Current State of the Market

Many of the homes for sale today – as many as half in some markets – fall under the category of “distressed properties.” These are homes that have either gone through foreclosure or are being marketed as “short sales.”. In addition, currently 49.1% of homes in the Greater Tampa Bay market have mortgages with negative equity (underwater).

Despite the favorable conditions for refinancing—U.S. mortgage rates are near their lowest levels in more than 50 years—many homeowners haven’t been able to benefit from the downward march in mortgage rates because they either don’t have enough equity in their homes or don’t qualify under today’s stringent lending rules.

Option the Property

A property that is under-performing is a good candidate for using an Option. The value of an investment property is determined primarily by its income and past performance. That would mean a distressed property is valued low. Investors can obtain an Option to purchase the property at its current low value. We would then proceed to direct our resources to increase the occupancy of that property at the highest possible rents.

Once the property’s occupancy is raised, its value will be correspondingly higher. Investors then have two choices:

1. Purchase the property.
2. Sell the Option to an interested buyer for more than what it is optioned for and pocket the difference.

Either way, you build in profit up front and reduce risk.