Bargain properties are properties that can be acquired at a price that is significantly lower than their true market value at the time of acquisition.
However, property investors need to be extremely careful of properties advertised that they are selling at a bargain price because they may be sold at just what they really worth for reasons that are not obvious to the buyer.
A property may be selling significantly below its market price due to special circumstances such as foreclosure,
tax delinquency, and bankruptcy. It should be kept in mind though that any of such circumstances does not necessarily represent a case of a bargain property.
Properties sold at real bargain prices should be sought by property investors aiming at high investment returns because, they can allow for large capital gain and double-digit returns, if they are resold at market price.
The advantage of bargain properties is that there is no need to wait for these properties to appreciate in order to profit from them, at least in a very active market with households looking for houses and investors looking for opportunities.
Usually, most of the properties that can be bought at low prices, due to the aforementioned circumstances, need some or a lot of fixing up before they can be functional and marketable. Thus, investors need to very carefully estimate the required repair and other costs for reselling it at market price and whether there is still significant profit after taking into account such costs.
Some investors may do minor cosmetic repairs and resell these properties fast to other investors, at prices that are still well below market for quick profits, but again, this is doable in a very active market, but it may be very difficult to apply in a down market with very few active investors.
Of course, if the property has potential for market-driven or development-driven appreciation potential, the investor will stand to earn much higher returns by holding the property for a couple of years and then selling it.
Property investors should be very cautious when buying such properties in falling markets, because even if they buy at a significant real discount from the true market price at the time of the transaction, that discount may shrink significantly or disappear in a short time because of the rapidly declining market price