Distressed Properties: High Risk, High Reward—And Right for You?

Dusty Rhodes • December 13, 2021

Are you looking to save some money? Do you need a property and don’t mind doing some repairs to get you started? Do you want to start investing in property? Well, look no further—distressed properties might be just what you need.

What is a distressed property?


To better understand this, let’s examine how a property gets to a state of foreclosure.


An individual wants to buy a house, so they will approach mortgage companies or financial institutions to get a loan. After the loan is approved, it is the individual’s responsibility to ensure that they meet the regular payment agreement that they made with the mortgagee.


However, if the homeowner fails to meet the agreement, the mortgagee or lender will want to get back the money they have provided to the homeowner. This process is what we refer to as foreclosure or repossession. This can happen for many reasons, like a divorce or bankruptcy.


There are also instances where houses are distressed because of the state of the property—that is, old homes that need repairs or buildings that are mid-construction and were halted because the owners ran out of money and weren’t in a position to complete the construction.


REOs are bank-owned properties that have already been foreclosed and are siphoning money from the banks that own them. Owners of these properties are very motivated to sell because they want them to stop costing them money.


Short sale properties are those whose owners are often in financial distress, can’t afford the mortgage payments and lack the assets to pay off the loan, and are willing to sell the property for a discount—less than the amount due on a mortgage. This can be a good way to flip a house and sell or rent it out for a profit.


And that’s exactly what distressed properties are. They are homes that are for sale not because the owner wants to sell but because of pre-foreclosure, foreclosure, repossession, real estate owned by a lender, (REO) or personal financial reasons. These homes are usually offered up through an auction in which the highest bidder gets the property.


These houses are usually offered way below market value. Basically, all parties are trying to cut their losses.


If you consider the actual cost that goes into trying to sell something for a good price, lenders want to make sure they don’t have to invest a ridiculous amount of money or time trying to get that extra dollar. That means low prices. All they want to do is get at least some of their money back.


This also means that these properties usually have work to be done. Most likely, the previous owner wasn’t able to carry out maintenance on the property because they were short on funds. Unfortunately, some homes really look pretty awful and need a lot of work.


Risks of buying a distressed property


Buying a distressed property can be a great real estate investment, allowing you to net a large profit off of a property that’s listed below market value. But although there are plenty of benefits that come with it, there are also risks.


The biggest one is buying the property as-is. Distressed properties usually come in bad shape and are sold as they are without a proper inspection. Plus, you can’t often negotiate for things like repairs or additions, as the seller doesn’t have much wiggle room in their budget. You’ll have to take on that maintenance yourself.


You may also be outbid at an auction for the property, a likely scenario for a distressed property. These properties are often a good value, which can mean more competition from other buyers.


Purchasing delays can be an issue as well. The purchasing process takes a relatively long time since the sale is a little less straightforward when working with a seller who is in debt on their mortgage. It can take months to finalize, and you may have to jump through hoops along the way to help the sale go through.


Why invest in distressed real estate?


Consider the disadvantages associated with building a new property, such as the time, permits, construction loans, and legal implications.


With the purchase of a distressed property, your core focus is on your ability to get a good bargain and maximize your investment returns.


Here are three reasons to invest in distressed real estate.


1. Lower prices

Due to the nature of distressed properties, it is easy to get a property below market value. You can easily buy distressed properties all across the Midwest from 10 to 20 cents on the dollar, which is one-third of the cost of building a new property—although be mindful that you may have to seek these properties out yourself.


This is because homeowners are usually in a position where they really want to sell—fast. That places you in a better position to get a bargain. Combining the position you’re in with negotiation talent is guaranteed to save you a lot of money going forward. If you’re looking to build a portfolio, that’s exactly where you want to be.


2. Financial gain

Distressed properties create opportunities for real estate investors to make a profit. Because the prices are below market value, your margins are simply a lot better with distressed properties.


That also means that you’re taking on far less risk. If you can buy two properties for the price of one, not being able to sell one of them might not be much of a problem. You’ll just hold on to it longer. Having less financial pressure comes with more freedom.


The law of home equity states that as the value of your property grows, your equity increases. With the purchase of distressed properties, you are instantly in a position to get yourself some great financial gain because you have bought a house for a value lower than its market value. Your net worth will hopefully increase dramatically after you’ve renovated the property.


3. Fewer delays for approvals

When building new properties, you are exposed to outside influences that cause delays and usually lower your margins. Some good examples include when the approval on your construction plans does not go in your favor, when your developer was in charge of getting the permit but didn’t do it in time, or when your contractor made some error that resulted in a poorly built property. Situations of this nature make a bad situation worse. And the worst part is that they can all occur with the same property. Sometimes this will force you to make decisions that will seriously affect your bottom line.


