How Do You Analyze Distressed Properties Efficiently?

Question

I’m trying to streamline my process for analyzing distressed properties and identifying value-add potential. What’s your step-by-step approach when you walk a property for the first time?

Ken M. · Answer

I look at a building and if it's ugly, I go "yup, that's distressed" That's a joke, for all of you haters :-)Anyway, there's a difference between distressed and old but functional. So, it depends on which market you are chasing. In Scottsdale AZ (somewhere out west) you could buy a beautiful $1,000,000 home that just isn't "updated" and put newer stuff in it and sell it for $2,000,000. In Maryvale (Phoenix, next door) ( basically the other end of the spectrum,) you'd look at the basics, roof, AC, kitchen, bathroom, floors, door knobs (hardware), switches, lights and you'd change it from antique Mexican flavor to newer antique Mexican flavor, and profit about $60,000 in shorter time. They are smaller houses, details don't matter nearly as much, and most of the people that live there are in the trades. They are going to rip out what you did and put in their own touches anyway. So, it greatly depends on the market you work in.

So, really, it's neighborhood specific.