So you’re thinking about diving into real estate investing, but you’re not sure where to begin? One of the smartest (and often most affordable) ways to get started is by buying distressed properties—those beat-up, overlooked, and sometimes abandoned homes that most folks avoid.

But here’s the secret: those “ugly ducklings” are often golden opportunities in disguise.

What Is a Distressed Property?

Distressed properties come in many forms:

• Homes facing foreclosure
• Search for Neighborhoods in Decent Areas with Missing Teeth (aka Vacant Lots) for New Build Construction
• Fire Damaged Properties
• Abandoned or vacant houses
• Properties needing major repairs

You’ll usually spot them with boarded-up windows, overgrown lawns, and that “no one’s been home in years” vibe. To a beginner, they might look like a headache—but to an investor, they scream potential.

Why Distressed Properties Are a Goldmine

Let’s break it down:

• Lower purchase price – You’re buying below market value, giving you room to profit.
• Built-in equity – Once you fix it up, the property’s value can skyrocket.
• Less competition – Many new investors shy away from distressed homes, so the bidding wars are fewer.

This is a great way to build wealth if you’re willing to put in some research and sweat equity.

Assemble a Power Team

Here are some Professionals in the Real Estate Industry that you need to network with and build Professional Relationships to conduct business to acquire Distressed properties: – Real Estate Agent: This person will aid you in finding comps and identifying those properties in an area where there is the Greatest profit Potential. This person will also aid you in finding properties available for Purchase AND once a property is found, He/She will assist you in marketing the property to find Potential Buyers to sell the Property.

Mortgage Broker: This person will identify how to complete the financial transaction of receiving the best Loan for your project, whether it be a Construction 203K loan or a Hard Money Loan, they will guide you thru this process. Licensed General Contractor: This is the Professional who has the Construction Staff to handle the actual labor and acquiring of materials to renovate the property in question. Title Company Attorney: This is the location of the closing to Purchase And Sell your Investment Property. They will handle ALL of the Legal paperwork & research upon the property you are seeking to purchase.

CPA(Certified Public Accountant): This is the Professional who will assist in providing Essential Tax information based upon the taxable event of Buying & Selling real estate properties. He/She will advise you on how to set aside your profits to pay for your Capital gains tax and setup your Business to take advantage of any Tax Benefits as an Investor. You definitely need a CPA who has a Specialty in Real Estate investing.

Appraiser: This is the Professional that you will submit ALL of your invoices and receipts to for analyzing the property BEFORE and AFTER Renovation has been completed. They will provide you with how much you can Optimally sell your property for in terms of Pricing strategies for Best & Worst cases.

Property Inspector: This is the Professional who will examine the property prior to any work being done to assess the Current condition of the property and identify Everything that needs to be repaired.

Last but not Least, for Beginner Investors, you will need to seek out a RE (Real Estate Mentor/Coach): This person will guide you through the Entire process and aid you in overcoming various obstacles during this REHAB journey.

How to Find Distressed Properties

Here are a few ways you can spot your first deal:

🛻 Drive for Dollars – Literally drive around neighborhoods and look for abandoned homes or code violations.

💻 Online – Check Zillow, MLS listings, and sites like Auction.com for foreclosure and REO (real estate owned) properties.

📁 Public Records – Visit your county clerk’s office or website and look for tax lien or code violation lists.

🧠 Network – Local wholesalers and real estate agents often have inside access to properties that aren’t widely advertised.

💡 Real Example: Buying an Abandoned Home in the Midwest

Let’s say you find a distressed home in Columbus, Ohio or Indianapolis, Indiana—common Midwest markets with great investor potential.

You spot a 3-bedroom, 1-bath abandoned property listed for $65,000. It needs a new roof, plumbing updates, and a kitchen overhaul. You also want to add a Full bathroom to make it a 3BR/2Bath property to increase ARV (After Repair Value).

For starters, you will need to create a Power Team of Experts to help you complete this process.

I would recommend doing a search for either a Real Estate Investor club or group in your city/town or County that you live in. If there is no Investor group close to you, you can join the Online Investor group called – BiggerPockets! This is an online community of investors that put you in touch with someone in your area AND/OR has experience in buying distressed properties as well.

Here’s how a beginner investor might break this down:

Item Estimated Cost Purchase Price $65,000Closing Costs + Taxes$12,000Rehab/Repairs$30,000Holding Costs (3 months)$6,000Total Investment$113,000

Now let’s say ARV (After Repair Value) is $205,000 based on comps in the area AND after completing a 3rd Party Property Appraisal.

So now, after closing costs (3-6% ) approx $12K, and aftercalculating short term property gains tax approx 22% OR $18k, would still leave you with approximately $65K NET Profit on this deal based on the Numbers. This is not an actual Deal but based on the numbers of the deal would leave this type of Value in Profits!—not bad for a first deal.

How to Pay for It

You don’t need to be rich to get started.

Here are your funding options:

• Cash (yours or a partner’s)
• Hard Money Loan – Short-term funding for flips
• Private Lender – Family, friends, or investors
• FHA 203k Loan – Great for owner-occupants planning to renovate

Talk to a local mortgage broker who understands investment deals—they’ll walk you through the right loan structure.

Do Your Homework First (Due Diligence)

Before you sign anything, do these 3 things:

1. Get a professional inspection – Even if it looks bad, know what’s underneath the surface. – Team Member –> Property Inspector
2. Run comps – Make sure the ARV is realistic. – Team Member–>RE Agent
3. Clear the title – Check for liens or legal issues. – Team Member–>Title Company Attorney

Skipping this step could cost you big later.

Renovate Smart & Know Your Exit Plan

Once the deal is yours, you have options:

🛠️ Fix & Flip – Renovate and sell for a profit.

🏠 Buy & Hold – Rent it out and build long-term wealth.

Just be sure to track your repair costs, manage contractors carefully, and stick to your budget.

Final Thoughts: You Don’t Need to Be an Expert to Start

Buying distressed properties might seem intimidating, but it’s one of the most powerful ways to start building wealth in real estate. You don’t need a perfect property, just the right strategy—and a willingness to learn.

So don’t wait until the “perfect time.” Start by driving your neighborhood, checking listings, and crunching the numbers. The path to wealth creation starts with that first deal.