Anyone can have a successful property investment. Overpaying for a property is the surest way to lose money on a property investment. No matter how great and excellent your renovations are, an over-capitalised property becomes increasingly hard to profit from.
Here are some key tips to buying a property at the right price.
Know what properties are worth
Knowing the current value of properties in your desired location lets you quickly know when a bargain comes along or when a property is overpriced.
Spending time attending open for inspections and auctions in suburbs you want to buy in will help you get an on the ground feel for pricing and values. You will also gain an understanding of who your competition is and the quality of houses in your location.
Property value is all about buyer demand. What features are people looking for in that area and what properties sell faster and for a higher price? Understanding the property dynamics in your area will help you find the value spots. The best property investments are generally those which require renovations to bring them up to standard. You need to have a clear view on the cost to renovate a home and the price that home could achieve if it was renovated. If cost to buy plus renovation is less than the expected future sale price, then you have probably found a good property investment.
Find out the Seller's Motivation.
Knowing why the seller is selling allows you to meet the their needs. Reasons may include financial or might be because the seller needs to move quickly. Knowing the reason behind the sale lets you structure your offer to fulfill those needs.
Don't forget that the vendor is a person with real emotions, so never submit an offensively low offer. If you make a low offer, give a logical reason why you think your offer is fair. Do not insult the agent by handing over a list of comparable sales. Instead, make notations on each sale that compares it to the subject property. Maybe the higher priced homes had remodelled kitchens, or a pool, or a better aspect. If the home you want to buy is not updated, then include a realistic discount that reflects the remodelling work that's required.
Make your terms flexible to give room for your vendor to move. Negotiating demands that work entirely in your favour is a definite no. Work towards a win-win situation. For instance, a deposit that could be given back upon settlement of the property can make both parties comfortable to go on with the deal.
Remember that price isn't always the only factor. There are a few other things to ask that could be highly beneficial to you or the seller.
30, 60 or even 90 days settlements are normal and may give you extra time to get a start on planning any renovations.
Why pay 10% if you could pay 5%. See what opportunity there is to negotiate the deposit. A lower deposit means your money stays in the bank longer earning interest or if you need to borrow you will be paying less interest.
You could potentially start, and maybe even finish renovations before settlement of the property by having immediate access. This is highly ideal for house flipping or the BUY-RENOVATE-SELL investments.
Always submit your offer in writing. Verbal offers gives no legal obligation for the property agent to submit your offer to a vendor. Have a date stamp on your offer and indicate when the offer expires. Try submitting multiple offers. For example, an offer with a lower price that has no conditions, then another full price offer with terms and conditions, plus maybe a third meeting halfway between the two in price and conditions.
The first step to renovating for profit is always purchase at the right price. Remember to be professional and keep your emotions out of your property deals.