Buying "Under market value" and giving low ball offers

Discussion in 'Property Investment - Other' started by Achimy, 16th Nov, 2014.

  1. Achimy

    Achimy Member

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    Hi,

    I'm new to these forums but I've been interested in property investing since I started in the rat race (9 months ago). I've been stuck in analysis paralysis but I finally feel I know which areas I want to invest in, and will start calling locals/agents to find out more about the area to consider demand and supply issues and the area profile in general (seen all the numbers including vacancy, stock on market, yields etc).

    When a below market value property comes on the market, how do people get the confidence to act straight away given it's only your first property. Like if I see property like these https://www.pt.qld.gov.au/real-estate/sales.html , can I just go in and low ball like 30-40% off the price?

    I'm guessing first I have to build rapport etc, but how do I know if I'm truly getting it below market value? I'm not good with building rapport, but I am learning slowly, and I feel the only way is to kind of say okay, so can I offer 350k for your 450k listed house?

    What if there are not many direct comparables?
    For e.g. https://www.pt.qld.gov.au/real-estate/properties/2-Orion-Avenue-North-Mackay.html

    This house isn't even below market value, it's listed at a price (even though the seller claims "MASSIVE REDUCTION").

    I'm an employee of a bank so I can get desktop valuations pretty quickly and for free (because the lender I contacted does this for me, but I don't want to keep pestering him as I feel I keep telling him to provide valuations without actually buying anything). Does someone have an example of a below market value property they have bough recently and the whole process they went through (from finding to negotiating to buying) to get it...

    How do you ask agents or tell them, I want to buy something below market value and make profit straight away, when it's in their best interests to sell for highest price (as they work for a vendor). Before me considering a buyer's agent, I would like to try it myself so I can learn. I'm 21, about to turn 22 etc, but I feel if I low ball heaps, I lose rapport and agents won't provide me future silent sales...

    Any help is appreciated. Apologies for wall -o- text
     
  2. Truly Exotic

    Truly Exotic Property Deal Finder

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    I have this feeling that BMV is now the latest buzz word, judging by the latest posts and articles in magazines

    there is intrinsic market value and actual market value

    some say market value is the actual price paid as its technically the 'market"

    however if you could get a property that will sell everyday of the week for $500k for $250k, then some will say $500k is the market,

    as for those PT auctions, just because its gone to a public trustee, its a bargain type of approach is not a good one,

    Those PT ones are always overpriced for my liking, and you can onl get negotiating once its sat on the market for a while. Unfortunately, offering x% below asking/market price I personally dont think it works anymore for public trustee/MIP sales
     
  3. Achimy

    Achimy Member

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    Yeah so like a lot of people say it a lot, and I guess it's a good strategy if simply wanting to buy and hold, and having an exit strategy. Like for example, your signature says "Ipswich 190k, MV: 220k" how do you even get 30 k off that value. Bank repossession deals I'm guessing are one way to do it, but I don't even know where to get in contact with administrators (despite working for one of the big 4)...

    So what's my best course of action. I want to retire in like <10 years, or ASAP so I can do what I want.. Development seems too far for me at the moment as I have no assets.
     
  4. Joeyv

    Joeyv Member

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    To buy a property bmv you need to know the area very well and be lucky enough to be in the right place at the right time

    Also a strategy of only looking for these property's is probably not going to work and will lead to a lot of wasted time and frustration
     
  5. travelbug

    travelbug Member

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    It is very difficult when you are just starting because you don't often realise it's a great deal.
    You hear people say "I got it $20K off" but maybe it was overpriced by $30K.
    People also ask how much they should offer below asking. But really you need to know what a property is worth.

    I saw a place on the net one Thursday night that looked really cheap. It had just gone on. I rang up at 9am and the agent said he had someone waiting at his door to sign right then.
    So you need to know when a bargain is a bargain and be there yesterday. ;)

    Also some are even sold before they hit the net. I bought one like that once. It was going on the net that night for 10% less than what it could have sold for. Owner wanted a quick sale. :D
     
  6. Achimy

    Achimy Member

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    Okay then...so do I just pay the normal price and buy and hold? I won't be able to move to my next deal instantly.....

    People claiming "I bought 20 properties in 3 months!", how is that even possible, especially if people say to inspect like 5 million properties just to "understand" the market/suburb. I'm not a very social person so I don't have contacts or people I know who are successful at investing (I do know people like Nathan Birch etc. but not anyone I can talk to or a "mentor" per se) but at the same time I would like to do it myself as a lot of people who are successful manage it. I don't have time to go in a suburb and live there for 5 weeks just to "study" it as I only get 4 weeks annual leave and other commitments such as further qualification study.

