Buying properties at a discount

One of the fundamentals of property investment is to buy at a discount. You build a safety margin when you buy at a discount. In fact, if you buy at a discount, you would have made money from the purchase already. On the other hand, if you paid higher than the market value, then you would have to wait for the price to rise before you can make money.
But of course, everyone knows this already. The problem is to find such a property. You have to search, and search hard. So, where can you find these discounted properties? One answer that leaps out is property auctions. As I have written about auctions before, I’m going to share another answer with you today – motivated sellers.
Motivated sellers
There are people out there, termed as motivated, desperate or distressed sellers, who are willing to sell their properties below the market value. Yes, some will even sell at a lower figure (at a loss) than the price they paid for the property. So, all you have to do now is to locate these sellers. Look a little bit harder at the classified advertisements in the newspapers, and you will find them.
Although it can be because the property is in a poor location, but often, there is nothing wrong with the property itself. There are a multitude of reasons why a seller becomes a motivated seller. For example, perhaps the owner had died and the children are selling the property to share the spoils. Perhaps the owners (husband and wife) are separating. Or perhaps the owner is facing a cash crunch and need to free his or her cash flow. The owner might be moving, migrating or may have lost his or her job. Whatever the reasons might be, the main thing is that they are willing to sell the property below the market value. A better way is to view the sellers as people who are in need of help. The sellers need to sell the properties to raise cash. And as long as the properties remain unsold, their problem remains.
At the same time, you have to be realistic as well. If the market value of the property is RM500,000, you should not expect to buy it for RM100,000 or even RM200,000 (unless the owner is really, really desperate). If you offer RM350,000 for it, there is a good chance the seller will agree. While that is not exactly a fire sale, you are getting a very good deal. In this example, you are getting a RM150,000 discount (30 percent off). That is a fabulous deal.
During a financial crisis, then it becomes a fiesta! There will be plenty of properties that will be going at prices well below the market value. Why? Because there will be thousands of owners who are unable to meet their financial obligations anymore. You will be doing them a huge favour by buying the property.