Finding a bargain

[funklaroon]

Hi All

Looking at an IP in the first quarter of the new year, criteria is cash flow positive and under market value, just wondering your thoughts on the best approach in finding something like this. I have considered BA, I'm in the Brisbane area so I am aware of some BA's through this forum, however are there other options apart from RE.com.au, as is most instances the deals on RE are few and far between and we all know that the real bargains are rarely advertised.

What tactics/methods do you guys/girls employ?

Thanks

 

[china]

Hi All

Looking at an IP in the first quarter of the new year, criteria is cash flow positive and under market value,

Thanks

Thats what I wanted for xmas. Throw in good capital growth history and potential as well for this IP.

 

[monalisa]

Hi All

Looking at an IP in the first quarter of the new year, criteria is cash flow positive and under market value, just wondering your thoughts on the best approach in finding something like this. I have considered BA, I'm in the Brisbane area so I am aware of some BA's through this forum, however are there other options apart from RE.com.au, as is most instances the deals on RE are few and far between and we all know that the real bargains are rarely advertised.

What tactics/methods do you guys/girls employ?

Thanks

• Look at comparable sales;
• Compare to rental properties on market to determine likely rent (I note Brisbane agents are good with noting rent on their ads);
• Look for something which needs cosmetic reno, which will lift the value up with little work;
• We have a template we have prepared for our use to determine the bottom line, i.e. negative/positive cash flow, before and after tax.

Good luck!

 

[monalisa]

Thats what I wanted for xmas. Throw in good capital growth history and potential as well for this IP.

I have heard a few people say high yields are followed by capital growth - esp when investors flock to one area with high yields, which pushes the prices up.

 

[jmillar]

I'm no expert but I would suggest that talking to agents in the area you want to buy wouldn't hurt. Let them know you are set on buying something in the next couple months and you have approved finance.

If they are good at their job, they will put you on a list and send you any new properties that become available.

They may also call you when something becomes available, as they will want to do a quick deal and move on to the next listing.

 

[jmillar]

I have heard a few people say high yields are followed by capital growth - esp when investors flock to one area with high yields, which pushes the prices up.

Yes, high yields can be followed by CG. But capital growth is dependant on supply and demand, as is the price of almost anything on this Earth.

For eg, some people say land gets capital gains. But a unit in a very high demand area can easily get more capital gains over a period than a house on a big block in a town with no demand.

In saying this, please find below a post (from another thread) which I believe effectively explains why land often performs well in terms of capital gains.

Land appreciates.

Bricks and mortar depreciate. (That's why you depreciate them on your tax).

Land in a certain area will always be limited to what's in that are. So as demand for that area increases, the value of the land increases.

Imagine a brand new house next to a 10 year old one. Both basically the same house, except for the age. Right now the new one would be much more expensive than the 10 year old one, right?

But in 10 years time the difference will be less.

In 20 years time, there won't be much difference at all.

So land content is king. For capital growth, its far better to get a bigger block with a cheaper house than a smaller block with a better house.

 

[monalisa]

I'm no expert but I would suggest that talking to agents in the area you want to buy wouldn't hurt. Let them know you are set on buying something in the next couple months and you have approved finance.

If they are good at their job, they will put you on a list and send you any new properties that become available.

They may also call you when something becomes available, as they will want to do a quick deal and move on to the next listing.

I'd like to add that often agents will ask you how much you are able to spend. I would refrain from telling them the budget. We generally say that it will depend on the deal - we are open to looking at whatever's available.

 

[Aaron_C]

I'd like to add that often agents will ask you how much you are able to spend. I would refrain from telling them the budget. We generally say that it will depend on the deal - we are open to looking at whatever's available.

All agreed but sometimes they ask follow up questions to try and get the answer in a round-about way.

 

[Truly Exotic]

I'd like to add that often agents will ask you how much you are able to spend. I would refrain from telling them the budget. We generally say that it will depend on the deal - we are open to looking at whatever's available.

I usually say, "if its a great deal, budget isn't an issue"

 

[Jack3d]

But if budget is an issue, I would feel bad telling them everytime they called that i'm not interested and they would probably get pissed off too.

Why don't you want to tell them your budget?

 

[ChrisA1]

Telling the agent too much

I made a mistake of telling the agent head too much when we were looking. We were signing the contract for a property with the agent and through our discussions, they knew we were actively looking and had finance available.

The conversation died after I said that we were looking for deals that 'returned 7%+ on purchase price'.... (everyone at the table knew that the price would need to come down a bit from the advertised price to reach the requested 7%).. the conversation went dead... and the phone lines....

Lesson from this, know what I will and won't say to each REA and don't get too excited in the heat of the moment... I would prefer to keep things back rather than splurge it all.


I think that telling the agent your 'general price range' is ok (has worked for me) so they don't send you deals that are wasting everyone's time.

Another lesson I learnt is that you must be ready to buy when you start actively approaching REA. I thought I was ready to buy in an area so approached a few REA, only to do some more DD in the area and decided that the area wasn't in my criteria. I may have damaged a few relationships in actively pushing them, then going quiet.

 

[Ed Barton]

I'd like to add that often agents will ask you how much you are able to spend. I would refrain from telling them the budget. We generally say that it will depend on the deal - we are open to looking at whatever's available.

What's wrong with that?

A good answer is a question. Questions as answers have agents chasing their tails. Never directly answer an agents question and only ask questions you know the answers to. Change the topic if necessary. You don't have to answer a question, you just have to respond.

 

[Melbournian]

What's wrong with that?

A good answer is a question. Questions as answers have agents chasing their tails. Never directly answer an agents question and only ask questions you know the answers to. Change the topic if necessary. You don't have to answer a question, you just have to respond.

sometimes - agents are pushy - best to tell them what they basically need to know. i understand what you're saying - their favourite question is "how much can you afford" and if you say X amount - they say you need to alter your budget etc" which is why i said have a budget of x amount but i am looking for this.

besides - they are no favours with agents - majority of agents would do anything for a sale including telling how great a suburb is because either they know the area of building or telling how their listing is far superior over another.

that's my experience buying off the plan places, home and building packages, 2nd hand units and houses - everybody's got an agenda.

 

[RedPanda]

When I approach REA, the first thing I tell them is my requirements including the max. budget. If I tell them I can go upto $500k initially, it doesn't mean that I have lost bargaining power if it comes down to negotiating on a property with asking price of $450k.

 

[Angel]

If I tell them I can go upto $500k initially, it doesn't mean that I have lost bargaining power if it comes down to negotiating on a property with asking price of $450k.

The REA will know that you can go the full $450K and may use that information to advise the vendor to not accept your initial lower offers.

 

[RedPanda]

If there is no one offering 420k and I offer 420k, the vendor will still accept it if they are willing to accept that figure. Whether I can afford $450k (or $600k) or not, should be of no consequence. What matters is my offer and vendor's willingness to accept that figure.

The REA will know that you can go the full $450K and may use that information to advise the vendor to not accept your initial lower offers.

 

[Jenko]

I like to make sure the REA know that I'm talking to other REA's so they work hard for my business.

 

[chindonly]

And try to have at least one other serious option - another property in play.

It helps take the emotion out of the transaction, and keeps you focused on your limits and the best value deal.

Definitely keeps the agent on their toes if they are at risk of losing a commission. They will then put pressure on the vendors to accept if it is a reasonable offer.