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When you're purchasing an investment property, the more you know, the better - so it's important to know what questions to ask, and what comments you should keep to yourself.
Blogger: Jarrad Mahon, Investors Edge Real Estate
The market for investment properties incan be fraught with pitfalls if you don’t have the proper knowledge to succeed. When it comes to investing, knowledge is power. However, nobody says that it has to be your knowledge. Ultimately, you just need to know what questions to ask and who to ask them to.
General Guidelines for Development Properties
For example, when preparing to purchase a property that has potential to be developed, you have to know with certainty exactly what can be done with the property and what your costs will be. Then, you will need to know how much revenue the property will produce so that you know how much you can feasibly pay for the property.
Always be careful not to tip off the seller’s agent that you are thinking of developing a property, especially if the potential is not clearly marketed. The agent and seller may not have seen that potential before you mentioned it and they may raise the price on you. Also, multiple dwelling apartment approvals and density bonuses which allow building at a higher density are just too confusing for many agents.
We always recommend finding a subdivision and building expert and then contacting the council governing the property you wish to develop.
For all Investment Properties
You need to check out any area in which you want to buy for yourself. You can ask the agent and they will have access to a lot of numbers, but the easiest, simplest and best way to find out about the neighbourhood is to talk to the neighbours on either side of the property in question.
Neighbours can usually tell you the good and bad about any area and give you some insight into why the sellers are selling. Sometimes you even find out that the seller is more motivated to sell than it looks like he or she is.
For most properties, but especially any over ten years old, you can’t trust your eyes or what the seller’s agent says. Always schedule a building inspection to find any hidden maintenance that needs to be performed and make sure your contract is conditional on the report being to your satisfaction.
Remember who the Selling Agent is working for
Remember that unless you hire a buyer’s agent, the agent works for the seller and will always represent the seller’s best interests. It is important to remember that when speaking with the seller’s agent.
Questions to Ask the Selling Agent
Here are some questions that are important to ask your agent when considering an investment property.
How Long has the Property been on the Market?
Generally, the longer a property has been on the market, the better the chances of getting the seller to move on the price. However, this can eventually approach the “point of diminishing returns” and indicate that you are working with an overpriced property and an obstinate seller.
Why is the Owner Selling?
You want a motivated seller. They are more likely to come down on the price.
Where are the Owners Moving To?
This is an underrated question that can give insight into the seller’s motivation level.
How Did You Determine the Asking Price?
Usually, this will be market analysis, but it’s always good to know if other factors were involved.
What Price Do You Think It Will Sell For?
This allows your agent to use his or her expertise in the market and give you a reasonable expectation concerning price.
What Price will the Sellers Take?
This will get you to the bottom line quickly, but remember that it’s the beginning of negotiations and not the end.
Are There Any Negatives I Should Know about the Property?
Every negative is either a reason to walk away or an opportunity to get the price down. Both are positives.
Are there any Written Offers Yet?
This lets you know if you are competing for the property.
About Jarrad Mahon
Jarrad is the director of Investors Edge Real Estate.
Jarrad thrives on helping hundreds of investors every year formulate a clear plan to get the best returns from their Perth property. This requires a carefully thought out and innovative approach to understand your situation and help you to make the right move at the right time.
His renowned personalised "Property Success Plan" takes you step by step through how to make thousands of extra dollars and avoid the costly mistakes that Jarrad has learnt the hard way by investing himself all around Australia.
Over the last five years he has used his engineering background to build and refine a unique property management, sales & investing process that is sure to impress while getting you real results.
A sales and marketing expert, Jarrad combines the latest technology and cutting edge sales strategies to sell homes across the whole of Perth metro area.