Adapting To Changing Markets
Researching the market place is critical when purchasing investment real estate. Whether the market is rising, falling or plateaued, this fact doesn't change.
It cannot be said enough; researching the market place is critical when purchasing investment real estate. Whether the market is rising, falling or plateaued, this fact doesn’t change. Doing your research and employing a couple of smart tactics will help you to unlock current opportunities in all markets.
With our market now on a downward adjustment we have seen some great opportunities surface, but it is critical that you dig a little deeper. This is where doing thorough property research comes in handy. To give you an example:
A just listed investment that compared to the market when you were looking 6 months ago is at least $50,000 below the average, appears to be a good deal.
In reality it might be; however it's essential to identify what comparables were selling for just a month or 2 ago because you might discover that this is actually now above the average and a good deal would more than likely be $60,000-$70,000 below.
Once we know the market well, we can start the search. Traditional internet searches, talking to agents and even driving the streets are all great and very effective search methods, but let’s ramp it up a little try and look at things in a different light.
With a falling market your budget may get you a great opportunity in your target location, but have you considered looking in adjoining higher priced pointed locations? Remember the market may not have just fallen in your target area but all areas, and sometimes you can get a great windfall.
One of my greatest purchases was attained using this method, looking for opportunities initially around the Melbourne’s northern suburb of Pascoe Vale there were some great deals, where 6 months earlier they were through the roof.
After a quick search just to see what my money could get me in the suburbs closer to the city, low and behold a great deal surfaced in Brunswick, and I snapped it up. Straight up out of the gate there was a better rental return to be had and the prospect of higher capital growth. All achieved by taking the time to do a little extra homework.
The other thing to remember with markets like the one we are in now is that there are a large number of failed sales campaigns; this has led to not only frustrated and dejected vendors but also the selling agents.
Why do I care and how does this affect me you ask?
Well, this leads me to one of my favourite and highly effective methods to source properties. Let’s look at a scenario:
The vendor places their property on the market, and 4 weeks later they have an auction that fails to produce a buyer, and it passes in. Now the motivation starts to dwindle, not just for the vendor but also the agent (even though they won’t admit it).
The vendor’s internet listing is now quite a few pages in, due to being on the market for some time and is now falling out of reach of the new buyers on the market. Plus the ones that have already seen it now believe there must be something wrong with it because it’s still for sale.
I call this my search for orphans, most people search using the default or will change to newest listing first; these sellers haven’t gone through the pain, humiliation, and dejection.
What we do at Real Asset is flip it upside down and start with the oldest listing; most times even the agent is surprised that there is an enquiry on it.
By searching this way you can place yourself in the best negotiating position and score yourself an excellent deal on great terms — something worth thinking about.