Homebuyer Triple D

I realize that the subject above may have caused some people think of Guy Fieri’s “Diners, Drive-Ins and Dives”, a bra size, $DDD (no position), or something completely different.

But, I obviously can’t read your mind, so I’m just going to assume that you’re a regular visitor, and that you've checking in for some lighthearted financial information.

Except, this post is not lighthearted, but concerns the rather serious topic of home ownership.  In this context specifically, Triple D refers to debt, death or divorce.

The Triple D’s above basically represent the only valid reasons for consideration when planning to buy residential property, for you to live in.  That’s assuming you wish to make an investment in residential real estate at all.  Historically, personal residential property has delivered a relatively poor longer-term return on investment... especially when compared with so many other investments that offer better longer-term returns, liquidity, passive income, etc.

In the absence of Triple D, you are at the mercy of factors beyond your control, e.g.

- An emotional ‘attachment’ to a property you don’t even own yet (“I will be so disappointed if our offer is not accepted”; “we really want this house”, “our dream home”, etc.),

- Unscrupulous realtors (barring a few professionals, many realtors unfortunately provide the worst financial & investment advice imaginable),

- Sellers (who, once they realize that you desperately want what they are trying to sell, will ensure that they take from you, everything that you have available for them to take),

- And more…

First, I have to assume that you possess enough logic and common sense to determine whether renting or owning would be better, given you personal financial standing.  I cannot know or guess, but I can personally assist if you feel you need help.  Oh, and I’m not a realtor or financial advisor, but I do manage assets, including my own.  Meaning… I’m willing to put my money where my mouth is!

Here are pointers for potential homebuyers:

Debt

Only buy a foreclosed property.  There are plenty to choose from, just do a little homework! $1 million 2007 properties can be purchased for ~$500,000; properties that sold for $250,000 in ‘07 may be available for under $100,000, etc.

You may need to submit several failed bids on foreclosed properties, and that’s okay.  Just be patient!

Death

A second methodology is to bid on a property owned by a deceased estate.  Regrettably, everyone will eventually die, hopefully later rather than sooner.  Many people e.g. leave property to children - who may not want it - or owners who died with outstanding mortgage debt (see debt above).

I’m not suggesting that you wait for the owner of you favorite house to die, but rather that you look out for either of the above, because that’s where the value vs. cost ratio will shift dramatically in your favor, as a buyer.

Divorce

Couples filing for divorce are unfortunately also just another fact of life.  Very frequently, the two parties desire an immediate separation not only from one another; but complemented by a desire to liquidate and divide jointly owned assets, as soon as possible.

Sellers getting divorced may not agree on anything, e.g. price, negotiable fixtures & fittings, etc.  These are not your problems… you simply work with the seller's realtor, Title Company, bank, attorney, etc.

*****

In the instances described above, investors can live by the golden rule… as in, he who holds the gold, always rules!

I’m also not suggesting that you shift your investment focus singularly to deriving profit from others’ misery!  Property investments are business decisions.  And I sincerely trust that you are unlikely to have been a contributory cause of any of the Triple D’s mentioned above.

There is no need for you to commit to a debt obligation (mortgage) for an extended period of time (e.g. 30 years), simply because your emotion overrode your logic.

One of the surest (almost guaranteed) ways to achieving financial independence is by being debt free.  And that especially includes a mortgage.  Property debt is the worst of the ties that bind you to your cubicle, and job, your boss, etc.!  To this end, avoid taking out a mortgage entirely if you’re able to do so.  Failing that, minimize the debt, as best you can, by ensuring that you buy within your affordability range, and live within your means.

A residential property mortgage is the worst personal debt trap ever invented!  It enables you to ‘buy’ a house you cannot afford with borrowed money… long-term debt that will control your work-life balance, entirely, often for the rest of your life!

When you have cash, you can buy anything you want, or like.   Don’t be fooled by comparative home sales analysis (CMAs), aggressive realtors, bankers who won’t negotiate on foreclosed properties, mortgage rates going up and down, etc.  Remember there are hundreds, or even thousands of properties for you to potentially bid on.

The poor seller – on the other hand – can only hope to find one willing buyer.  As in, the seller needs to find that one buyer, one single person!  And the value of a house is determined by the price that a willing buyer and willing seller agree to close the transaction for, nothing more, and nothing less.

As a buyer, it’s like playing poker… never showing your hand.  Find any of the Triple D’s… always bid low, and be prepared to walk away.  It’s that simple… just business!