What is a Distressed Asset?
Updated: Jul 28
A distressed asset is experiencing financial or operational difficulties, such as low or negative cash flows or insolvency.
Due to the need for quick liquidity or to avoid potential losses, these assets are often sold at a discount to their actual value.
Some examples of distressed assets include properties that need repairs or have been repossessed; distressed debt, which is loans or bonds that are in default or at high risk of default; and distressed developers who may be facing financial distress, bankruptcy, or insolvency.
Investors who specialise in distressed assets may seek to acquire them at a discount and turn them around for a profit, either by restructuring or improving the asset or by selling it to a buyer willing to pay a higher price. Property investors can find distressed assets at property auctions, through off-market deals and via receivers and administrators. Some astute investors have seen, analysed and acquired distressed property at bargain basement prices by attending property auctions, including repossessions, bankruptcies and bargain properties.