Nobody likes paying full price. Whether it’s a box of cereal, a pair of jeans, a new TV or a new car, we’re all on the hunt for a bargain. And it doesn’t get much more satisfying than when you pick up a property for less than its market value.
It’s the holy grail of real estate: buying property at a discount. It means you get instant equity, a shot in the arm for your wealth creation goals.
But bargains can be elusive if you don’t know where to look. In my experience, there are seven main ways to score a discount. Read on to learn the ‘Seven Ds of Discount Property’....
Before I reveal my Seven Ds it’s important to point out that we’re not looking to take advantage of other people’s misfortune. As I repeatedly remind our students, we should always be looking to solve other people’s problems and create win-win solutions.
Don’t rip people off, help them sort out their home hurdles with their dignity intact.
Now, let’s explore the Seven Ds in detail.
Debt
If a property owner is struggling with repayments or finds themselves facing a significant financial crisis, they may be forced to sell their property.
The most typical scenario is mortgagee in possession. This is where the bank or lender exercises its right to sell the property in order to reclaim an outstanding debt.
While the lender is legally obliged to “act in good faith” and sell the property at a “fair” price, ultimately they’re acting in their own interests, so they’re unlikely to pull out all the stops to get the top price for a mortgagee in possession sale.
The bank wants its money back, and the gap between what the mortgagee owes and what the property is worth becomes an opportunity for buyers.
So how do you find out about these deals?
For every mortgagee in possession sale, the bank has to issue a notice through the courts process, and the court's process is public, so you can actually subscribe to those court appeal lists.
Just Google distressed property listings or mortgagee in possession and the internet will dish up details for companies that specialise in compiling these listings to save you from doing the grunt work. You can set up alerts so that you’re in the loop each time a new property is listed. This can be a powerful source of below market value property opportunities.
Death
A deceased estate doesn’t automatically mean a discounted development site, but there are circumstances that can provide opportunity for buyers. If the seller is motivated and looking for a quick transaction, they may not be as focussed on profit as the average Vendor.
If multiple parties stand to inherit the proceeds of the sale, it’s less likely the property will be optimised for sale – meaning they may not bother with maintenance, renovations or styling that could help to achieve top dollar.
It can take time to get a property through all the legal paperwork and onto the market, but once on the market, it will typically be sold quickly via an Auction campaign. Public trustees often provide listings of deceased estates at the local level, and there are specialised websites devoted to finding Auctions.
If, on the other hand, the seller wants to maximise their inheritance, they may be open to a delayed settlement with early access in return for a premium purchase price. While this isn’t strictly speaking a discount, it is one of the golden avenues for Developers to find a no-money-down deal.
Divorce
According to ABS figures, there were close to 50,000 divorces granted in 2019 and you can bet plenty of those couples had to sell their property in order to complete financial settlement.
If the couple ended their relationship on a less than amicable note, they may be looking to sell as quickly as possible so they can move on with the next chapter of their lives.
And in some cases, parties will sell under market value just to spite their ex-partner. While this is not an ideal situation for the unlucky couple, it can present opportunities for buyers.
The best way to find out about these deals is to ask real estate agents outright. A good agent won’t give the game away, but an agent as keen for a quick sale as their Vendor won’t hesitate to air the reasons for sale and may even invite you to make a low-ball offer if you can back it up with a cheque and a signed contract.
Disaster
Natural disasters wreak havoc on homes. Floods and fires, landslides, cyclones and earthquakes can all devalue property and not all homeowners are equipped to walk the road to recovery.
The underlying fundamentals of the market may still be fine, but the market has had a fundamental shift by an incident or an accident of some description that has taken the wind out of prices for the short term.
There will be people who are looking to get rid of their properties because they weren’t insured, are not at a stage of life where they want to tackle a renovation or rebuild, or can’t face the emotional challenge.
These properties may take quite a bit of effort to bring back to life and in some cases may need to be demolished. It can also take time for the market to return to pre-disaster price points, even with homes restored, so you may need to go into these deals with a long-term view.
But while you’ll need to do plenty of due diligence when valuing the property, there’s a good chance of buying at a discount when a disaster has occurred.
