Monthly Archives: March 2016
Leaving decision-making to your “gut feeling” can work in many realms of life, but when it comes to buying investment property, those with a proven strategy are more likely to succeed consistently.
If you are actively in the market for an investment property, you will be met with numerous “opportunities”, but only a few are likely to deliver the growth or return you are seeking.
Successful property investors filter opportunities through a set of predetermined criteria, dividing the suitable from the unsuitable.
While there is no foolproof system, investment property success stories are a product of research and careful consideration rather than chance.
Let’s start with the assumption that you are buying a new or near new property which requires little or no maintenance, and have researched and identified a region or town where you want to buy.
When looking at a specific property, what’s the type of criteria you may use to rule a property in or out of your consideration set?
Here’s a quick summary:
Location, location, location.
It’s the absolute non-negotiable of buying real estate. Location can refer to what is close by in a positive sense, for example waterfront, shopping and public transport. Location can also refer to what is close by in a negative sense. For example, if the property is on a busy highway, close to an industrial area, or an airport (such as in the classic movie The Castle), then the possibility of capital gain and/or strong yield reduces significantly.
When assessing the design of a potential investment property favour functionality and practicality first and foremost. What are the important factors in home design that will encourage long term tenants? Some finishes wear more quickly than others, which will increase maintenance costs. For example, carpeted floors wear more quickly than tiled floors.
Value for money.
Relying on capital growth alone to increase the value of an investment property can be hit and miss. It’s obvious, but the sure-fire method to make money on investment property is to buy under market value.
Trusting the developer.
Particularly with property being sold off-the-plan, the reputation of the developer becomes an important consideration. Before buying, you need to do all in your power to perform a background check on the developer to ensure they are not only reputable, but financially secure. The last think you want is to invest in a property off-the-plan that is subsequently abandoned or postponed.
Consider the typical person who is likely to seek a rental property in your property’s location. Whether you are buying in a suburb known for its families, its working class, its prestige, or a high number of students, you should seek the type of property that matches the needs of a likely tenant.
Considering the likely yield of the property (annual rental income (weekly rental x 52) / property value x 100, is it suitable for rental. If the investment property will not return a yield above 4%, than it may not be suitable.
Ideally, your investment property should remain attractive to the market no matter what the economy is doing. For example, a property in the top 5% price bracket may struggle to attract tenants if the economy slows. Favour properties that will be tenanted no matter what the economy is doing.
At any one time in Australia, there will be individual markets going up, going down, and going nowhere. By investing counter-cyclically, for example, buying when others are selling is more likely to lead to a value-for-money deal.
In a crowded market place, look for a property that has an X-Factor – something that will set it apart from other similar properties in the same area. This could be anything – from a stylish Balinese hut in the backyard, a fireplace or easy access to a local park.
Some of these factors are easily discovered. Others take serious investigation and due diligence, but the time you take to establish a thorough understanding of the property to inform your decision making will be well worth it.
You’re desperate to sell your house. In fact, you need to sell yesterday. Whether it’s financial stress, or your new job is in another part of the country or overseas, the most welcome sight in the world right now would be the words “SOLD” emblazed in your front yard. Hence, you are preparing to sell your home quickly – and for the real estate equivalent of speed dating.
Just as in speed dating, you know roughly what you want, you need to meet someone who likes what you have to offer, but the last thing you want is to give any hint of desperation.
You are not desperate, but keen.
Don’t panic. Whether speed dating or preparing to sell your house quickly, the key is to remain calm by clearly understanding which factors are in your control, and which are not.
The strength of the economy, employment and income growth in the area are out of your control. Obviously if the housing market is booming, and demand is outstripping supply, your house may sell on the same day it’s listed.
Partitioning these uncontrollable factors in your mind, but being an active participant in the factors within your control, will increase your chance of selling quickly.
So, what are the factors in your control?
Price your property competitively from the start
Pricing your property correctly, right from the start, is without doubt your top priority.
Well-priced does not mean “cheap”, but a price that meets the market. Suitable pricing for selling a property quickly, is what wearing a pleasant smile is to a speed dating night – nothing gets started without one.
A new property listing will attract the most views in the first two-three weeks, and then interest levels plunge. So to sell quickly, you need to take full advantage of this window of opportunity with a price that will attract the most interest. This cannot be overstated. Smile at your market with an attractive price.
If after a few weeks your property isn’t attracting the type of enquiry needed to sell, talk to your Harcourts Sales Consultant about a price drop. If this becomes necessary, the best option is to reduce your price significantly once, rather than incrementally several times, which can quickly build cynicism in the minds of potential buyers.
More information about pricing your property is available here.
There is no doubt that the systems, expertise and connections available to you through engaging a professional real estate agent will increase your chance of a quick sale.
Don’t forget your real estate agent not only has a vested interest in selling your property, but doing so quickly. They are on your side.
Talk to your agent about using all the marketing tools available to gain maximum exposure for your property, and make sure these tactics are connecting with the type of buyer more likely to buy.
