The average Australian does 7 months of research before buying a new car (AFR). The median $ house price in Melbourne is over $1m but even despite the huge disparity in money invested, most property investors dedicate less time towards analysing their next property purchase than their next car purchase.
How much time did you spend researching your last investment property?
Our clients are busy professionals (in medicine, law, engineering, finance, etc). They’re good at what they do, and they recognise the importance of expertise and how much effort goes into establishing it. It takes hundreds of hours of analyses into market trends, socio-economics, demographics, infrastructure, etc to determine what to buy where for long-term wealth creation.
But data analyses is one thing – actively searching for, assessing, and securing good buying opportunities takes a lot of time, energy and expertise.
Time spent Searching for suitable properties
We’ve established decades-long relationships with selling agents in the areas that we rate highly. Vendors who wish to sell without advertising are more common that you’d think, and who do their agents call with these opportunities – someone they met at an open for inspection the first time a couple weeks ago, or a fellow professional who they’ve grown to know well over years? Some of the best buying opportunities are never advertised, and many property investors miss out without even knowing it.
The off-market purchase opportunities that our professional network provides means that our clients get access to properties that nobody else does.
Because we are so active in the market, we understand at any given time what suburbs represent the best buying opportunities for our clients. Every month, we send hundreds of targeted letters direct to addresses in areas that we rate highly. Results over the years through direct-vendor negotiations have been great. The open-ended authorities that we have in place with long-term clients means that we have credibility when engaging with owners.
And of course, a big part of search time involves constant, methodical management of online portals. We’re on all the property listing websites so that our buyer clients don’t have to be. Sometimes it pays to be the first enquirer on a property, particularly if you know the agent and if the vendor is motivated to sell quickly.
Time spent Assessing properties
We subscribe to all of the paid real estate data aggregators you can imagine, giving us visibility into all properties sold across Melbourne. It costs us thousands of dollars each month to consolidate all property characteristics into our own database. This allows us to statistically estimate the value of properties under consideration – quickly and accurately. But, as much as we love data, there’s much more to assessing properties…
The unique, unvarnished advice that we get from knowledgeable local agents whom we have professional relationships with proves critical in weighing up properties..
What is the property really worth? Do you know of other buyers looking at it? Did you appraise it, and if so what are the real motivations of the vendors? Are there things you don’t like about the property?
Of course, we examine school zones, proximity to shops, transport, parks, etc to ensure the future capital growth prospects of a particular location. And, we know what to look for to identify likely maintenance concerns in coming years: appliances, windows, signs of damp, guttering, sub-floor, electrical, etc.
A big part of our property investment philosophy involves buying properties with development potential. Even if our clients don’t ultimately develop, a property with development potential will appreciate in value over time more than a similar property without development potential.
Over 15+ years we’ve studied planning schemes, built relationships with key development consultants (land surveyors, arborists, architects, town planners, etc) and examined thousands of development projects. We know what to look for to determine whether a property is suitable for a profitable development – now or in the future.
Time spent Securing properties
We tell our buyer clients that finding a good investment property requires a strange mix of patience and decisiveness. For every property we ultimately recommend for purchase, there are dozens that we have examined but found wanting. It can take weeks to find a great buy, and sometimes the purchase window is a few hours. If we recognise it as a great purchase, then others will to.
My client once wrote up an offer at the kitchen table of the property at our first off-market inspection. Best decision ever – he did very, very well.
It’s important to be cool-headed and clear about budget though – if someone else wants to overpay, then let them. We’ll move on to the next opportunity. Too often, buyers get emotionally invested in purchasing a particular property, and are naturally reluctant to walk away from a property that they’ve spent hours searching for and assessing. But, that is part of the negotiation process.
We’ve purchased dozens and dozens of properties – before/at/after auction, private sale, expression of interest, off-market, vendor-direct. You need to be willing to act quickly when a bargain presents, but equally you need to be patient when time is required. Countless times, I’ve agreed a reasonable price with a selling agent only for us to drag out a negotiation for days and weeks. Most sellers don’t want the process to be too easy – they are reluctant to sell to the first offer. So a $2.3m fair value price often starts with a $2.0m offer, leads to a $2.5m counter-offer, to a $2.1m reply…
There are many lessons we could share about negotiations, but one of the most important is DO YOUR HOMEWORK. When you’re comfortable that you know all the important details about a property, its location, and market trends at the time, then you’re in a strong negotiating position.
Ultimately, if you’re not spending over a hundred hours researching searching, assessing and negotiating your next property investment, you’re not dedicating enough time into one of the biggest decisions you will ever make. You run too many risks:
Spending too much money purchasing a bad property in a low-growth area with no future value-add potential.
The thousands of hours we have dedicated to building up our expertise is the main reason why so many successful professionals appoint us to find them their next investment property / development project.