Certain types of real estate investing can require a large dollar amount — large enough to discourage many people from doing their first deal.
But for someone looking to get started in the field with a small, out-of-pocket budget, investing in probate real estate may be the answer.
What Are Probate Properties?
A “probate asset” is a property or object left behind by a deceased person.
Although anything can be a probate asset — cars, jewelry, furniture, stocks — most professionals use the term in reference to probate real estate.
If the deceased was the sole owner of the real estate property when they died or left no will, the property goes to probate. That’s the name for the court process of distributing the deceased’s holdings.
The probate court either:
- names an executor
- oversees the probate sale of the deceased owners’ real estate by itself
What Is Probate Real Estate Investing?
Often, the holder or executor of a piece of probate real estate, such as a family member or friend, has incentive to sell.
They may decide not to live in the property or might not want the responsibility of ownership long-term.
When that happens, the property is put up for probate sale — and that’s a big opportunity for real estate investors.
Because the probate property is likely to be priced much lower than others in the surrounding area.
The heir or executor often wants to unload the property as soon as possible for three reasons:
- so that they can avoid paying taxes and fees on it
- so that they can get the value out from the house
- so they can emotionally move forward
Because of these factors, probate properties are often “priced to move.”
On top of that, property in a probate sale often has no outstanding mortgage due, simply because the departed owner might have been older or paid off the mortgage in full.
With a low base price, the investor can better afford to “fix and flip” — renovate and resell — a probate property.
As a result, an investor is likelier to see greater profit from a probate sale than they might with a standard real estate purchase.
Of course, property in a probate sale is not a totally risk-free investment. Keep in mind:
- The legal process of transferring ownership may take a while.
- The property will usually be sold “as-is,” making renovations in some cases expensive.
But a well-executed probate sale can create a win-win for all involved parties, investor and seller alike.
Getting Started: How to Find Property in a Probate Sale
Naturally, the first step in buying a probate estate is to find it.
There are easier and more ethical ways to do so than scanning the obituary page. Here are some of the things that you can do.
Contact Your Local Probate Court
Your county’s probate court should have a list of all open probate cases that involve real estate, and it should be free for you to review either in person or online.
You may be able to find probate property through a dedicated web search.
Look Through Your Local Newspaper
Some county clerks publish notices of upcoming probate sales in the local paper or on their website.
Buy Probate Sale Leads
Companies offer lists of potential probate sale leads for a price.
Investing In Probate Real Estate
If you’re looking to invest in real estate with a small, out of pocket budget, a probate sale is one option.
Before you get started on your first deal, we encourage you to mitigate risk by continuing your education about probate investing, and real estate investing.