Open houses are important, but be ready at all times for a showing and second inspections. Follow up your Sales Consultant continually for feedback from potential buyers.
To avoid losing time and effort on contracts that “fall over”, be prepared to discuss the pros and cons of your home openly with potential buyers.
Prepare your house for sale
There are bare minimums that need to be done to ensure a fast sale. At the very least, you’ll have a shower before speed dating. Read more here.
Staging and professional photography
OK … here comes another speed dating analogy. Who goes to speed dating nights in their gardening clothes? Presentation is king or queen. Dress your house in fine jewellery, beautiful clothes and spray on Chanel No. 5.
Property staging or styling is the process of using a property stylist to “stage” your property with furniture when preparing for sale. Generally, items are hired for a term of approximately six weeks.
Staging is about building emotional bridges with potential buyers, and through the work of professionals, presenting your property in the best possible way.
By going the next step, and engaging a professional photographer to capture images of your house once it’s been styled, you can multiply the styling effect in the market place.
There’s an old saying about a picture painting and word numbers, and it applies here when great photos of your house are featured across multiple marketing channels. Dress for success!
Method of sale
An auction is the go-to sale method for those with a tight time frame, as it gives the vendor a potential predetermined sale date. In a seller’s market, auctioning for a quick sale is a no-brainer.
In tougher markets, there is always a risk that the house will not sell, or you may not meet your reserve, but auctions still increase the visibility of a property in the market place over a short time frame. Talk to your Harcourts Sales Consultant about whether an auction is right for your property.
In searching for solutions for a quick sale, you may come across investment companies that offer to “sell” your house quickly, by buying your house themselves. Often, however, this will be well below the true market value, so beware.
Prepare for after the sale
Do you know anyone who has gone to a speed dating event with a marriage contract prepared, ready to go?
It’s an audacious step to say the least, but if your objective is to sell your house quickly and move on, and you are committed to the sale, fast-tracking the conveyancing process makes good sense.
Conveyancing is the legal transfer of property from one person to another. So why not instruct a solicitor or conveyancing firm like Strand to start tackling the administration of the sale by drafting up a contract and applying for title deeds?
Preparing the paperwork that will be needed after the sale of your house is a great way to get you in a positive frame of mind.
Like speed dating, selling your property quickly is a daunting and potentially an emotionally draining task. Take the time to plan and prepare with the help of a real estate professional, and understand the factors you can and cannot influence, and who knows – you may quickly find your perfect match in the market.
You can return most things you buy if you discover that they don’t fit or don’t work. But if you buy the wrong home, the chances are that you’ll be stuck with it for several years – or have to pay quite a price to correct your mistake. However there are some tried-and-tested preventatives for what is known in the real estate industry as “home buyer’s remorse” and it is worth running through these before you go house-hunting.
A recent study in the UK revealed that about one new buyer in 10 regrets their choice to some degree, with the most common cause of their dissatisfaction, thinking they could have got a better deal if they had taken more time to choose.
You shouldn’t buy the first house you see – or at least not until you have had time to think about it and compare it to several others. You need to feel sure that the home you’re buying is good value and will meet your needs at this time of your life. Getting caught up in a bidding war early on in your home search can also lead to you making emotional decisions that you may regret later.
Other reasons that buyers may suffer remorse include not liking the new neighbours, finding that their new home is too small, finding that their new home requires more work than they expected and finding that their mortgage payments put them under financial strain – and that with this in mind, Harcourts has the following advice for prospective buyers:
1. What’s your wish list – now and the future?
Think very carefully about what you need from a property, and may need five or 10 years from now. For example, a large garden might appeal to you, but will you really have the time – or money – to maintain it? On the other hand we find that people who are downsizing are also liable to under-estimate the amount of space they will need – such as an extra bedroom to use as a home office or to accommodate family visitors.
2. Can you afford it?
Double check your finances to make sure you can comfortably afford the mortgage payments and the other ongoing costs of home ownership, such as insurance, rates and maintenance. And be sure to create a contingency fund so that an unexpected repair or interest rate increase won’t send you into a tailspin.
3. Does the location suit your needs?
Research the area in which you are thinking of buying. Picking the wrong location can have a negative effect on the future resale value of your property as well as your current lifestyle. Look out for positives such as good schools, public transport, medical facilities and clean parks, and for negatives such as nearby road-building or large commercial developments.
4. Check it out – at all times of the day.
Visit the home you are thinking of buying at different times of the day and on different days of the week. In this way, you may well discover noisy neighbours before you move in next door to them – or a noisy local gathering place that only gets busy after dark. In addition, you may find that traffic in the area is worse than you thought, or that the commute to work is actually further or more difficult than you estimated.
5. Stay focused on your priorities.
Don’t let a lovely entertainment area blind you to a floor plan that won’t suit you. Try to find the home that most closely matches your original wish-list and that is within your budget. It is not worth buying a home you can’t afford as it will very likely prevent you from reaching other financial goals.
Home sellers don’t offer a refund policy, so take the time to make your decision when buying and avoid being counted amongst the regretful home owners.