Any good property investment starts with buying in the right area where there’s a demand from both buyers and renters, and then to make sure that you pay the right price.
How much bargaining power you have depends on a number of factors.
One of them is whether it’s a buyers or sellers market. Generally, when interest rates rise, demand for property slows down so it becomes a buyer’s market. The opposite is true in a declining interest rate environment. Knowing where to pitch an offer isn’t an exact science, but there are some general guidelines which you can follow.
In slow markets you can punch above your fighting weight by offering on properties that may have previously been out of your affordability range. Don’t be afraid to make low ball offers, estate agents are legally bound to present all offers made to Sellers so keep offering and something might just stick.
If you have your eye on a particular property, get to know the neighbourhood. Find out what plans are in place for the area that could affect the property value in future. It’s also a very good idea to visit the neighbourhood two or three times before making an offer. Go over a weekend, in the early evening and at rush hour so you get a good feel for the area.
Then gather some specific information - find out how long the property has been on the market and why it’s being sold. If it’s been on the market for a while, or the seller has made an offer on another property or is emigrating, they may be open to accepting a lower offer. The same is true if a property is very outdated and needs extensive work.
It’s also useful to know how often the property has changed hands. If this has happened every few years there may be some underlying issue that can affect the future value.
Lastly, if you’re a cash buyer, the seller may also accept a lower offer just to get the deal tied up quickly.
Whether you’re investing in a buy-to-let property or to renovate and sell, your return on investment is directly linked to the purchase price. So make sure you never over pay to maximize your return.
Rule number one in property is that you make your money when you buy – if you buy right. In my experience it is very difficult to find great deals in a hot property market. Anytime a seller is being presented with multiple offers the seller wins and the buyers are paying too much.
In slow markets it is time to get cheeky with offers. I often start offers at 30% below asking to test where the seller is at. Personal issues like divorce, death, insolvency etc. often push sellers into a corner where they are forced to take offers way below their expectations.
Key in closing deals is to be patient. My property mentor always told me in the heat of the deal, “be patient, be patient, be patient.” When I was young I was pushy and wanted deals done overnight. I realize now that I often left a lot on the table by rushing the process. Now, I slow play deals and have learnt that repeatedly saying “no” is often the best way to get a “yes”. Following this approach may lead to you losing some deals, but it is way better to do a few truly great deals, than a bunch of deals that anyone could have closed on because you offered too much.
Members of my website can refer to the “Closing the deal” tab on my website for great tips and advice on negotiating money making deals.
All the best