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Apartment found on a distressed property list, picture before and after repairs


As a real estate investor, your job is to identify lucrative investment leads and then to capitalize on these finds. One of the most sought-after types of leads in the industry is distressed property leads

Distressed property leads refer to properties where the owner is experiencing financial hardship, and the property is at risk of being foreclosed or seized due to unpaid debts. 

These properties often present investors with the opportunity to purchase a property below market value, potentially generating significant returns on their investment. In this guide, we'll cover 6 of the most common types of distressed property leads, how to find them, and the tools you can use to maximize your chances of success.

6 Types Of Distressed Property Leads

Understanding the various types of distressed property leads is crucial for any real estate investor. If you're new to real estate investing, gaining a clear grasp of these types of leads will set you up for success. Let's dive into each one:

1. Foreclosure Leads

Foreclosure leads are properties that have been foreclosed by the lender due to the owner's failure to make mortgage payments. 

Image of foreclosure notice letter on wooden table

When a property is foreclosed, the lender repossesses the property and typically sells it at a public auction to recover their losses. Investors can find great deals on these properties since they are often sold below market value. This is an excellent opportunity to acquire properties at a discount, as long as you're willing to navigate the complexities of foreclosure auctions.

2. Pre-Foreclosure Leads

Pre-foreclosure leads are properties where the owner has defaulted on their mortgage payments, and the lender has initiated the foreclosure process. 

These properties have not yet been foreclosed on, and they provide investors with the opportunity to negotiate directly with the owner to purchase the property before it goes to auction.

Pre-foreclosure leads can offer investors more flexibility in negotiations and a higher likelihood of finding motivated sellers.

3. Bankruptcy Leads

Bankruptcy leads are properties where the owner has filed for bankruptcy protection. 

This can present an opportunity for investors, as the owner may be willing to sell the property to settle their debts. Bankruptcy sales can result in excellent deals for investors who are ready to act quickly. However, it's essential to understand the legalities of bankruptcy sales and be prepared for a potentially lengthy process.

4. Tax Lien Leads

Tax lien leads are properties with unpaid property taxes. 

When a property owner fails to pay their taxes, the local government may place a lien on the property. Investors can purchase these liens and, in some cases, eventually take ownership of the property if the owner doesn't pay their outstanding taxes. Tax lien investing can be complex, and it's crucial to understand the rules and regulations surrounding this type of investment.

5. Upside Down Leads

Upside down leads are properties where the owner owes more on their mortgage than the property is worth. 

These homeowners may be motivated to sell their property to avoid foreclosure or financial stress, allowing investors to potentially purchase the property at a discount. This type of lead typically results from a declining housing market or the owner's inability to manage their mortgage payments effectively.

6. Low Equity Leads

Low equity leads are properties where the owner has little to no equity in their home. 

These owners may be motivated to sell their property quickly to avoid financial hardship, creating opportunities for investors to acquire properties at attractive prices. These leads can be a goldmine for investors who are skilled at negotiating and can offer creative solutions to help the seller out of their predicament.

Where To Find Distressed Property Leads

Locating distressed property leads is a crucial part of a successful real estate investment strategy. Here are three ways investors can find these valuable leads:

1. Skip Tracing

Real estate investor using laptop to skip trace for email contact information

Skip tracing is the process of locating property owners and their contact information using various publicly available resources and databases. 

Skip tracing can help real estate investors track down distressed property owners and initiate negotiations to purchase the property. It’sis an essential skill for investors seeking off-market deals and can lead to significant investment opportunities. However, it's important to note that skip tracing can be time-consuming and may require a certain level of expertise to be effective.

2 Ways To Skip Trace

1. Use Publicly Available Information

Investors can actively seek out public records by visiting their local county tax offices, assessor's offices, or county clerk's offices. 

These offices hold property ownership, tax, lien, and other essential records, proving invaluable for skip tracing efforts. Sometimes, investors can access these records online, while other times, they must visit the offices in person and request the information. Although effective, this method can be time-consuming and may require considerable effort.

2. Use Professional Software

On the other hand, skip tracing with software offers a more efficient and streamlined way of gathering necessary information. Realeflow’s software has built-in, next-generation skip tracing capabilities, enabling users to access a wealth of data directly from the platform. 

Furthermore, software-based skip tracing typically delivers more comprehensive and up-to-date data compared to manual methods, as the software continually updates its database with the latest information.

Consequently, investors can trust the data's accuracy, increasing their likelihood of successfully contacting property owners and closing deals.

2. Driving For Dollars

Driving for dollars involves physically driving around neighborhoods and identifying properties that show signs of distress. 

Distressed property against a blue sky

Some indicators of distressed properties include; 

  • Overgrown and unkempt lawns
  • Boarded-up windows
  • Piles of uncollected mail

By identifying these properties, investors can then research the property owners and contact them directly to discuss purchasing the property. This strategy is both affordable and effective, but it does require patience and persistence, as well as a keen eye for spotting leads.

3. Real Estate Investing Software

Technology has revolutionized the way investors find distressed property leads, making it easier and more efficient than ever before. Using specialized software like Realeflow, investors can access extensive databases of properties and filter their searches to focus on the types of distressed leads they're most interested in. 

Realeflow boasts an extensive database of properties, including foreclosures, pre-foreclosures, tax liens, and more. Investors can set up customized searches and alerts to stay up-to-date on the latest distressed property leads in their target market. Additionally, Realeflow offers comprehensive property analysis tools, allowing investors to quickly determine the potential profitability of a property before making an offer. With advanced features like CRM integration, automated marketing, and deal management, Realeflow streamlines the entire process of finding and managing distressed property leads.

Another advantage of using software like Realeflow is the ability to analyze vast amounts of data in a short period. This can help investors identify patterns and trends in the market, enabling them to make more informed decisions about potential investments. Furthermore, software tools can also help investors manage their leads more efficiently, keeping track of contacts, appointments, and follow-ups.

Want to see how Realeflow can help you identify distressed sellers? Grab your 7-day free trial of Realeflow here!