Tuesdays Tip: The 3 D's of Real Estate

Readers of this post will fall into two distinct categories. Some of you will say, "Dan that is so harsh. People should not take advantage of the misfortune of others." Others will say, "That is so true, now I know what to look for!" As you may know, I am the eternal optimist, but I am also a Realist. Real estate and finance are industries where there will always be winners and losers, and you need to stay on your game to make sure you come out on the winning side. Did I mention I also hate losing?

When looking for a property, the easiest way to get a good deal is to look for the 3 D's of real estate: Debt, Death, and Divorce. In all 3 cases, a seller is looking to unload the property quickly, hence the term "distressed sale" came about.

DEBT - Owning a property is a liability. If you have a mortgage, car payment, children and other financial obligations, there is a lot of debt on your plate. The largest and most sensible chunk to get get rid of would be the mortgage. Unfortunately most people do not come to this realization until it is too late. At this point they are desperate to sell in order to pay off debts or avoid losing the home altogether, along with any equity. When the opportunity presents itself, there are huge rewards for timely buyers. I spoke to a woman 2 weeks ago that bought a 4 family property appraised at $375,000 for just $149,000. Here's the best part, after PITI there is a positive net cash flow of over $2,000 per month! That's a steal! All because the borrower couldn't afford the mortgage (debt).

DEATH - If you find a way to avoid it, let me know! Heck at the rate we're going with medical breakthroughs, we're all going to live to be 100 anyways! It's unfortunate, but most families do not want to be saddled with the burden of another property after a loved one passes. On the other hand, people are greedy and want to sell as quickly as possible to get their hands on any equity. Both scenarios present a great opportunity for opportunistic buyers! We just did a deal a few months back where the borrower was able to purchase a 600k home for over 100k below its value! All because it was an estate sale and the family wanted to get their hands on the money. It's unfortunate, but it was a great opportunity for the buyer!

DIVORCE - Much like death, divorce comes with a lot of emotions. Sellers that think, or don't think in this case, with their emotions are bound to get the short end of the stick. Divorce cases have become a bit of a niche for me, unfortunately there is certainly not a shortage of them! In nearly every case, I encounter a couple that is not thinking clearly. Many times, either ex cannot afford the property on his or her own, so it is a forced sale. When someone needs to sell quickly, they drop the price. Yet another winning scenario for opportune buyers.

None of the 3 D's are fun situations to deal with. However, any individual with a keen eye for seeking out these opportunities may reap huge rewards. Do your research. Find out why a seller has a property listed. In an era where information is readily available online, via the news, and via gossip, it is not difficult to obtain the necessary information that will give you an edge while looking at properties. If you would like more information on this topic, feel free to contact me.

Make it a great day!