Purchasing an investment property when the market is down can be extremely profitable.
But you still have to make sure you’re getting a good deal in a buyers’ market – and wise investors won’t be so blinded by the chance of a ”bargain” that they ignore their long-term strategy – which all means it isn’t as simple as it might look.
In a sellers’ market almost any price a vendor puts on a property results in a sale and such buoyant conditions tend to hide ”over-enthusiastic” prices.
In a depressed market, it’s much easier to buy real estate at more realistic prices because there’s more supply than demand.
Real estate isn’t a uniform market, though. There are many sub-markets that perform differently.
Good properties in certain areas can still sell within 24 hours of being listed, whatever the prevailing conditions, so it’s vital you get up to speed with the buying tactics used by seasoned investors.
The best properties to buy are those that will always be in demand. For many investors, this means acquiring property that’s close to the city centre. For others it means opting for houses or units priced at near the median price for their areas, which are sought-after by owner-occupiers and investors.
Areas that perform well over time and properties that have a high land content are often your best options.
With units, the golden rule is to go for an apartment in a popular location with restaurants and transport nearby. It should be in a well-constructed building with a high land-to-unit ratio.
Many vendors have been hit hard by changes in their circumstances. While mortgagee sales are a clear sign of the economic slowdown, you also need to be on the lookout for other signs of vendor distress.
The number of couples seeking divorces tends to rise in times of financial hardship. Other vendors give up on home ownership and go back to renting. You don’t always discover these factors the first time you talk to an agent. But if you prod him or her and ask the right questions, you’ll obtain information that may help you secure a good property at a great price.
It’s crazy to buy a property at below market value if it’s in an area where prices are set to fall. Some property advisers believe this is not a good time to speculate or to rely on the ripple effect to drive up capital growth in suburbs bordering proven growth areas.
Speculators do best when markets are running hot. With the number of properties for sale rising in many areas, your opportunity to make good money by targeting properties in established suburbs is higher. Why take the risk on an unproven area?
Listing a property with several agents shows a keen vendor. Because no single agent has an exclusive deal, you may be able to buy directly from the vendor. This can eliminate $30,000 or more in agents’ selling fees from the sale. You need to tread carefully and take legal advice, however.
Many of these vendors usually want an agent to handle the final sale. Even so, the fact their property is listed by several agents means they want to sell and fast.
A buyers’ market means buyers are more in control than sellers. It’s easier to negotiate a delayed settlement on a purchase but don’t forget that speed is also a useful bargaining tool. In a slow market, cash is king. A vendor may take considerably less for a quick settlement compared with another higher offer on delayed terms.
If you’ve found a property you want and have gone through your normal planning and checking processes, a cash unconditional offer and a quick settlement can significantly reduce the price you pay.