You have decided on your budget and now you’re looking to buy a rental property, your keen to get on the property investment ladder and the idea of being a landlord has you tingling all over. If this is you and you’re sure you are not having a stroke, then carry on reading for a few pointers on how to get the best price for your prospective property. We will use Residential Investment Property for the purpose of this article
1) Take an investment approach:
Chances are, you won’t go out and buy the first property you see. As this purchase is for an investment purpose you can remove yourself from the emotional ties that usually go with buying a home for you to live in. You can look at from a pure investment point of view and decide what will be good and what won’t. Yes, a nice big garden with lots of lawn would be great for you, but will tenants see it that way, or as just a big chore to do each weekend? You may have always wanted to live in a turn of the century villa, but will it have the same appeal to tenants? By looking at each prospect as a potential tenant and not an owner, it will help you remove some of the extra luxuries that you don’t need to pay for.
2) Make sure the returns are realistic:
The first thing you need to be comfortable with is the amount of rent you will be getting from your investment. As you view properties in different areas and for different price ranges, you will get a feel for how much rent the property would command. Rental agencies will be able to give you rental appraisals (generally for free). If you encounter a property that has unusually high rent returns for its asking price, there will usually be a reason for this. A good rule of thumb is to get a couple of appraisals from different agencies and then take the average from what they tell you. If you want to be ultra conservative then you can take 10% off that average amount and then use that figure as your rent return for budgeting purposes. It’s not uncommon for rental agencies to increase the rental amount they would expect to get, in order to win your business. They then lower your expectation, as tenants prove hard to locate.
3) Make sure the property is in acceptable condition:
You have found a great little house that would appear to be getting suitable returns in rent and would appear to be offered at the right price. Excellent! The next thing to do is to get the house thoroughly checked out. The building, electrical and plumbing inspections check all the building and local body permits are in place and get a solicitor to look over the title of the land to check everything is all tiptop. It will cost these things unless you have some great family or friends who owe you a favor, but it is a small price to pay for a piece of mind. Without them, you run the risk of things like, and electrical rewire being needed, replace the roof or the piles of the house or maybe there has been a slow water leak for the last 10 years that has rendered half the flooring unsafe. All these things can cost thousands to fix and all could have been prevented with a bit of due diligence before you purchased the home. If you get the necessary checks and something is found to be wrong, then this can be used to negotiate a lower price or you can simply walk away from the deal.
Many people do not like the idea of haggling or bartering to get a good deal. Some are happy to pay the asking price and walk away. The thing to remember with an investment property is, the less you pay, the better the return on your investment, and the less interest you have to pay the bank (if you take out a loan). In real estate, people expect to receive offers that are lower than the asking price, they expect to negotiate with the prospective purchaser and in many cases, they put an inflated asking price for the property because they expect to be knocked down. You have nothing to lose except a few thousand from your home loan. If you have a maximum price that you are willing to pay, then do not go above this. There will be other deals out there, if this one does not suit, then simply move on to the next one.
5) Immerse yourself in the scene:
Information and knowledge is a powerful tool in this game. Read books, newspapers, investor magazines, websites, chat rooms, anything you can that is going to give you tips and advice. Talk to people, ask friends and workmates who you know are involved. From my personal experience, property investors are only too happy to talk to others about their experiences. Most areas have groups or clubs for investors to meet and talk, source these and give it a go. There is no such thing as too much information. It is also a great way to meet others who can help you with certain aspects of the investment game.