This is not the case when you purchase a distressed home. The previous owners likely have already gone through this process, so you will not need to worry about getting government approvals and avoiding setbacks.


But best of all is the fact that you don’t have to deal with delay after delay. Sure, you’ll have someone renovate the property. But the complexity of getting an entire home built is far greater than doing some renovations. This has a major impact on the timelines you’re working with, so you’ll be making more money faster with distressed homes.


How do I find a distressed property?


The best place to start looking for distressed properties is at the bank or other financial institutions. Usually, they don’t have the time to advertise and seek out real estate agents or companies to market their properties.


You can also take a look at foreclosed properties from government-owned institutions, such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs, or the Internal Revenue Services Department (IRS), to name a few. Usually, these institutions will advertise their properties in the newspapers.


Another way to find distressed properties is to do a simple Google search for properties in your area that are on auction or up for foreclosure. You can look for online public records at the county courthouse, which records and stores real estate transactions for property in that county. Make sure to check Craigslist daily, and try sending out some yellow letters.


Finally, it is always best to contact an experienced real estate investor specializing in this area to guide and advise you on your purchase. Apart from the fact that successful real estate investors have access to all kinds of lists, you can take advantage of their networks and connections to banks, mortgage companies, and real estate agencies.


Can you finance a distressed property?



Financing any investment property can be difficult. Distressed properties are even more difficult to finance, but it can be done.


One option is to get a conventional mortgage if the home is in livable condition. To get one, you will need to prove to the bank that you are trustworthy, meaning you must have excellent credit, low debt, and a solid income. You must also be able to provide a large down payment.


Non-traditional lenders may be more likely to finance distressed properties. You can look to friends and family who may be willing to loan you money, or you can look to private groups and clubs interested in real estate and/or investing.


If you have a good track record as a real estate investor, you may be able to get a short-term hard money loan, sometimes known as a “fix-and-flip” loan. You won’t need as high of a credit score or down payment for this option, but the interest rates are higher than those of conventional loans.


If none of these options work for you, you can try to use the equity of your primary residence as collateral to put in an offer and then purchase a distressed property. You can do this through refinancing, which will allow you to borrow more than what you owe on your property and use the excess money to invest in a distressed property.


Now that you have all the facts, you are in a better position to own your first distressed home in the future. Often the difference between a successful real estate mogul and a failure is not one’s better abilities or ideas but the courage to bet on ideas, take a calculated risk, and act.


Most of all, it will come down to your ability to sniff out the perfect opportunity. That means the highest chances of getting your bid accepted, the right location, and manageable renovations. All these things factor into what makes a great deal or not.


It’s important to remember that you’re looking for an undervalued property—not just a cheap one. You can buy a $60,000 property for $10,000 and still end up with a loss. Some deals just never make sense, and if you understand that, you’ll love what distressed properties have to offer.

Source: Bigger Pockets Blog


Dusty Rhodes Properties is the Best Realtor in Myrtle Beach! We do everything in our power to help you find the home of your dreams. With experience, expertise, and passion, we are the perfect partner for you in Myrtle Beach, South Carolina. We love what we do and it shows. With more than 22 years of experience in the field, we know our industry like the back of our hands. There’s no challenge too big or too small, and we dedicate our utmost energy to every project we take on. We search thousands of the active and new listings from Aynor, Carolina Forest, Conway, Garden City Beach, Longs, Loris, Murrells Inlet, Myrtle Beach, North Myrtle Beach, Pawleys Island, and Surfside Beach real estate listings to find the hottest deals just for you!