    I'm guessing I just talk to agents etc.. by correspondence and then go around for a weekend looking at properties and then low ball and hope for the best...

    Again need more advice on what action to take. Let's say I've found two areas I'm interested in , Moreton Bay and Beenleigh, I've got the numerical figures, but now do I have to go up there and start inspecting?
     
  7. TMNT

    TMNT Member

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    a few things!

    a guy with a moderate amount of cash could buy 20 OTP properties in 20 mins if he wanted to.....is this a good deal???

    a guy with $500k in cash could buy 20 x $250k properties @ 90%LVR (excluding costs)

    a gun with contacts and cash could buy a 40 dwelling apartment block in one shot if he buys the entire building


    Lots of ways to skin a cat and it should be quality over quantity approach
     
  8. Deltaberry

    Deltaberry Member

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    Buying a good property is much more important than buying below market value. Period.
     
  9. Joeyv

    Joeyv Member

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    I wouldn't take the story's of "I bought 20 propertys in 5 months " seriously.

    I good way to get idea of market value is like you said go to open inspections and speak to agents
     
  10. hpresident

    hpresident Member

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    I started property investing not too long ago, now currently doing my first subdivision. There are a few things you need to know:
    1. It is not easy, there's a lot to learn, not everyone make money out of this property investing game.
    2. Learn, learn, learn, start by reading the local council plans, what are the future infrastructure plans, zoning codes, ect. Then go to house inspection, when I first started I did 4 each Saturday, but after awhile you get a better feel of the whole process.
    3. Learn more: browse Somersoft daily, talk to agents and join local property investment group if there's one.
    4. Decide on a strategy: In a sea of property investors what can you do to better. Do you want to simply buy and hold? or subdivide? develop? Reno?

    Getting back to buying below market value, first you need to have a in depth understanding of your area, what you believe as "fair value" then you can make the decision whether something is under-market value. But just because it's under-market value so what? if it doesn't fit your strategy then it's no use.

    Try door knocking if you want to buy property before it gets listed.
     
  11. Achimy

    Achimy Member

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    How can I inspect 4 properties a weekend when I live 14 hours away. Can u give me some tips on how to buy from a distance? And my local area is Sydney from which I'm shut out because market cycle and unaffordability. I've checked solds etc in depth. Even got rp data valuation reports. But who's to say someone will lend to me after I buy it even better 10k below mv. Do I set up a team first or go research? Any suggestions for a qld solicitor? I feel overwehelmed :(
     
  12. Joeyv

    Joeyv Member

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    Use buyers agent if too far away
     
  13. Achimy

    Achimy Member

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    If I take the buyers' agent route, I will not learn anything about negotiation, about what they look for. I read a lot of stories of people doing it themselves, but then again there are some cases which they don't disclose their whole story.

    But for those who do manage to buy away from their local area, how do they manage. What if they have a job with limited leave opportunities? Anyone who's done it, please advise. Also paying 10k to a buyer's agent, how do I move forward from that? I buy one, and then do I keep going or what? Extremely confused..
     
  14. Newbieatlife

    Newbieatlife Member

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    While this is true I don't think they are mutually exclusive. There are plenty of 'good properties' that can be had at below market value

    you will find many people are reluctant to share their trade secrets, especially identifying and locating good/true BMV deals openly on a public forum as they can essentially be shooting themselves in the foot.

    My advice is to educate yourself as much as you can from non-mainstream sources, use a bit of common sense and think outside the square.

    Buying interstate is easy and in my opinion, more simple than buying something you can see personally as you can ultimately talk yourself out of what could be a good deal due to a few imperfections

    A good way is to enlist a third party for a small fee to inspect a property and list all the problems associated with the property or even facetime you as they walk around the house. A good local property manager could do this for as little as $100 and in many cases for free if he/she knows they can get business out of you upon purchase. They would also be well versed in the more common problems with general maintenance

    Personally i don't even bother as at the end of the day, its all about numbers and a house good enough for me to buy is usually one where it wouldn't affect the deal financially to fix some minor teething problems.

    Good luck
     
  15. LeoT

    LeoT Member

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    Mate trust me do yourself a huge favour and invest in some property investment books to increase your basic knowledge before you buy anything. If you are serious about your financial goals then you first need to acquire some basic knowledge and build on that by asking questions on SS etc.

