I'm interested to know from those of you who talk about "buying below market value".
How do you know that you are actually buying below?
Are you getting valuations done on properties?
Are you basing this on research such as past sales?
One certainly can't go by the vendors asking price, so if any of you more knowledgeable can enlighten me I'd be very grateful.
Cheers.
I have bought many below market value.
Living smack bang in the middle of first home owners/investors territory you soon learn that FHO do not like auctions. Newbie investors don't like auctions either, and most investors only ever purchase one IP. So..........I love auctions.
We have bought many of our properties at auction where there has been little competition. We ususally set a price, if it goes above that, we just move to the next one. Sooner or later, you will pick up a bargain.
Mind you, this will only work in a flat/slow market. Back in around 2003, when there were a lot of reno/auction shows on TV, the market was so hot that auction properties were selling for well above the private treaty ones, so, of course, didn't purchase anything then.
Late last year, there were many selling for well less than $200k, which if sold private treaty would have fetched over that mark. These are usually department of housing/mortgagee sales, so they have to be sold via auction.
This is a mortgagee sale that we bought a few years ago. At the time, a similar property, sold private treaty would have cost around $240k, possibly more as it has a small flat available.
http://www.somersoft.com/forums/showthread.php?t=21718&highlight=auction
We have also bought below market by low-balling. This works really well if a property has been on the market for a long time.
Another thing is if the property is listed by an out of area agent. Sometimes you can get a good deal because they don't know the area well.
I am sure that I posted about the property that we bought from an out of area agent, but I can't find it at the moment.
Anyway, we paid $180k for a property that was worth, from memory, around $260k at the time. It was a corner block, that could be split. The agent had it advertised in a tiny ad in the local paper with only two open homes per week prior to auction. I went to a mid week open and told him how much I was willing to pay, hubby went to the weekend one and told him how much he was willing to pay. Agent thought he had two very interested parties, so didn't do much else to get any interest.
Another party did show up at the auction. He only turned up as he had seen the ad that morning, and since he was another investor known to me, I thought the price would have gone higher. Turns out he didn't have his cheque book with him. No other bidders.