Share

How to Move Out After Selling a House

By Dusty Rhodes • October 13, 2025
From the first coat of paint you used to freshen up your house’s trim to the stress of wrangling your way to a deal, you’ve been through a lot in that place. Now you’ve made it to the final hurdle of selling a home: moving out! Don’t worry, this is the easy part… but you want to do it right. Here’s how to get through the last leg of your journey without any bumps along the way. How to move out on time Once the paperwork is signed at closing, the buyers will officially own the house—and you won’t. That means that, technically, if you or your stuff is still there after the close, “the buyer could evict you,” says Joshua Jarvis , founder of Jarvis Team Realty in Duluth, GA. So make sure to have your exit strategy in place! Still, most buyers will understand if you need a bit more time and have a legitimate reason—like if you can’t move until the weekend due to your work schedule. Just be sure to discuss these issues as soon as possible before the close, so your buyers can plan accordingly. Decide what to leave behind To make sure you’re leaving behind everything the buyer wanted—and that you agreed to—double-check the closing documents . There should be an itemized list of what comes with the house . And even if the buyers didn’t formally request them, it’s just good form to leave certain types of things behind. Such as? “Generally speaking, you should leave anything that’s bolted to the wall,” says Jarvis. “Some homeowners want to take their fans and blinds to the next home, but generally if it’s screwed in, it stays.” Also, if you and the buyers agreed to transfer any services—such as alarm monitoring or pest control —be sure to set that up before you go. Leave the buyers a detailed note in the house, or ask your agent to get in touch with theirs to make sure the transfer goes smoothly. If you do inadvertently take an item that the buyers had requested, they have the right to ask for it back—and they could potentially sue you in civil court for the cost of a replacement. So, when in doubt, feel free to check with the buyers before you grab and go. But don’t leave anything else behind Just as important as what you leave behind is what you don’t. Your buyers have a right to move into a home that’s been cleared of furniture and other movable items they didn’t expressly request. “Some folks leave all kinds of unwanted clothes, furniture, paint cans, and other items, thinking they are helping the buyers,” Jarvis says. If you truly think your buyers might love to have your old planting pots or kiddie equipment, go ahead and ask—but please don’t assume they’ll welcome your leftovers. Even if you’re careful, you might forget something—at which point the buyers may contact their agent to get it back to you, but they also have the legal right to just keep or get rid of it. So double-check areas (e.g., the attic, garage, basement, storage shed, kitchen, and bathroom drawers) where people commonly overlook items. Clean up It’s common courtesy to leave the place not only clear of your possessions but also clean. However, that doesn’t mean you have to leave it immaculate. “Generally, you shouldn’t have to pay to have it deep cleaned,” Jarvis says. In most cases, a simple broom-clean will do. That means wiping down the countertops, cleaning out drawers, sweeping or vacuuming all the floors, and giving the bathroom and kitchen appliances a once-over so the new owners aren’t grossed out when they arrive. Are you forgetting anything? Before you close the door for the last time, run through a quick checklist. Did you eyeball every room for stray items? Have you forwarded your mail and turned off the utilities? Is the water running in the jacuzzi? We all get in a bit of a rush even in the best planned moves, but you won’t be able to get back in, so it can’t hurt to do a final run-through before you move out. Once you’re ready, it’s time to leave. You can drop a line to your real estate agent to let them know you’re out, although it’s usually a courtesy more than a necessity. If you’re feeling truly gracious, feel free to leave a note, card, or bottle of bubbly congratulating the people who’ve inherited your former home. Given all the fond memories you’ve built between those walls, wouldn’t it be nice to start the home’s new owners off on the right foot? And buy yourself some Champagne, too. Make it the good stuff—you’ve earned it. 

When Are You Considered a First-Time Homebuyer Again?

