The year 2009 was when Arizona attracted many investors to purchase homes through trustee sales. Three years later, companies bidding for investors have fine tuned their processes and streamlined their efficiencies in order to make things extremely competitive when purchasing properties this way.

One of the more challenging aspects in this approach is estimating the cost of repairing these distressed real estate properties. Often access is restricted for viewing the property, and time is limited to obtain very accurate estimates for repairs. This is even more challenging when the former owners/tenants are living on the premise which may discourage some from bidding on these properties.

What some may not realize is there is a great potential benefit to purchasing homes with occupants living on the premises. Here are 3 benefits that can occur when purchasing auction homes that have people occupying the premises.

  1. Little to no fix up costs- If a previous owner/tenant is occupying the property, many times they would rather rent the property than move to another location. They may request some items to be fixed, however this is substantially less than rehabbing an entire home. Consider repairing a few items for $500 rather than spending $5000 to make a home rent ready after a tenant has moved out.
  2. No vacancy time- Current tenants and owners who become tenants can eliminate the one month vacancy time that stems from acquiring a vacant rental. One month of vacancy at $1000 is money that an investor cannot regain.
  3. Cash flow- Renting your property out from the date of purchase will bring a faster return on your investment. This allows investors purchasing multiple properties to better leverage their position; especially if they are financing their purchases.

Keep in mind that these situations do not always work out; some tenants/owners may not want to lease or cooperate. They may ask for money to leave or offer to stay and rent for a price well below market rate. Some of these may even lead to eviction. However, out of 32 occupied foreclosure purchases made by a single owner since January, 43% have leased back to the owner at a reasonable rental rate.

(Figures from home purchases through Brewer Caldwell Property Management)