The complete guide to buying repossessed properties

With an abundance of repossessed properties on the market, interested buyers need to understand what to look for when investing in one.

Whether you buy a new property or a repossessed one, evaluating it first is essential. Usually, properties that are listed below the market value have structural issues, which are invisible to non-experts, and need heavy renovations. Probably, the homeowner was faced with repossession and was unable to afford maintenance. Furthermore, if the property was unoccupied or neglected for a long time, chances are it was exposed to vandalism.

A common issue with repossessed properties is that basic utilities, such as electricity, gas and water, have been disconnected. It can be time-consuming and costly to have these services reconnected. The effort involved can affect not only your return on investment, but also how soon you can begin renovations.

Banks want to reclaim as much return as possible when you are buying repossessed properties. However, due to the high amount of repossessed properties, banks seek a quick turnover. At this point, you have to prove that you are a genuine cash buyer if you want access to deals below the market value.

Purchasing a repossessed property is different from purchasing a new one, as you can't speak directly to the homeowner. It is unlikely that the bank will be able to give you the desired answers regarding the property. Ensure the extensions or any structural alterations made on the property have the proper paperwork.

If a property has been repossessed, it's possible the previous owner left other debts behind. In the event that you are flooded with envelopes from different debt collectors, be sure to return them to their senders. It is the best way to avoid visits from the bailiff. Moreover, if you bought the house to rent it, your future tenants will not be happy if faced with the financial difficulties of the previous owner.

Whether you buy a repossessed house to live in or you are purchasing it to rent out, you will need to pay income taxes. You are eligible for income tax relief for any improvements made to the property. Owners can also claim professional and legal costs such as insurance, solicitor's fees, service bills or ground rent when letting the property.