By Dusty Rhodes • October 6, 2025
Buying a home is an exciting time, whether this is your first time purchasing a house or you’re a repeat buyer. But if you’ve owned a home before, you may be wondering if you can be a first-time home buyer again. In some cases, yes, you can. In this Redfin article, we’ll go over what qualifications you need to meet and when you can be considered a first-time homebuyer again. Whether you’re buying a home in Atlanta, GA , or a condo in Portland, OR , read on to find out if you’re eligible to be a first-time homebuyer twice. Key takeaways Usually, you’re a first-time homebuyer again if you haven’t owned a home in 3 years. Some special situations may also qualify you as a first-time buyer. Benefits include down payment and closing cost assistance and lower interest rates. When are you considered a first-time homebuyer again? Typically, you’re considered a first-time homebuyer again if you have not owned a primary residence for at least three years. There are several additional reasons you may qualify as a first-time homebuyer again, which we’ll explore below. Some first-time homebuyer programs have different definitions of “first-time homebuyer,” so check with the specific program before proceeding. Qualifications to be considered a first-time homebuyer There are other reasons you may qualify as a first-time homebuyer twice. Let’s take a look at them: You haven’t owned a primary residence for 3 years: This means if you owned a home, but sold it and rented for 3 (or more) years, you can be considered a first-time home buyer again. If you’re buying with another person, only one of you needs to meet the criteria to use most first-time home buyer programs. You’re a single-parent buying on your own: If you’ve never purchased a home by yourself and are a divorced single-parent, you may qualify again. Even if you purchased a home with your former spouse, you likely still meet the criteria. You’re a displaced homemaker/family caregiver: If you are a displaced homemaker who doesn’t or didn’t earn wages from employment and has only owned a home with a former spouse, you’re likely considered a first-time homebuyer. You previously owned a mobile home: If you owned a mobile home or property not affixed to a foundation, then you likely qualify. Your previous home was out of compliance: If your home had building code violations or safety issues that could not be repaired or brought into compliance for less than the home’s value, you’re likely eligible. Benefits of being a first-time homebuyer again There are benefits to being a first-time homebuyer twice. Let’s take a look at them: Access to first-time homebuyer programs: One of the biggest benefits is the ability to use first-time homebuyer programs such as down payment and closing cost assistance , grants, credits, or loans. Every program has different qualifications, so make sure to research each program or speak with your agent and lender to explore options. Options for low down payment mortgages: There are several loans available for first-time buyers that offer lower down payment amounts. For example, Freddie Mac’s Home Possible and Fannie Mae’s Home Ready offer down payment amounts as low as 3%. Potentially lower mortgage rates: Sometimes, lenders will offer slightly lower mortgage rates to first-time borrowers to help them buy their first home. FAQs about first-time homebuyers Can I be a first-time homebuyer again if I previously owned a home? Yes, as long as you haven’t owned a primary residence in the last 3 years, or you owned a home while previously married. Do both homebuyers need to be first-time homebuyers to qualify? No, in most cases, as long as one homebuyer meets the qualifying criteria, then you’re considered a first-time homebuyer. However, some programs require both homebuyers to be first-timers. Can I qualify for a first-time homebuyer loan again? Yes, for the most part, if you qualify as a “first-time homebuyer,” you can get another first-time homebuyer loan. Every lender and loan is different, so be sure to read the eligibility criteria thoroughly. Are there income limits for programs? Yes, many first-time homebuyer programs have income limits. This means you won’t qualify if you make more than the specified annual amount.

