One of the things I love about property is the thrill of the chase, the hunt for a bargain where I can add some value (“manufacture equity”)…but for most people the process of buying property is something they would rather avoid. They find the property hunt (either for a new home or for an investment) frustrating, time consuming, and generally an unpleasant experience. Here are a few tips to help:
Tip 1: prepare yourself for the time required This is likely to be one of the biggest purchases you ever make, be prepared to invest the time to getting it right. The transaction costs can easily be 7% or more if you get it wrong….or $35,000 on a $500,000 house…if you change your mind…not exactly “chump change”. Not getting the best deal in negotiating can also easily cost you the same as your budget to reno the bathroom! and not getting the best deal is usually due to not investing enough time in the process. Once you have “done the time” in property research and selection, be prepared for the time in negotiating the price (and be prepared to walk away if the price is too high).
Tip 2: do your research Start by narrowing down your suburb and then really get to know the market and prices in that suburb. The best way to understand the “market price” for your target area is to get information about recent sale prices. Don’t pay any attention to the asking or listed price…more importantly is what other properties in your target area were actually sold for over the past 6 or 12 months. Understand the reasons why some comparable properties in your target area sold for more than others…there is always a reason…closer to shops or transport or schools, or too close?. Become the expert in your target area on properties that have sold in the last 6-12 months, that way when it does come to making your own offer you will know exactly what price is good value.
Tip 3: talk to lots of “sources” There are many people you can talk too (and even Google) for info. I will often give buyers numerous property reports from a professional RP Data subscription of recent sales history for a specific area so they can then go and compare a property with the actual sale prices in close proximity over the last 6 months. Real estate agents are another great source of info….if you are informed and investing the time in understanding your target market, they will happily give you their perspective. Yes, they are there to sell property…but often they have sold hundreds of properties in a suburb and have a great depth of knowledge on why some properties sell for more than others (remember: “there is always a reason”)
Tip 4: assemble your own “team” As you go through the above you will get to know people who are capable (experts) and willing to help. Unfortunately you will also meet people who are only interested in a deal and in maximizing their earnings, with little regard for you as a person. People know people, so ask about the various parties you need (agent, finance broker, solicitor, building and pest inspector, insurance, accountant, builder, etc) and make your own assessment on who is genuine, professional and independent and who is fake and not engaged in working for your best interests. If someone is getting a kickback from someone who refers them, be suspicious! “Filter” the people the same as filter your properties….the more times you talk to someone the better gauge you will have on whether they are working for you or for themselves.
Get to know your market, know the process (ask for help), and work with people you feel comfortable with. If you follow these steps you should be able to both enjoy the journey as well as feel very confident with the destination (and price you pay).