Sorry Paul & kylie, I should have given you a little more info.
The method I was taught was from Rick Otton and I know Rick's stratergy is to buy the house first then find the buyer. The reason I have gone the other way, is I did not want the house sitting for months while I was trying to find the buyer. I know houses can sell very quickly under wrap contracts, but because I advertised in the local paper up here in Cairns and did not receive a very big response, I was worry that the house could more then like be on the market for a while. So for my first few I thought I might find the buyer first and give them a price range that they can afford (Going on my Calculations)and let them go out and choose the property.
The listed price is what is what it is advertised for, so my profit will come for me negotiating a discount off the listed price. I am getting my buyer to choose a few properties so I can go with the one that gives me the best discount.
This is all a big learning curve for me, they say your first property is your least profitable. Because it is all new, I find myself sometimes commiting to different things with the buyer and then thinking afterwards that I should have commited to something else. I do not want to say one thing to the buyer then change it at a later stage, I just do not think it is very professional. As long as I learn for next time that is the main thing.
I am just finding it really hard to know how much to add on or mark the property up, I do not want to rip people off, but at the same time I do not want to skim myself too much either.
I have heard other people who find the buyer first say they add 15 to 20% onto the purchase price.
On a $150k house that is 22.5K to 30K, I do not feel comfortable marketing properties up that much. I just want to do the right thing by the buyer and the right thing by myself, it is finding the happy medium that is difficult.
The steps I have taken so far are:
Advertised for buyer. (Found a good candidate, with a sizable deposit and on a good income.)
Got the buyer to fill in an application form and provided me with his credit file.
Verified income and got tenancy references, all check out OK.
Met the buyer and went over the contracted. Gave him a copy to take to his solicitor. I also told him he would have to pay me a document preparation fee and he would have to pay stamp duty on exchange of the contracts.
After he has received legal advise, then the next step is for him to go out and choose the house.
Other points:
My contract is a Deacons contract which came with Rick Otton's Wrap Pack.
I charge a 2% spread.
Before I do my next wrap I am really going to have to think how I am going to provided myself with a better margin without feeling as though I am overcharging for the property. I just do not feel right charging people $15K to 20K over the market price.
Anyway just something I will have to give a lot of thought to on my next wrap.
Regards,
Matt