I’ve discussed in a previous article how buying a property during a recession can be good for real estate investors. But there are also risks to avoid. If you haven’t read part one yet, click this link. Otherwise, read on to learn more points to follow.

1. Make sure the title is clear

During a recession, the reason why some sellers are putting up their homes on a list at a low price is because they have a lot of problems on their plates. At most times, the property is burdened by a lien which could be passed on to your ownership.

You don’t want that kind of problem. It’s best to get a real estate lawyer to do a title search and protect your interests. Don’t forget to employ the services of title insurance companies as well.

2. Avoid a bidding war

Emotion is an investor’s worst enemy. If you get too excited about buying a dream property, you could end up wasting a lot of money and time. This is a common scenario for properties with a good deal that has more than 2 interested buyers.

A bidding war could happen and buyers would raise their offers defeating the purpose of buying in a down market. The one with the highest bid loses. The property may be acquired but a lot of money has been spent when there are still other good deals on the market.

3. Don’t be afraid to walk away

Contrary to a bidding war, there are also properties out there with sellers refusing to accept and price their home more than its actual worth. If you do find yourself in a situation where you can’t get the deal you deserve, take all your chips and find something else to buy.

As I said, there are other better deals on the market. You just need to be very patient. If a deal doesn’t push through, try again next time. Don’t ever allow yourself to be highballed. Stick to the buying price you’ve set.

4. Avoid foreclosures and short sales

Don’t buy a property that has been foreclosed, in an area with a lot of foreclosures, or if the seller is short-selling you just to avoid foreclosure. A foreclosed property may have some damages that are costly for repairs due to being vacant for a long time.

A home in an area with a lot of foreclosures is less likely to increase its value in the future. Short sale homes often have liens with multiple lenders which will take a long time to be closed. These homes have a very low selling price and are really enticing for buyers.

But you must also remember that with cheap products, you’re bound to experience pesky problems in the long run.

5. Consider cash flow

For real estate investors buying rental property in a recession, you should keep cash flow in sight. This means looking at the property if it’s still making money in even if it’s paying for the upkeep expenses and mortgage. Cash flow rentals are a huge asset in minimizing risks and losses.

6. Research deals thoroughly

Since there are many good deals on a down market, you should weigh the advantages and disadvantages of one property deal to another. Then, pick the property with the best deal for you before scooping a good bargain for both you and the seller.

This is to make sure that at the end of the day, when you have made a final buying decision, you and the seller won’t regret completing the deal.

In summary, buying a property in a recessive environment involves a lot of research and patience. You must get to know the property first you’re interested in buying, find the best deal for you, and keep a calm mind to present an offer that a seller cannot refuse.

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