What is a Stigmatized Property?

In 2019, more than 9,000 guests have stayed in haunted houses. That’s why we decided to write an article about stigmatized properties - You can make money off these spooky homes.

What is a stigmatized property?

A stigmatized property is a real estate with an "evil" past that tends to repel most buyers. While the events (whether actual or alleged) had no physical impact on this house, its psychological effects can be everlasting. A bad reputation and unwillingness/inability to sell or rent out are characteristics of a stigmatized property.

Specific scenarios that cause a property to be stigmatized

• It was the site of a murder or suicide

• The property is allegedly haunted or is known to have paranormal activity

• The property was the residence of an infamous person

• It was the site of criminal activity

• The location is near a cemetery or an area with high crime

State have also set laws about stigmatized properties. In New York, a seller doesn’t have to disclose any reason why the property would be considered stigmatized. In Florida, real estate agents don’t have to disclose any information about a murder or suicide that took place on the property. Meanwhile, sellers in South Dakota are legally obligated to disclose not only that information, but also felonies. Sellers in California are only obligated to disclose death on the property if it took place in the last 3 years.

Since every state has their own laws, a good rule of thumb is to simply ask the seller or agent. Legally, they’re obligated to disclose when prompted. Nonetheless, it’s a good idea to research the stigmatized property laws of a given state.

Tips for investing in these properties

As an investment property, stigmas could also include debt and public fascination. The latter could work in favor of the cash return and allurement of the property. Yet, the previous characteristic can be a deterrent.

Nonetheless, the steps to analyze the opportunity remains the same with one additional add on.

• Do your research on cap rate, cash-on-cash return, rehab costs, etc. per usual

• Conduct a more thorough neighborhood analysis than usual. As we previously mentioned, crime rate and the overall reputation of the neighborhood will determine the marketing opportunity. For example, an AirBnb in a war zone is less alluring than a stigmatized property in an upscale area. But stigmatized properties in both rural and urban areas can be equally profitable; it just depends on the guest and what type of experience they’re looking for.

• The additional consideration is if the reputation of the property is favorable and not favorable. If you haven’t surmised, a dark history can be great for marketing; it’s an experiential AirBnB stay for some thrill seekers. On the other hand, it can just be what’s so about the property and have no impact on the market’s view of the house.

Would you invest in a stigmatized property? Investors tend to not care while homeowners may be wary.

For more information about investing in these properties, schedule your consultation today!