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7 Tips to find a great deal...
Savvy property investors know that just because the property market is slowing, doesn't mean that you can't make money. It's simply a matter of being smarter. A smart property investor will be looking for properties with a twist, something where the opportunity exists or can be created, to add value through renovation, subdivision, development or strata titling.
To help you invest smartly, we have put together these 7 Tips to find a great deal.
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Get your Finance Foundations |
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Consider getting pre-approval, so that you know how much you can borrow.
Note 1: Pre Approval does not guarantee final approval of the loan, but it does give you an indication of your borrowing capacity.
Note 2: If you find the deal of the century, don't give up if one lender says no...as you may find that you can turn that 'no' into a big fat YES, if you just try one more time.
If you have properties in your portfolio already, then take some time to review them.
Take a look at each property in your portfolio and ask yourself the following questions....
- Do I have any properties that need to be refinanced so I can get some equity out to use as deposits?
- Do I have any investment loans that are not interest only loans?
Interest only loans allow you to increase the cash flow of each of your investment properties, therefore giving you more cash in your pocket and helping you qualify for that next property loan.
- Do I have any properties that are currently due for a rental increase?
If so, it may be time to review the rent. Remember the more income you get, the more you can tick the Bank's lending criteria boxes.
- Do I have any properties that could be quickly renovated to increase both equity and rental income?
Again, the more rental income and equity you have in each property the better your borrowing capacity
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Success leaves clues - learn from it |
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Keep your educating going - never stop learning. Look for books, workshops, and networking groups that are dedicated to giving you information about property investing. The more knowledge you have the smarter the investor you'll be.
The more networking with like minded people you do, the more connections you'll get. Contacts you meet today could be your key in the future to helping you solve a problem or giving you the inspiration that will motivate you to continue to grow your portfolio. They may even become the mentor you need to overcome your next challenge :)
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Build your Team |
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If you have already have a team in place then you are already miles ahead. Here is a checklist of some of the team members you may want to consider having on your team:
- Real estate agent / Buyer's Agent
- Lawyer/Conveyancer
- Finance Broker
- Insurance Broker
- Property Savvy Account
- Property Manager
- Like minded Property Women
Plus if you are planning on renovating, developing or subdividing.add these to your team...
- Tradesmen
- Town planner
- An experienced mentor who has already used the strategy successfully...see tip 2 Success leaves clues with suggestions to help you findia mentor
Remember the people on your team should be there to help you, not hold you back. If you have a team member that you feel has not been doing a the best job of you - it may be time to review that relationship and look for a new team member.
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Macro View - The big picture |
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Remember your big picture. Where are you going, and how are you going to get there? Before you start looking for properties, make sure you are clear on the following:
- your strategy
- your budget
- your time available
- your risk tolerance
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Micro Research - Focus on one area |
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When investors try to look in too many areas at the same time, they usually end up confused and frustrated and both these emotions are counter-productive to good investing. Look at your options, choose the best region you can, and then focus on researching that area specifically.
Knowing an area like the back of your hand increases the chances of YOU finding the Diamond in the Rough.
Below are some additional research points you can do once you have narrowed down your selected area - and many of them you can do online anytime:
- Go to the local council or other websites and find out the demographics in the area. This will help you work out if the rental market consists of students or families and therefore help you decide what type of property you need to look for to suit your strategy.
- Go online and look at the properties for sale in the area; how much are they advertised for, how much do they actually sell for and how long do they stay on the market.
- Get in contact with the local real estate agents, tell them specifically what you are looking for and ask them to send you information on all new properties that come up for sale that suit your criteria. Also ask them for any properties that have been for sale for several months... you could be the answer to a desperate vendor's prayers.
- Vist the area, talk to business owners. Go to the local cafe for a snack and ask a few questions; its amazing what information you can pick up while sipping on your latte.
- Ask the local property managers where they wouldn't manage a property, and where there is good demand from tenants.
- Find out where there are flood zones - and avoid them.
- Take a look at the local police reports - are there area's with a higher crime rate
- Find out if there are any development proposals in the area
- Find out if there are good reasons for investing in the area i.e hospitals, schools, universities ,takeaway food chains, industry/business that are employing people in the area
- Take some business cards and hand them out while you are in the area; you never know when you'll find a valuable resource to add to your team :)
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Analyse the Deal |
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Once you've found a deal or two that you think look good, it's time to analyse each one.
Your first step would usually be to calculate the gross rental yield* to see if it suits your investment criteria;
If it looks promising, then you'll need to do some analysis to find what the cash flow of the property is likely to be.
Here are some things to consider when analysing a property...
- how much will you borrow and what interest rate applies
- estimate of ongoing repairs and maintenance costs
- accountancy costs
- conveyancing and other purchase fees
- property management fees
- council and water rates
- body corporate fees
- building and perhaps landlords insurance
- travel - if you are purchasing a property farther away
- land tax
- Improvements - perhaps a small renovation might be needed?
- Will the property value increase after a renovation?
- Is there depreciation in the property, that you will be able to claim?
*Gross (Rental) Yield is the annual rental income of a property express as a percentage of its value or purchase price. Gross Yield Calculation:
weekly rent x 52 x 100 (to give you the percentage) = Rental Yield
purchase price + costs
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Negotiate - |
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Ask lots of Questions and Listen Very Carefully
When looking at property it is very important to ask lots of questions, but remember you also need to be listening to everything that is said about the property. You never know when you might pick up on something that will help you with your negotiations down the track.
Some of the information you'll be looking for:
- Why the vendor is selling
- How soon do they need the sale
- Is the vendor experiencing any challenges
- How long has the property been on the market
When you find a great deal, or a vendor who is keen to sell, make your offer in writing and be prepared to negotiate...
If you take the time to find out what the vendor wants or needs, you may be able to work out a win win solution..
For example...
- A vendor needs a quick sale to free up some cash for her next project. You could negotiate a lower purchase price in exchange for a quick sale
or
- A vendor is building a home elsewhere and would prefer to stay in the current property until the construction is finished. You may be able to negotiate a lower purchase price in exchange for an extended settlement
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Remember that the journey is just as important as the destination, so enjoy your investing and have fun while you build your fortune!
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