to work within.

When you're ready to begin work, start with all the licensed internal work you need to get done, such as electrical, plumbing, and HVAC. Once that’s all in place, you can start with other repairs, followed by painting and flooring, and finally with exterior upgrades and maintenance.

If you're new in the game and don’t have much experience with renovating commercial properties, then there are plenty of great contractors and professionals out there who can help, and this can ensure you get the most return on your investment.

However, you may also need help with financing, because distressed properties typically demand lengthy repairs. This type of financing can be difficult to find depending on the current state of the property.

If you’re looking to invest in a property that needs significant repairs, you may need the help of one of our mortgage experts.  Visit our contact page here to get in touch with someone from our team today.