Are you getting the best deal on your property purchases?
As investors, we actively seek to secure the best deal possible every time we make a purchase, don’t we?
After all, no one wants to pay more than they need to and we all want to ensure that we maximise opportunities for creating equity as quickly as possible.
So how do we find properties that will deliver us ‘instant’ equity?
And how can we master the often stressful and emotional purchase process?
It comes down to a combination of knowing how to identify properties with value-adding features and honing your negotiation skills.
Three questions to ask when identifying your next purchase:
Does the property have subdivision potential or is it in line for a re-zoning to higher density?
If yes, then you could have found yourself a gem. Sub-dividing and then selling or developing the additional lots can be very lucrative for the savvy investor. Developing property requires considerable further knowledge and skill so make sure you are well prepared if you take it on.
Is the property a diamond in the rough?
Many buyers can be put off by unattractive appearances. Often properties that don’t present pristinely or need a little TLC go un-noticed in the market. If the cosmetic problems are easily rectifiable, then a small investment into improving aesthetics could deliver a significant return.
Does the property have a below-market lease in place?
Often owners will accept lease terms below market value to secure a high quality corporate tenant or long term lease. This can impact the value of the property’s re-sale price based on achievable yield in some locations. Buying a property with a below-market lease in place is quite often a great way to secure a good buy. You may have to ride out a number of years at a lower return, however once the lease expires, the rate can return back to market and often instant equity is achieved in the property.
When you’re happy that the property offers some ‘instant’ equity potential, you need to consider the maximum amount you would be willing to pay for it and any opportunities that may enable you to lower the price.
Mastering the art of negotiation:
Do your homework
Research the market to gauge the amount of buyer interest, the time the property has been on market and what similar properties in the area have sold for in recent months. This will enable you to establish what you believe the market value of the property to be.
Find out more about the seller. Why are they selling? Is it an urgent sale? Has the price of the property been reduced during its time on the market? What interest has there been? This information will give you a great advantage ahead of entering negotiations.
Often the price is not the only motivator in property negotiations. Many sellers may also be motived by other needs including a swift or unconditional settlement. Ask what other terms may suit the sellers – being flexible to their additional needs could help you negotiate a better price.
Leave emotion at the door
When it comes time to make your offer, keep a poker face – don’t reveal your position or plans. Let the seller know that although this property may tick many boxes, you are considering a number of property. Play it cool and you’ll find yourself securing some great buys.
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