The one thing that the most profitable types of option properties all have in common is that none of them will ever be mistaken for a so-called blue chip property. The term blue chip is used to describe properties that have a flawless appearance, are in pristine condition, and are situated in prime locations. As you will soon see, none of the properties that I write about in this chapter fit that bill. In fact, the chances that the average real estate option investor has of ever putting a trophy-type property under option are slim and none. I say this because the owners of highly sought-after properties can pretty much name their own sale price and terms and have no compelling reason to sell an option to anyone whereas owners of vacant properties with various types of problems, which scare off most prospective buyers, are in no position to be choosy when it comes to how they sell their property. And this is exactly why one of the most profitable types of properties to buy real estate options on is properties with correctable problems such as:
1. Title problems that cloud a property's title and prevent the owner from having a clear and marketable title.
2. Maintenance problems that result when routine building maintenance is deferred over a long period of time and causes the property to be in a rundown condition.
3. Structural problems resulting from damage done by sinkholes and earthquakes, which cause building foundations to crack and sink.
4. Code violation problems that occur when owners neglect the upkeep of their properties, which causes them to be cited for building, fire safety, and health code violations.
5. Stigma problems that affect properties that are located near various nuisances, such as sewage treatments plants, hazardous waste material, halfway houses for criminals, and group homes for sex offenders.
6. Property damage problems caused by man-made disasters such as wildfires and natural disasters like hurricanes, tornadoes, floods, and earthquakes.
The key to being successful with this option strategy is to put only properties with problems that can be corrected under option. And to do this, you must know the difference between correctable and noncorrectable property problems. For example, almost all property title problems can be corrected by a knowledgeable real estate attorney or land title professional. However, a building with a major flaw that affects its structural integrity and cannot be repaired, is not the type of problem property that you want to buy an option on.
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