How property investors can nab a bargain

Everyone loves a bargain, but in the world of property they’re as rare as hens’ teeth.

That’s not to say that they’re not out there!

I always try and buy my properties under “intrinsic value”, but many investors aren’t sure how to go about doing this. 

As an investor, you have a huge advantage over most other buyers: you’re not motivated by emotion (or at least you shouldn't be), because you're not looking for your family’s dream home.

This means your real estate purchase should be a purely financial one and you should be in no hurry to close a deal.

Play the long game, follow a few simple rules and you can still bag a bargain, even in today’s strong markets.

Make sure you know the market you’re buying into like the back of your hand. 

That way, you can detect in a matter of minutes whether a property is undervalued and move to take it off the market as quickly as possible to avoid bidding against other buyers.

I would also like to make a distinction between a bargain and a property that is merely cheap.

Some properties are cheaper than their competitors because they are less attractive, on a main road or back onto a railway line.

It is not a bargain to buy these properties.

Look for properties that are of a similar or higher standard to their competitors, but have been priced too low for whatever reason.

Look for motivated sellers

Sometimes vendors don’t have the time to sit and wait for the offers to roll in. 

They could be keen to sell quickly for any number of reasons.

Sometimes it’s because the parties are divorcing and at other times it is because they have bought another property and they need to release the equity in their current home.

Always try and gauge how motivated the seller is.

Of course there won't be a sign outside the property saying “Motivated Sellers!”

And the agent is unlikely to tell you all the details, but I still like asking the agent why the vendor is selling and look for signs of eagerness to close the deal quickly.

If you have a motivated seller on your hands, you can afford to offer a little less than you otherwise would to secure the home.

Buy off market

At any given time, real estate agents have a handful of properties on their books that are termed ‘off market’.

These are owned by vendors who are interested in selling, but don’t wish to go through the expensive marketing process of selling a home publically.

Sometimes people choose an off-market approach because they are private and hate the thought of people traipsing through their homes.

Whatever the reason, your competition is likely to be a lot smaller for off-market properties.

The trick to finding out about them is in cultivating great relationships with local agents.

Of course this is hard to do when you only buy a property every few years or so, thus it's an area we specialise in at Metropole.

Because of the number of properties we buy each month for our clients, we’re on the speed dial of most local agents.

Cheap versus undervalued

In today's more informal market, it’s rare that an agent undervalues a property, but it does happen.

Sometimes that happens because they're an out of area agent, not familiar with the local territory.

At other times they’re young and inexperienced.

Combine agent inexperience with nervous vendors who are keen to avoid the public nature of property sales, and you could bag the property for a bargain.

But it's important the able to understand a well priced property and a cheap property because they are very different.

Some properties are cheaper than their competitors because they are less attractive, on a main road or back onto a railway line.

It is not a bargain to buy these properties.

Recently in a hot property markets most property sold or rented out quickly.

However now that our markets have reached a more mature stage and things are slowing down, “A class” properties are still selling well, but “B” and “C” properties are languishing on the market .

Be an attractive buyer

If you have your finance preapproved and prepared to be flexible with settlement dates, you'll be a more attractive buyer for both agents and their vendors.

Look for poor taste

Look for properties where the value is hidden behind poor presentation.

Cluttered homes are a selling agent’s worst nightmare.

Why?

Because many buyers can’t see past the junk and will often dismiss a property if it’s unattractive in its presentation.

While it may offer enormous potential, a home full of dated furniture or overly personal items will stop many buyers from imagining that they own it.

Of course, that’s why so many homes are professionally ‘staged’ with attractive furniture these days - it can make a huge difference to the sales price.

Take Advantage of off-putting conditions

As a property investor you should be in the market for the long-term, which means you could take advantage of short-term fluctuations in consumer sentiment to nab a property at a good price.

I've seen this occur in anticipation of The Reserve Bank’s interest rates announcements, or after the Federal Government issues a policy announcement that’s likely to cool the heels of buyers, but does not affect your investment position.

At other times, an extreme weather condition, such as a hot day or a huge storm, will keep other buyers at bay.

Or maybe the vendor has been forced to list their home around the Christmas period when everyone else is on holidays.

This could also be your time to strike as competition will be low.

So as you can see, there are plenty of occasions when a real estate bargain may surface.

The trick is to have your finances ready to go, be knowledgeable about the market, and know what to look out for.

Then, when a fantastic property comes up at a fair price, snap it up.

But remember…you make you money when you buy your property by purchasing the right property, not a cheap secondary property.

WHAT CAN YOU DO TO STAY AHEAD?

As signs point to softer growth conditions for Australian property over the coming months, independent professional advice and careful consideration will be as important as ever in navigating Australia’s varied market conditions. 

If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. Or call us on 1300 20 30 30.

When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.