    Goodluck

    Leo
     
  16. Achimy

    Achimy Member

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    I've read a lot of books/magazines/ articles/ videos etc.that's all Ive been doing the past few months. There comes a point I must take action and implementing my learnings. I can't just buy anything. I'm trying to target stuff below MV, but becoming harder and harder as I'm just starting.that's why I'm asking as how they did it when starting or the best approach
     
  17. LeoT

    LeoT Member

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    Something that is not mentioned but highly relevant to "BMV" is ones own level of negotiation skills/tactics. There is no doubt that being proficient in this area greatly improves one's chances of buying at a more favourable price/terms of contract as opposed to not having skills in that area.

    Serious investors should spend some time to refine/add new negotiation skills to their skillset. Personally, I don't know any really successful investor who isn't at least decently adept in negotiation skills/tactics. IMHO this is not an area to just brush over and there are some good books out there too.

    Cheers

    Leo
     
  18. LeoT

    LeoT Member

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    OK then.

    What strategy are you wanting to use? you looking for CG or cashflow? Are you happy with a negative cash flow on your IP? If yes, then by how much is OK for you?

    Are you thinking to buy in an advantageous stage of a cycle for a particular state ? Cos if your looking at say Syd or Melb for example and trying to buy 30-40% "BMV" then your completely wasting your time/energy etc

    Do you know your borrowing power? Do you have your finance ready? Finance broker or direct to bank? Structure to purchase in or own name? Interest only or P&I? Planning to pay LMI or putting in 20%?

    Just a few important things to think about.

    Leo
     
  19. Big Will

    Big Will Member

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    To buy BMV you will want no competition and a vendor who is wanting a quick sale or inherited the property and has multiple beneficiaries.

    If you are the only person putting an offer in then you hold majority of negotiation power. However if there are 10 people putting offers in then the vendor can afford to reject offers. End of the day a property is only worth what someone else is willing to pay and accept... this is MV. Would you sell a property with the value of 1M for 900K? I would wait, however if I got an offer after 3 months at 980k I would most likely accept.

    Multiple beneficiaries of the sale means each person gets a couple $1,000s less.

    E.g. You buy a property for $450,000 when it could sell for $500,000 ($50,000 less) but there was no one else interested and it was inherited by all the grandchildren which there is 10 of them. Their share is 45,000 instead of 50,000 so all lose $5,000 instead of a couple going through a divorce who loss $25,000 each or a single owner who losses the full $50,000.

    However if you really bought it for 50,000 less than what the mv was then why did no one else buy it? Surely if I came to you and said I have found a property that is $50,000 (10%) below market value you would put an offer in right? How about 40k? 30k? 25k (5%)?

    When I first started my journey it was the same as you, I want to buy for less than mv but the truth is it is really rare you will get it for a steal. The people that make claims of 50 properties in 3 months, they don't mention what properties they are, what their income was, how much equity they have. If it was just every average joe could buy 50 median houses in 3 months from a capitial city we are talking about for Melbourne (600k median price) = 30M total assest at 90% LVR would need 3M in deposit (6M to avoid LMI 80% LVR) and would leave them with a 1.35M interest only p.a. to pay which would give an income (rent) for Melbourne the median rent is probably around 3.1% would equal 930k income and without any fees or vancany you would need to supply an additional $420,000 p.a. just to cover the interest. This does not including purchasing costs, rates, PM fees, insurance, maintenance.

    But if you buy 50 properties like a one bedroom, one bathroom home at Vernon St, Korong Vale for only $20,000 (http://www.news.com.au/finance/real...-cheapest-houses/story-fndban6l-1226845542025) Have a look at the pictures well then it is a lot easier to buy 50 properties but only have a total asset of 1M and good luck with CG or renting them out!

    Life lesson if it is to good to be true it is.
     
  20. Michael_X

    Michael_X Member

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    I started buying in Brisbane this year from Sydney and at first it was pretty overwhelming too. Over time it's actually no more difficult than buying in Sydney. Here are some tips:

    1. Research as much as you can on SS - I noticed Beenleigh was one of your target areas. Plenty of good posts on SS. Look out for posts from Beanie Girl, she is the resident guru on the Logan area.

    2. Network with SS members, I sourced my property manager, solicitor, building & pest, trade contacts all from forum member recommendations.

    3. Fly up. Spend a day or so viewing as many open homes as you can. Nothing beats viewing the properties on the ground. I normally catch the 6AM flight from Sydney, book a car and try to smash out 8-10 inspections in a given day then fly back that night.

    4. Over time you will get a really good feel for the prices and potential on properties. These days, I take the deal to contract then fly up to view it in person and finalise everything then.