The 3 Sacred D’s Of Real Estate Investing

 

The 3 Sacred D's Of Real Estate Investing

What are the 3 Sacred Ds of real estate investing? There are plenty of reasons you might need to sell a property or get rid of real estate. Some get unexpected job changes that require them to transfer to other areas, others might not like the way their neighborhood has expanded.

Did you wake up to find a big-box retail construction project too close to your neighborhood for comfort? Neighborhoods aren’t the only things that can change unexpectedly–changes in marital status also play a big part in the decision to buy or sell real estate, investment properties, or not.

Sacred D’s of Real Estate Investing

Real estate investors with experience know there are some life-changing events that can lead to investment opportunities for the right kind of investor. These are sometimes referred to as the Sacred D’s of real estate investing–things that lead to people selling property off, and often at deals hard to find otherwise.

What are the three sacred Ds of real estate investing?

Death

There’s an old saying. “Death is a part of life.” This is definitely a truism to remember when looking at an investment opportunity that is created by the death of someone who has surviving family members anxious to dispose of property after the owner has passed away. Some won’t want to live in the home where their loved one died, others can’t afford the upkeep of a property left behind after a family tragedy. Death is, cynical as it may sound, an opportunity for both buyer and seller.

The seller may simply want to be rid of the real estate, or be so eager to move on that the price they set for the property seems a bit like a “steal”. It’s important to strike a balance between the needs of the seller and the needs of the buyer. Some investors may be tempted to give in to their urges to indulge in some profit-taking, but if the seller isn’t happy with the deal this could come back to haunt you before–or after–closing day. It’s best to work up a fair deal in these cases. Keep in mind that the seller won’t always be as distracted by personal issues and may change their mind about selling in cases where it begins to seem like the transaction isn’t doing much for the seller’s bottom line.

Yes, the right buyer can help a seller in a time of grief. But keep in mind the old saying; “Pigs get fat, hogs get slaughtered.” Keep an eye on being fair and equitable in these cases for the best results.

Divorce

Divorce is another of the Sacred D’s of Real Estate Investing. Consider the person who got married, bought a house, but later had trouble and wound up getting a divorce. If one party or the other cannot afford the home on their own, they wind up in a predicament; sell the house for a net loss, or rent it out?  One option here is to offer the home to a third party under a “Subject To” agreement. If you don’t know about such arrangements, now is an excellent time to research your options.

Debt

Debt is the third of the sacred D’s of real estate investing. From credit card debt causing a move from ‘homeowner’ to ‘renter’ to being “underwater” on a home mortgage causing the need to short sell or foreclose.  Debt is profound, and it is everywhere. The homeowner with too much debt may have to sell short, offer a deed in lieu of foreclosure, or simply allow the property to go into foreclosure in cases where there is too much debt and the borrower can’t save the home.

Some view real estate investors as a sort of problem solver option; a real estate investor could help the homeowner out (depending on circumstances) by arranging a private sale pre-foreclosure which can help the borrower avoid the damage to their credit rating that comes through an actual foreclosure sale. Borrowers who need to sell their home because they can no longer afford the mortgage payments should know one very important thing–the lender’s participation is usually required in these cases so be sure to discuss your private sale and pre-foreclosure sale options before dealing with an investor.

Real estate investors should be prepared to work with the current loan servicer depending on the nature of the transaction. A home owner’s debt may lead to a real estate bargain, but knowing at which stage in the process the homeowner is at (in terms of missed payments, the need to arrange a pre-foreclosure sale, relevant dates, and deadlines, etc.) will be an important determining factor.

 

Share this post: