What is an Absentee Owner?
Absentee Owners in Real Estate Investing
When real estate investors use the term “absentee owner,” they are usually referring to the owner of a vacant property.
Real estate investors will often seek out properties owned by an absentee owner because, comparatively speaking, an absentee owner is more likely to sell their property at a lower price (i.e. – as a “motivated seller”) as opposed to a property that is owner-occupied.
Here are some examples of absentee owners that might attract the interest of an investor:
- Someone who inherited a property either through a will or the probate process
- Someone who moved to another location before they were able to sell the property
- An investor who purchased a property as a potential rental but hasn’t been able to find tenants
- An investor who purchased property solely for appreciation purposes who has no reason to live in it
- An attempted landlord who is tired of dealing with tenants, toilets, and termites (among other things)
There are also corporate absentee owners who invest in commercial real estate and then contract out the management services. These investors take a hands-off approach so they can focus their energies on acquiring and developing other properties.
Why do real estate investors pursue absentee owners?
In a competitive market, real estate investors will search for overlooked opportunities to expand their investment portfolios. In many cases, off-market properties like those owned by absentee owners present an opportunity to pursue a deal before other buyers have a chance to present an offer.
Many times, absentee owners are highly motivated to unload their vacant property, but they may lack the time and resources to list and sell it. If an investor can find the absentee owner of a vacant property and contact them, the investor may be able to acquire the property at a below-market price and either flip it or rent it.
Absentee owners typically don’t have the same level of emotional attachment to their property as owner-occupant would. This is often a significant contributing factor in their willingness to accept a below-market offer from another investor to purchase their property.
How to find absentee owned properties
There are several ways to find absentee-owner properties; some are free and involve legwork, others require a cash outlay. Here are the most common methods:
- Driving for Dollars: This is exactly what it sounds like. Investors identify neighborhoods that interest them and simply drive around them looking for vacant homes. If there are poorly maintained homes with overgrown yards, boarded windows, or other signs of neglect, they make a note of the address for further research later on. If it isn’t obvious that a property is vacant, they may knock on the door or ask neighbors about the status of the owner.
- Comb Tax Records: This is labor-intensive detail work that involves comparing the tax records of properties with the addresses of the owners. In some areas, this information is available online, but in others, you’ll need to visit the tax assessor’s office. If the owner’s address is different from the property address, it’s an absentee owner who may be receptive to selling.
- Buy an Absentee Owner List: There are services that compile absentee owner lists for a fee. Investors should have a plan for contacting the absentee owners so they get the information they need from the list. For example, you may only need names and addresses for a direct mail campaign. If you plan to make phone contact, you may want more specific information such as price ranges, amount of equity, and property details. However, list prices go up based on the amount of detail required.
- Check Rental Listings: Absentee owners are people who choose not to live in a property they own, but that doesn’t mean they aren’t interested in renting it out. Not all absentee owners of rental properties are good targets for investors, but if a home has been listed for a long time, the owner may be open to an offer.
Some absentee owners are listed as LLCs or other corporate entities. This doesn’t automatically mean that they’re owned by a large investment company not open to offers. Many small investors who own just a few properties often incorporate for tax and liability purposes.
Advantages of Absentee Ownership for Investors
Many corporate and individual real estate investors prefer being an absentee owner of each property they own.
Absentee owners aren’t limited to a particular area or geographical region when they search for properties to buy. Turning management responsibilities over to a local property management service leaves the investor with more time to scale up his operations and build a portfolio.
However, the relationship between the absentee owner and property manager can make or break returns on an investment property. A manager who takes good care of the tenants and the properties keeps vacancies low and ensures a steady stream of rental income. A bad one drives away good tenants and risks your return on investment.
Absentee owners are a valuable source of real estate investment deals. Anyone interested in getting involved in real estate investing would benefit from gaining experience identifying properties with absentee owners.