Expensive Problems Hide in Distressed Properties

Investing in a distressed property can be a strategic move. Distressed properties allow you to sharpen your investing skills as a real estate investor and cultivate value in your portfolio.

While distressed properties often have the greatest potential for return on your investment, they are also some of the riskiest investments you can make.

To minimize your investment risk, consider the most common risks below. By reading over them, you can turn your risky investment into a profitable one.

It doesn’t take an expert to see these potential problems for what they are, but it does take a careful eye to spot them. Especially if they’re being hidden from you on purpose.

Now, if you are interested in learning how to properly finance the purchase of a distressed property, click the link below for a free strategy call with our team at LendCity to weigh your financing options.

Book Your Strategy Call

Most Common Issues Found In A Distressed Property

When you purchase a distressed property, you don’t expect everything to be perfect. But you must be mindful of the kinds of repairs that are necessary to rehab the property.

Buying a distressed property that needs extensive repair, and rehabilitation might cause you to exceed your budget and overspend on the home.

It’s important to understand the most common issues when investing in distressed properties. Understanding the issues can help give you a better idea of what to look for and what to avoid.

Here’s where to pay very close attention.

Plumbing Issues

Distressed properties are notorious for having plumbing issues that can be difficult to identify at first glance.

Plumbing leaks can be found anywhere in the home. You might not be able to find the source of a leak until it becomes a major problem.

You should pay special attention to the condition of the plumbing system in the property you are considering purchasing.

Failing to identify any plumbing issues within the house, you can check the water meter to help you determine if there are plumbing issues.

Turn off all faucets and appliances and check the water meter. If the meter is spinning, then you potentially have plumbing issues.

Additionally, you can bring a moisture sensor with you when inspecting the rental property. A moisture sensor can help you find leaks within the walls.

Water Damage

Water damage is one of the most serious issues that can occur in a home. It’s always easy to spot if you don’t know what to look for.

Besides obvious leaks and water damage out in the open, keep your eye out for mould growth. Mould can grow:

underneath sinks
near water lines in the basement
in the attic from the roof
under flooring

Water damage also can cause warped flooring in and around bathrooms and kitchens.

Keep in mind, water damage may not necessarily be a plumbing issue. Bad grading on the property can leave it vulnerable to flooding and water intrusion after a storm. Or, a previous one-time plumbing incident may not have been properly re-mediated, leaving behind lasting issues.

Water damage can be visible and structural. If you see spots on the ceilings in any rooms, this can be a sign of a previous leak.

Also, try to use your nose and smell around and see if you can smell anything musty. Usually, a damp property will smell musty. This musty smell indicates potential water, or plumbing issues.

Broken Sewer Lines

A broken sewer line can be an incredibly expensive and labour-intensive issue to repair. Sewer lines can be damaged by debris being flushed into the system, overgrown tree root systems or erosion. Regardless of the cause, you would rather not get stuck with a property that has a broken sewer line.

You can’t easily look at the sewer line to see whether it’s in good condition. You will need to look for signs of damage on the surface.

Check for any depressions around the line that indicate erosion and line collapse. Also, pay attention to greener grass growth above the line that indicates a leak and look for signs of digging nearby.

Also, if you’re doing a home inspection, you can bring a plumber with a camera and run it into the sewer line. This does come at a cost, so try to only have your plumber if you are serious about a certain property.

Pests

Dealing with a pest issue is the last thing you want to do after you purchase a distressed property.

Depending on how long the pests have been on the property, it may be challenging to get rid of them.

By the time you identify and eradicate unwelcome guests, chances are that they have already done damage to the distressed properties structure and foundation.

You can look for rotten wood, sawdust, tiny holes and other signs of nesting and burrowing. These signs indicate the presence of pests in a home.

Another great tip is to ask the neighbours how the pest are. Often, if your neighbour is having pest issues, so could you.

Wiring Problems

Electrical wiring is incredibly important in a home but can also be incredibly dangerous if it isn’t in good condition.

Electrical wiring that’s old and corroded doesn’t have the capacity to support the electrical needs of a property can cause an increased fire risk.

Find out as much as you can about the existing wiring at the property. You can avoid purchasing a home if it requires extensive wiring installation and repair, if you’re not financially ready to update it.

Check the electrical panel and wiring that is exposed to get a general idea of the condition of the wiring. Stay away from knob and tube wiring, or expect a hefty bill for replacement.

Keep Your Wits Sharp While You Inspect

Investing in a distressed property can be a great choice, but extra caution is necessary to ensure your investment pays off.

Taking the time to inspect a distressed property and check for major issues before you buy can save you a headache and financial loss.

Now, if you are interested in learning how to properly finance the purchase of a distressed property click the link below for a free strategy call with our team at LendCity to weigh your financing options.

Book Your Strategy Call

Frequently Asked Questions

What is a distressed property and why should I invest in one?

A distressed property is a real estate asset that is being sold below market value, often due to financial distress, neglect, or needed repairs. Investing in distressed properties allows you to purchase real estate at a discount and potentially earn significant returns through rehabilitation and resale or rental income. However, these properties come with higher risks that require careful inspection and due diligence.

What are the most common problems found in distressed properties?

The most common issues in distressed properties include plumbing leaks, water damage and mold growth, broken sewer lines, pest infestations, and outdated or dangerous electrical wiring. These problems can be expensive to repair, so it's crucial to identify them during the inspection phase before purchasing the property.

How can I identify hidden water damage in a distressed property?

Look for visible signs like mold growth under sinks, in basements, attics, and under flooring. Check for warped flooring around bathrooms and kitchens, spots on ceilings, and use your sense of smell to detect musty odors. Bring a moisture sensor during inspections to find leaks hidden within walls.

Should I hire a professional inspector before buying a distressed property?

Yes, hiring a professional home inspector is highly recommended when purchasing a distressed property. Consider bringing specialized professionals like plumbers (who can run cameras through sewer lines) and electricians to identify issues that may not be visible during a standard walkthrough. The inspection cost is minimal compared to unexpected repair expenses.

How do I check for plumbing issues in a distressed property?

Turn off all faucets and appliances, then check the water meter. If the meter continues spinning, you likely have a leak somewhere in the system. Use a moisture sensor to detect hidden leaks within walls, and carefully inspect all visible plumbing for signs of corrosion or damage.

What electrical problems should I watch for in distressed properties?

Look for old and corroded wiring, outdated electrical panels, and insufficient capacity for modern electrical needs. Avoid properties with knob-and-tube wiring unless you're prepared for a complete rewiring project. Faulty electrical systems increase fire risk and can be expensive to replace.

How can I tell if a distressed property has a broken sewer line?

Check for depressions in the yard around the sewer line indicating erosion and collapse. Look for unusually green grass growth above the line (which can indicate a leak) and signs of recent digging. If you're serious about the property, hire a plumber to run a camera through the sewer line for a definitive assessment.

How can LendCity help me finance a distressed property investment?

LendCity specializes in investment property financing and can help you evaluate financing options for distressed property purchases. Schedule a free strategy call with their team to discuss loan products, down payment requirements, and financing structures that match your investment goals and rehabilitation budget.

Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.

Written by

LendCity

Published

December 18, 2025

Expensive Problems Hide in Distressed Properties | Guide