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Not all cheap properties are bargain buys, so you need to know what to look for and how to identify if the property is primed for growth.
Blogger: Jarrad Mahon, Investors Edge Real Estate
However long ago money was invented, it’s a decent bet that somebody came up with the phrase, “buy low, sell high” shortly thereafter. It is still the cornerstone of most markets today. When purchasing investment property, especially in themarket, it isn’t as easy as it used to be because there is so much competition.
Luckily for property investors, there is still a lot of money to be made with the right team on your side.
There are three ways to make money on investment property: buying, renting and selling. You want to get the highest returns out of all three of these phases to gain maximum revenue and profit. Here are some tips on how to profit off of the first step: buying.
So, what is a “bargain buy?” It’s just what it sounds like: a property that is underpriced and represents an opportunity to make money, save money or both. Of course, sellers want to make money, too, so savvy sellers present their property the best they possibly can. This involves the property being in great condition, priced for maximum demand and well-marketed. Another important factor is that the home should be vacant by settlement time.
To spot a bargain buy, you are looking for properties that are lacking in one or more of the above qualities. Basically, you are looking for problems that may help you get an offer for a lower price accepted. Anything that reduces buyer demand can help you find a bargain buy and save money. Let’s take a look at a few.
Generally, any property that has been on the Perth market for more than four weeks is stale. It usually means that one of the factors we are about to mention are present, keeping the property from selling at the price the seller is asking. This can present tremendous opportunity if you know what you are looking for.
If a property isn’t marketed properly, it isn’t going to sell as fast or for as much money. This represents an opportunity for you to make a lower offer. If a property is only marketed on private seller websites, the paper or Gumtree, with little to no advert copy and no photos, limited photos or bad photos, it isn’t being marketed correctly.
Poor Physical Presentation
Any home that isn’t being presented at is physical best is an opportunity to bargain for a lower price. This can be due to tenants who don’t care how the home looks or a seller who doesn’t understand how important presentation is.
Cosmetic details are important in presenting a home because most buyers purchase based on emotion. Failure to see this important issue can turn a home into a bargain property.
Poor Physical Condition
Anyone who has watched one of the many home renovation “reality” shows on TV knows that there is a huge market for renovating homes across the globe. Consequently, one of the first recommendations made to people selling a home is that they should fix or renovate everything that needs it because they will at least double what they put into it.
Fortunately, the reverse is true here. For every flaw you can find in a home,you can save a lot of money if you have to fix it yourself. Point out everything that needs to be repaired or renovated and “charge” them 2-3 times what it will cost to do by asking for that much off of the price.
Homes that have some exploitable flaws are actually quite common because a lot of people just don’t have time to do maintenance or renovation work on weekends, so they keep putting it off until it’s time to sell the home.
Homes that need work represent a great opportunity to save a lot of money and profit off of doing the work yourself or paying someone to do the work.
If someone is trying to sell a home with a tenant who has a long lease, it precludes buyers who need to move into the home right away. Since a majority of homes are sold to people who plan to live in them, this means that a lot less people are making offers or even looking at the home.
Sometimes, if the tenant is on periodic lease, other agents who don’t know the difference mistakenly steer their clients away from the home because they think it won’t be available for immediate move in. In reality, a periodic lease can be terminated by giving 30 days notice to a tenant after sale.
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.