10 Home Renovation Projects Under $1,000 That Add Lasting Value

By Dusty Rhodes • September 29, 2025
Enhancing your living space doesn’t always require a hefty budget. With the right updates, you can add real value to your home for under $1,000. Whether you’re preparing to sell your home in Grand Rapids, MI , or looking for some easy DIY projects for your house in Portland, OR , these cost-effective upgrades can breathe new life into your space. To dig deeper into this topic, we spoke with Kevin Brasler, executive editor at nonprofit Consumers’ Checkbook , a consumer advocacy group that helps homeowners save money and make smart choices. With decades of experience evaluating service providers, Kevin shares insights on how to budget wisely, avoid common renovation mistakes, and know when to hire a professional versus taking the DIY route. 1. Add fresh paint to the walls of your home Painting is one of the most affordable ways to refresh your home. A gallon of quality paint costs $30 to $50, with a full room averaging around $350 . Neutral shades like gray, beige, or white appeal to most buyers, while accent colors such as navy, forest green, or mustard add personality. For a calming vibe, try sage or powder blue. Brasler notes that painting is one of the best DIY-friendly projects homeowners can take on. “Good DIY projects are those that involve mostly labor: painting, basic tile work, installing fixtures that don’t require new wiring or plumbing, landscaping, and most flooring jobs,” he says. 2. Update your cabinet hardware A cabinet hardware update is a subtle yet effective strategy to elevate your home’s functionality and aesthetic appeal. Swapping outdated or generic cabinet handles and knobs for modern, stylish alternatives instantly transforms kitchens and bathrooms. Consider sleek brushed nickel handles for a contemporary touch, or opt for vintage-inspired brass knobs for a timeless charm. This modest investment typically costs between $2 to $10 per piece. 3. Change the kitchen backsplash A new backsplash can quickly refresh your kitchen while protecting your walls. A custom kitchen backsplash protects your walls from daily wear and creates a focal point that elevates the entire room. Opt for affordable ceramic or glass tiles, which can be found for as low as $1 to $5 per square foot. Staying within a $1,000 budget for a standard-sized kitchen is doable with those materials. Or you can go for a peel-and-stick backsplash that is not only budget-friendly, but a quick solution to make your kitchen stand out. Brasler stresses that getting multiple estimates is critical for even small-scale projects like this. “The biggest mistake homeowners make is not getting multiple bids. Even for smaller projects, you should get at least three written estimates; five is better,” he explains. 4. Switch to energy-efficient lighting By making the switch to energy-efficient lighting, you’ll not only improve the sustainability of your home but also create a more comfortable and inviting living environment. Switching to LED bulbs, which typically cost between $2 to $10 each, saves energy and reduces utility bills over time. Beyond the financial benefits, the crisp and vibrant illumination of energy-efficient lighting can effortlessly enhance your home’s overall mood and appeal. 5. Create a beautiful landscape A simple landscaping update is another low-cost project that adds value. Try planting vibrant flowers, shrubs, and trees, which can cost anywhere from $100 to $500, depending on the size and variety. Add mulch or decorative stones to create a polished look for approximately $50 to $150, while adding affordable outdoor lighting options typically range from $50 to $200. Low-maintenance features lower costs down while still making a strong impression. For most landscaping updates, DIY is both practical and cost-effective. Still, Brasler advises calling in professionals for anything involving gas, high-voltage electrical, or structural work. 6. Install a smart thermostat A smart thermostat, such as popular models like Nest or Ecobee, typically costs between $150 to $300, depending on the brand and features. Homeowners can often handle the installation themselves, avoiding additional labor costs. Once installed, these intelligent devices learn your preferences, allowing for automated temperature adjustments, and can be controlled remotely via smartphone apps. 7. Refurbish or paint the front door Refresh your curb appeal by refurbishing or painting the front door – a low-cost project with instant impact. Sanding and restaining often costs under $100 and requires just a few materials. Another choice is to use high-quality exterior paint, which typically ranges from $30 to $50 per gallon, providing a fresh, vibrant color that suits your home’s style. 8. Add floating shelves or built-ins Consider adding floating shelves or built-in storage solutions to maximize space and keep your home organized. Floating shelves, available for as little as $20 to $50 per shelf, provide an affordable and stylish way to showcase decor or organize essentials. For a more customized approach, DIY built-ins can be crafted using plywood or ready-to-assemble shelving units, typically ranging from $100 to $300. 9. Upgrade your kitchen sink and faucet Breathe new life into your kitchen with a sink and faucet upgrade. Faucets usually run $100 to $300, and sinks $200 to $500. Consider a sleek pull-down faucet and a resilient stainless steel or granite composite sink to improve both function and style. Spending $300 to $800 on a sink and faucet upgrade can instantly refresh your kitchen’s look and make daily tasks easier. 10. Add safety measures to protect your home Smart security cameras or a basic surveillance system now offer affordable and effective protection. Investing in a home surveillance system, typically from $200 to $500, allows real-time monitoring and deterrence against potential threats. The addition of smart cameras, with features like motion detection and remote access via smartphone apps, can improve your home’s overall safety and convenience. With a budget-conscious investment of $500 to $1,000, you can create a comprehensive security network covering critical areas of your property. Tips for finding good contractors Even for smaller projects, working with contractors requires careful planning. Brasler emphasizes the value of comparison shopping. “Get proposals and detailed pricing from at least three reputable, licensed contractors,” he advises. “The only way to ensure you’re paying a fair price is to initiate competition.” He also suggests: Check references thoroughly. Ask questions like: Did the company follow plans? Did it finish on time? Was the work professional? Did the contractor offer low-cost solutions and stick to agreed prices? Were problems handled promptly and effectively? Did the team communicate clearly throughout the project? Was disruption to your daily life kept to a minimum? Did the finished results meet your expectations for quality and appearance? Was the contractor flexible and fair about changes if you adjusted plans? Ask neighbors and friends for referrals. Word-of-mouth often uncovers the best local contractors. Look for complaints. Check ratings at Checkbook.org or your local Better Business Bureau and be cautious with online reviews as they can’t always be trusted. Common mistakes when budgeting for small renovations Brasler states the biggest budgeting mistake is skipping multiple bids. “A contractor charging $800 might be using premium materials while the $500 bid uses builder-grade stuff. Try to get prices from each business for the exact same work,” he explains. He also reminds homeowners not to assume that a low price means low quality. “For decades we have evaluated all kinds of businesses and often find some of the best companies have the lowest prices,” he says. When to DIY vs. hire a pro While DIY saves money, Brasler stresses knowing your limits. “Call in pros to deal with anything involving gas, high-voltage electrical, or structural changes. Ditto for work that requires a permit and inspection,” he advises. For tasks like painting, basic landscaping, or adding shelves, homeowners can usually manage on their own. Keep expectations realistic since DIY projects often take longer and may not match professional results. The bottom line Budget-friendly renovations under $1,000 can make a big difference in your home’s look, comfort, and value. From painting and landscaping to updating fixtures and adding smart technology, these projects prove you don’t need to overspend to refresh your space. As Brasler reminds homeowners, “the key is balancing creativity with caution.” By comparing bids, avoiding common budgeting mistakes, and knowing when to call in the pros, you can achieve lasting results without stretching your wallet.