Distance
There are two possibilities for grabbing a bargain here: either the agent lives ‘out of area’ or the homeowner lives ‘out of area’.
In both scenarios, familiarity with the market is undermined by the tyranny of distance.
If an agent lists a property in an area they don’t normally operate in, they’re instantly on the back foot. They may not understand the dynamics that affect property prices in that neighbourhood and they may not enjoy travelling to open homes from their usual stomping ground. You’ll often find this situation when an agent agrees to sell a friend or family member’s property, even though it’s not their specialty area.
Likewise, if the owner of a Brisbane property lives in Sydney, they may not be on top of local values and may not be aware of the best agent to sell their asset.
Unfortunately for them, this means they may be off-target when setting the market value, giving you, as a property developer, an opportunity to buy at a discount.
Derelict
These are the “renovator’s delights” right at the bottom of the barrel, perhaps so neglected that buyers aren’t even permitted entry for an inspection for fear they’ll come to harm (think falling through floorboards or impaling yourself on exposed nails).
A house that is in a bad state of repair or has been abandoned over a long period is unlikely to fetch top dollar. They’ll need major repairs and renovations – or perhaps a complete rebuild – before they reach liveable condition, so you’ll need to factor the cost of this into your purchase price.
In the best-case scenario, you may be able to pick up a salvageable property in a good neighbourhood for little more than land value.
Dud
One man’s trash is another man’s treasure: a dud is often a property someone else has bought with a particular development strategy in mind, but has had to offload when things didn’t work out.
For one reason or another, they haven’t been able to realise their vision for the property, so they decide to flick the site. Perhaps the development didn’t stack up on the profit front, the application was rejected or they found themselves short of the money required to do the deal.
Of course they’ll be keen to get their money back, but if there’s another opportunity on the horizon, they may choose a speedy sale over top dollar to free up cash for the next deal.
Now that you know the ‘Seven Ds of Discount Property’, you’ll have more tools in your tool box and better yet, the possibility of helping others along the way in your property development journey. If you'd like to learn how to assess deals quickly, our free introductory course 7 Step Development FORMULA is a great place to start.
It’s the holy grail of real estate: buying property at a discount. It means you get instant equity, a shot in the arm for your wealth creation goals.
But bargains can be elusive if you don’t know where to look. In my experience, there are seven main ways to score a discount. Read on to learn the ‘Seven Ds of Discount Property’....
Before I reveal my Seven Ds it’s important to point out that we’re not looking to take advantage of other people’s misfortune. As I repeatedly remind our students, we should always be looking to solve other people’s problems and create win-win solutions.
Don’t rip people off, help them sort out their home hurdles with their dignity intact.
Now, let’s explore the Seven Ds in detail.
Debt
If a property owner is struggling with repayments or finds themselves facing a significant financial crisis, they may be forced to sell their property.
The most typical scenario is mortgagee in possession. This is where the bank or lender exercises its right to sell the property in order to reclaim an outstanding debt.
While the lender is legally obliged to “act in good faith” and sell the property at a “fair” price, ultimately they’re acting in their own interests, so they’re unlikely to pull out all the stops to get the top price for a mortgagee in possession sale.
The bank wants its money back, and the gap between what the mortgagee owes and what the property is worth becomes an opportunity for buyers.
So how do you find out about these deals?
For every mortgagee in possession sale, the bank has to issue a notice through the courts process, and the court's process is public, so you can actually subscribe to those court appeal lists.
Just Google distressed property listings or mortgagee in possession and the internet will dish up details for companies that specialise in compiling these listings to save you from doing the grunt work. You can set up alerts so that you’re in the loop each time a new property is listed. This can be a powerful source of below market value property opportunities.
Death
A deceased estate doesn’t automatically mean a discounted development site, but there are circumstances that can provide opportunity for buyers. If the seller is motivated and looking for a quick transaction, they may not be as focussed on profit as the average Vendor.If multiple parties stand to inherit the proceeds of the sale, it’s less likely the property will be optimised for sale – meaning they may not bother with maintenance, renovations or styling that could help to achieve top dollar.
