The biggest mistake that investors sometimes make when using this strategy is that they bite off more than they can chew. They do this by trying to correct the problem affecting the property themselves, instead of reselling their option to a niche investor who specializes in turning problem properties around. You should be using this strategy the same way that I told you to use the obsolescent property strategy in Chapter 4. And your objective after you put a problem property under option should always be to find a buyer for the property. The only exception to this is properties with title problems that can be quickly and inexpensively corrected in order to put the property's title in a marketable condition and greatly increase its resale value. In cases like this, you would correct the title problem and then resell your option to a third party or exercise the option yourself and buy the property. I realize that some of you reading this may wonder why problem property owners do not correct the problems themselves and then sell the property by owner or list the property for sale through a real estate broker. The truth of the matter is that most owners do not have the money, knowledge, time, or desire to solve their own problem property woes. Plus, most real estate brokers are very reluctant to list any type of problem property out of fear that the buyer will come back and sue them after the sale, and they will somehow be found liable for wrongdoing. And those owners who do attempt to sell their problem properties themselves usually do a pretty lousy job of marketing and end up with no takers. They do not know how to conduct market research to identify prospective buyers who could possibly have a use for their property. And luckily for us savvy option investors, they usually fail to look beyond the borders of their own local real estate market for so-called niche investors, who specialize in buying properties with every imaginable type of problem. These niche problem property investors run property wanted ads in professional real estate trade publications and newspapers with national circulations, such as the Wall Street Journal and the New York Times. For example, I have resold options on two problem properties that were contaminated with hazardous waste material to niche investors who specialize in cleaning up contaminated properties, whom I found through ads in trade publications.
Was this article helpful?