Halloween may still be months away, but the zombie property is here to stay, for now, anyway.
What exactly is a zombie property?
Are they the ones you see on Halloween?
Are they the ones from the HGTV show, Zombie House Flipping?
Actually, they have been around for a long time and became more common and frequent during the 2007/2008 housing subprime mortgage crisis.
If you remember the housing crisis back then, buyers were underwater on their mortgages, meaning they owed more than their house was worth due to subprime lending We would see short sales, and many foreclosures during that time.
Enter the Zombie property. The Zombie property is a type of investment property that has been abandoned by the property owner after the foreclosure process begins. The lender, which is usually the bank, hasn't sold it or taken ownership of the property yet. So, it is abandoned, as the foreclosure process has not been completed, and "zombie property" is the classification of the property and the zombie property title remains in the owners' name.
The cast and show, Zombie House Flipping made this property type more familiar to the general public back in 2016 when their show first aired on A&E while purchasing zombie, abandoned, bank-owned property in Orlando, Fl and bringing them back to life.
Cool, huh? And the renovations are fantastic, I might add!
So, as an investor, you may already be very familiar with these types of property and know they potentially can be great properties to flip or use as a rental property right?
However, there are risks to investing in a zombie property. One of the main risks is the property condition. Remember, these properties have been abandoned for months or even years may have had squatters, or even provided space to those to conduct illegal activity. There is no telling what you will walk into or even how much work you will need to get the property back to a habitable state in order to flip it or especially, rent it out!
Another risk is that since the property has been abandoned, there is a chance it may have lost property value, meaning a low buying or selling price. So, you certainly want to make sure the numbers will work for you, including costs such as your holding, closing, renovation costs, and your return on investment (ROI).
One final risk is that even if you scored an "awesome deal" on the zombie property, the numbers worked for you, you made proper, professional renovations to get it ready to sell or use it as a rental property, some potential buyers or renters may not feel comfortable living in the property due to the negative association it has had on the community in its zombie state.
While all the risks associated with zombie properties are true and valid, there are also advantages as they are often "cheap" properties to purchase, and you can hopefully gain a great return on your investment whether you are going to flip and sell it or rent it out.
Opportunities may become challenges to some investors, and it is highly advised that you do your due diligence when looking into purchasing a zombie property.
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