Before making a decision, it is essential that you know how much the property you are interested in is worth. Buying right will mean that your property will possibly appreciate in value in the years to come.
Here are some factors to help you make your decision.
• True value
Never pay for potential alone. Pay true value now, and when the property realise its potential in the future, you will pocket the profit.
Never pay for potential alone. Pay true value now, and when the property realise its potential in the future, you will pocket the profit.
• Repairs
Avoid property with major structural defects unless you have the expertise to rectify them at a very reasonable rate. Always check out the property first. You’re looking for potential that can be realised with minor improvements (a coat of paint, new fence, gardens, etc).
Avoid property with major structural defects unless you have the expertise to rectify them at a very reasonable rate. Always check out the property first. You’re looking for potential that can be realised with minor improvements (a coat of paint, new fence, gardens, etc).
• Area research
Get in touch with real estate agents to ask them about occupancy rate and rent in the area that you are looking to invest in. Find out the asking prices and selling prices (transacted prices) of properties in the area. There is always a difference between the two. Properties being advertised for sale are usually asking prices. In most instances, asking price is higher than transacted price.
Get in touch with real estate agents to ask them about occupancy rate and rent in the area that you are looking to invest in. Find out the asking prices and selling prices (transacted prices) of properties in the area. There is always a difference between the two. Properties being advertised for sale are usually asking prices. In most instances, asking price is higher than transacted price.
You need to know the demand for properties in the area and compare it with similar properties. Study asking prices and transacted prices from as far back as a year, six months, three months and compare with current prices. Also, find out how long properties-for-sale are in the market before they are sold. This is to ascertain if there’s a shift in the market. Check with your banker or a valuer on the property’s value before you invest.
You should also analyse the buyers and sellers in the area that you are thinking of investing in. Check out your competition. Who are the buyers and tenants? How has the area been performing over the years? If it’s a new location, what are the factors that would cause the potential capital appreciation of the property? Are there new proposed highways and amenities to spur the neighborhood?
• Negotiate
Whenever possible, negotiate with the vendor. Get advice from the real estate agent before making your offer and use their services to present your offer to the vendor. Offer an odd amount—it makes it seem like you have a valid reason for the price. If your offer is rejected by the vendor, ask for a counter offer.
Whenever possible, negotiate with the vendor. Get advice from the real estate agent before making your offer and use their services to present your offer to the vendor. Offer an odd amount—it makes it seem like you have a valid reason for the price. If your offer is rejected by the vendor, ask for a counter offer.
The right price is relative. An investor friend of mine shared an interesting tip with me. I quote, “Look for the worst property in the best street”. To some investors, their right price would be based on a certain percentage on the Return on Investment (ROI) of the property, while others would top a little extra for its potential, and some base their decision on personal wants. Whichever the case, necessary homework and research must be done before investing.
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