Looking for signs of Distress

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Now there are many ways investors can look for signs of distress. And at the same time whilst it may be a good thing in your pocket. Sometimes it is a bad thing for the person on the other side. Now, I know that’s just the way investing can work sometimes but it’s important to consider that that’s happening.

Now as an investor when you’re considering these things
on a high level you want to filter drill down. There are many softwares and databases and research available for example, NMD data, SQM research and a few others are providing some lists of distress store or you know properties with some issues there. Now what they usually work on is a high level and deep review of keywords and movements in listing so example the words like Deceased Estate, Distressed, Mortgagee position.

All these different things can come up, but if you think about it and you go
“Well Australia doesn’t have much affordable property” and you start putting in $400,000 enlisting across 4-5 cities and put below you’re going to see 8-9 thousand plus properties at times come up. So that means a lot of properties A) that are affordable but then B) for you to try and find which one is having some issues with whether it be “distressed”, “deceased”, “mortgagee position”, “must sell now” ”motivated vendor” all these different keywords coming into it. Now, that’s just the start of it. But when you look into it, there are a few other signals to consider when you get to the micro this “time stress” “discounting stress” “campaign stress”

So “campaign stress” can come up from the review of what’s on the campaign in terms of the word. Sometimes the photography, sometimes discussions with agents and very easily do people actually miss out for discussions of the agents. They think that “ah well sales agent and me can’t be friends” and we really got to go at each other and then I’m going to tell me that anyway, but if you ask the question, then you’ll know how motivated is this vendor to sell this property? Is there anything that you’re able to share that make makes you feel that ” I should come up with this X level of offer to try and secure this property” Now, obviously they want the best value in the price for their vendor. But at times there is a genuine need to sell now and there is a compromise that the party needs to make
and then we’ll just genuinely let you know of it. It’s hard to say who might be saying what but from that angle that will help. Campaign stress is just one of them but going into the next piles – Discounting Stress.

We’ve seen suburb averages for discounting. Where does that land? How does it sit amongst the average? but at the same time don’t be tricked by that because they may have listed it fairly. And so then the discounting in the stress and the of the suburb may not really mean as much because they’re just fairly listed it but that is one thing to consider in terms of movements. We’ve seen properties for example offers over 330 and suddenly offers over 309. Well, imagine what would have happened
even if someone paid through 35 and they had that offers over. You don’t have to do what the agent is asking you to do as a sales agent. However, if it’s relative if it’s fair if it sits well, but may in truly will be the range
so that can be another part which is discounting stress Time stress is another one how long has this been on Market? Sometimes too long in the Market can show problems and issues, but at the same time they can be some of the best opportunities. I can take you back to one opportunity has probably been one of the best purchases in my own portfolio.

There was a market for a shocking 11 months. People may go “whoa like why why’d you even touch that?” ”What’s the reasons?” sometimes if you’re looking at markets before their massive cycles before their growth periods.
It’s not expected for it to go fast. Otherwise, you might be buying mid-cycle or you might be buying at a start of a rise, which is okay. But at the same time it’s important to consider that you maybe just buying not in the time where everyone sees it. Now, it’s crazy that may sound 11 months in Arjun.
What are you doing buying a property? That’s actually being my best performing property in my portfolio. So when you think about that, it’s not always about how long it’s on Market but how long it’s on Market can also help you when it comes to negotiation. Sometimes distressed properties can be the ones that last for a few hours and that’s just where they’ve been honest and open on the motivation of the vendor. The agents been open and honest with regards to the stress that’s here from a campaign level.
They’ve decided to discount it very quickly not in terms of from Listing price A to Listing price B but just a very fairly set Listing price A.
And then that time stress isn’t an issue because it just sold off in two hours
or the same day or two days later We’ve seen these sorts of things happen.
So when considering distress there’s all these tools and databases that can help you from a back row level, but when you come down to the micro
Campaign, Discounting, Time are the key core components and if it’s off Market, starting to review some of where it genuinely sits in comparison to comparable sales.

There are little other tips to throw in there as well. For example, Title Searches having a look at title searches can help you uncover the lender
or if there is a loan on there. Now there are traditional lenders
and Alternate lenders and usually people don’t go to Ultimate lenders in case they have a very unique scenario, which in that case might be within reason or have a specialized self employed or other types or at times it can be because they’re genuinely stressed. They couldn’t get the light right loan approval and then now had to go to an alternate bank to get that loan approval with higher interest rates. So when looking at that the title search can sometimes help. It can also help you realize that it’s not really distressed. If you think of places that may be saying “Our mortgagee position under stress” and you have a look at the title search and there’s no mortgage on there at all. So these are some of the things to consider although it could be that they have other mortgages elsewhere and that’s where they need to sell it off.

That’s it from us here at InvestorKit, the experts in Wealth Creation
helping you take action.

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