It can take time to get a property through all the legal paperwork and onto the market, but once on the market, it will typically be sold quickly via an Auction campaign. Public trustees often provide listings of deceased estates at the local level, and there are specialised websites devoted to finding Auctions.
If, on the other hand, the seller wants to maximise their inheritance, they may be open to a delayed settlement with early access in return for a premium purchase price. While this isn’t strictly speaking a discount, it is one of the golden avenues for Developers to find a no-money-down deal.
Divorce
According to ABS figures, there were close to 50,000 divorces granted in 2019 and you can bet plenty of those couples had to sell their property in order to complete financial settlement.
If the couple ended their relationship on a less than amicable note, they may be looking to sell as quickly as possible so they can move on with the next chapter of their lives.
And in some cases, parties will sell under market value just to spite their ex-partner. While this is not an ideal situation for the unlucky couple, it can present opportunities for buyers.
The best way to find out about these deals is to ask real estate agents outright. A good agent won’t give the game away, but an agent as keen for a quick sale as their Vendor won’t hesitate to air the reasons for sale and may even invite you to make a low-ball offer if you can back it up with a cheque and a signed contract.
Disaster
Natural disasters wreak havoc on homes. Floods and fires, landslides, cyclones and earthquakes can all devalue property and not all homeowners are equipped to walk the road to recovery.
The underlying fundamentals of the market may still be fine, but the market has had a fundamental shift by an incident or an accident of some description that has taken the wind out of prices for the short term.There will be people who are looking to get rid of their properties because they weren’t insured, are not at a stage of life where they want to tackle a renovation or rebuild, or can’t face the emotional challenge.
These properties may take quite a bit of effort to bring back to life and in some cases may need to be demolished. It can also take time for the market to return to pre-disaster price points, even with homes restored, so you may need to go into these deals with a long-term view.
But while you’ll need to do plenty of due diligence when valuing the property, there’s a good chance of buying at a discount when a disaster has occurred.
Distance
There are two possibilities for grabbing a bargain here: either the agent lives ‘out of area’ or the homeowner lives ‘out of area’.
In both scenarios, familiarity with the market is undermined by the tyranny of distance.
If an agent lists a property in an area they don’t normally operate in, they’re instantly on the back foot. They may not understand the dynamics that affect property prices in that neighbourhood and they may not enjoy travelling to open homes from their usual stomping ground. You’ll often find this situation when an agent agrees to sell a friend or family member’s property, even though it’s not their specialty area.
Likewise, if the owner of a Brisbane property lives in Sydney, they may not be on top of local values and may not be aware of the best agent to sell their asset.
Unfortunately for them, this means they may be off-target when setting the market value, giving you, as a property developer, an opportunity to buy at a discount.
Derelict
These are the “renovator’s delights” right at the bottom of the barrel, perhaps so neglected that buyers aren’t even permitted entry for an inspection for fear they’ll come to harm (think falling through floorboards or impaling yourself on exposed nails).
A house that is in a bad state of repair or has been abandoned over a long period is unlikely to fetch top dollar. They’ll need major repairs and renovations – or perhaps a complete rebuild – before they reach liveable condition, so you’ll need to factor the cost of this into your purchase price.
In the best-case scenario, you may be able to pick up a salvageable property in a good neighbourhood for little more than land value.
Dud
One man’s trash is another man’s treasure: a dud is often a property someone else has bought with a particular development strategy in mind, but has had to offload when things didn’t work out.
For one reason or another, they haven’t been able to realise their vision for the property, so they decide to flick the site. Perhaps the development didn’t stack up on the profit front, the application was rejected or they found themselves short of the money required to do the deal.
Of course they’ll be keen to get their money back, but if there’s another opportunity on the horizon, they may choose a speedy sale over top dollar to free up cash for the next deal.
Now that you know the ‘Seven Ds of Discount Property’, you’ll have more tools in your tool box and better yet, the possibility of helping others along the way in your property development journey. If you'd like to learn how to assess deals quickly, our free introductory course 7 Step Development FORMULA is a great place to start.
