3 tips for buying under market value
There’s a difference between a cheap property and a highly profitable deal. Find out how you can distinguish them to maximise the value of your investment.
Let’s face it – money is the biggest issue when it comes to property investing. Nobody wants to sink hundreds of thousands into a property if they’re not certain that it will pay off. Plus, many aspiring investors struggle to get their foot in the door in the first place.
For all the reasons above, a good property deal isn’t just nice to have – it’s a must to score a good deal if you wish to profit later on.
But in many cases, cheap doesn’t readily translate to good. That’s why you wouldn’t want to focus solely on the price tag. Rather, you need to look at the potential market value that you’ll get for your money.
That said, how do you bring affordability and high returns together?
Here are the best tips for finding the most profitable property deals.
1. Find out what matters to the seller
As mentioned, a low price point for a property doesn’t automatically make it a good deal. You must look at the contract terms to see if they fit you.
Whenever you see a price that’s below market average, you must look further to see why. The seller wants to get out of the property as quickly as possible for a reason. It may be because they’re moving out of state or there’s something wrong with the property.
You can use this as leverage to boost your negotiation power. Find out what matters to the seller and what they might be willing to compromise. You can either knock down the price further or negotiate more favourable terms that make your investment more profitable.
2. Put in the work
To save money, you’ll want to invest time and effort into searching for a good deal. And the key component of this is valuation.
How do you know if the deal is good?
It’s quite simple – you can go online and perform auto valuations. There are a host of websites that can show you if a property is over or underpriced.
If the deal seems too good to be true, you’ll have to be really careful. You should get all the relevant information about the property to see if there’s something wrong with it. From there, you can then decide if it’s worth investing.
Bear in mind that the websites have their own valuation methods and data. As a result, you’re unlikely to get the same number every time. Put all the data into a spreadsheet and get the average – you could also eliminate the outliers before getting the average. This will give you a good idea of the property’s value.
3. Research the rental demand
After buying a property, how will you make money from it? Even if you want to flip it, you probably won’t be able to do it immediately. It’s a much better idea to hold onto the property until it builds up equity and sell for a profit. In the meantime, you’ll want to rent it out to offset the holding costs.
To see if your property can be cash flow positive, you need to research the rental demand in your area.
There are two common ways to do this. First, you should look at the number of available listings. If it doesn’t go down over time, it might signify oversaturation. It might be hard to find tenants for your new property.
You should also look at the changes in available listings. If there are no fluctuations, it’s a sign that the demand is low. The listings should come and go frequently if the rental market is healthy.
4. Be diligent
Good property deals aren’t easy to come by. While you might get lucky once in a while, you shouldn’t build your portfolio on luck. Rather, you need to dig deep into the market to find a profitable property at an affordable price.
Remember that the price is only one piece of the puzzle. Research the property thoroughly to see if it can really get you closer to your investment goals.
