How to buy undervalue property

Allow me to weigh in here.
When you purchase a property on the market, whatever price you paid for that property is the market value. Why? Because if the seller could get more for the property, they would have.

Sounds good in theory, but not so in practice.

The last one I bought was under market value, no two ways about it. An out of town agent listed the place with old, crappy photos; failed to mention a bunch of the big selling points and amenities (I mean, ****, a new light rail stop 5 minutes away, going direct to the Sydney CBD was a few weeks from completion and it wasn't even mentioned!) etc and the first open conflicted with a few others that were quite similar so not many people showed up. I pounced.

I turned up at the first open with an unconditional offer, way below what I was happy to pay, and exchanged contracts a few hours later, taking it off the market a few days after it was listed. No one else had a chance.

I have absolutely no doubt that a higher offer would have come if it stayed on market, and it would have sold for plenty more if it made it to auction. Two of the area's most experience local agents found out (independently) that I was the bloke who bought it and both made an effort to congratulate me on the epic buy (it was in a piping hot market, too).

In this case, the vendor trusted the agents' opinion of its value, and took his guidance on the pricing which was not on the mark (whether the long drive to open it each weekend of the campaign which stuffed up his other opens had anything to do with his suggesting they take the offer, I'll leave to your judgement). The agent simply didn't know the suburb he was selling in.

A telltale sign was when I asked him about the rents. The tenants were paying $50/week less rent than market and he said they miiiight be ok with a $10 or $20 a week increase in a few months but it was a really good amount anyway for the area..
 
I purchased an IP from a divorc"ing" couple in 2013 for 25% less than they purchased it for 12 months earlier.

The fact that the Husband was in North QLD and the Wife was in Perth really made negotiating quite interesting, but successful.

Just had it Bank Valued and its given me $100k equity and has a 20% ROI per year based on rental income.

BMV is very hard to define. However, whatever it is, there are plenty of opportunities out there.

My interpretation is BMV= Price acquired in which is lower than someone else would have paid "ON THE DAY". Which, is hard to define...

However, the way I target finding a BMV property, is to make sure my purchase price is well below that of an imminent bank valuation.
 
BMV, like many have said, could also be able how much you paid versus how much others would have paid.

Example 1: We bought an IP in early 2009 during the FHOB period and there were offers on similar desirable properties with amounts upwards of $400K. We ended up buying for $375K from a vendor who was moving to a retirement home, and a newbie agent.

Example 2: Second IP in 2011 and this was from a mortgagee sale. Agent dropped an email to say this property was ready to go, so we inspected and offered $274K. The Median price for the suburb was $300K at the time (based on the figures at the back of API Mag).

Both properties would be BMV in my view.
 
One of my mentor mention, market is always moving. Since its hard to judge market value, and buy below market value hard as well. You may think you bought well, since the market trending up. But what if the market turn opposite..

He change the way I think, buy at or below market value still important element. But lesson learned for me is how you can do cosmetic reno. And learn how influence the banks/valuator

He also teach, every suburb in the market have market range. Observe well, and you will know your profit. He teach me why that house sold at higher market range at that time, and vice versa. From there you will know your profit estimate.

Buy lower range, do cosmetic reno and sell higher price range..

I'm with you on that, buy at 280, spend 10k and make it look like the ones that are selling for 330-360
 
He means if you bought a house for $350k that was worth $400k

The bank will let you withdraw more than 350k (what you paid for the house)

my friend works for nab and deals with equity release all the time, he says they never even look at a release unless it's 12 months past settlement. the only time they would look at a release is if they have done a reno.

if the house is worth 300k and you pay 250k. the house is now work 250k from the eyes of the bank (this is what my friend at nab says)

so with my original question i was kind of hoping someone would tell me if they had any luck doing that equity release? within a short period
 
I've read several authors state that you should attend 100 inspections (same property type, same area) before making an offer, and that after 100 you will know the market, and will spot a bargain when it comes.

I don't have the time or the patience though and start making offers pretty soon, just low ones that don't get accepted, then slowly increase them each week closer to comparable sales.

That must be the slow learners method ;)

100 times without any action, I reckon you would talk yourself out of it by the end. How long would that take anyhow for someone who works regularly? a couple of years with my work schedule.
 
That must be the slow learners method ;)

100 times without any action, I reckon you would talk yourself out of it by the end. How long would that take anyhow for someone who works regularly? a couple of years with my work schedule.

I did exactly this - it was more like 150 before I made any offers. It took me around 6 months, and I consider it the best thing I ever did.

No substitute for knowing the market like the back of your hand.
 
It's a good idea in theory, but sometimes the market is moving and I know I personally am scared of missing a good deal (if I can recognise it). I've been to Brisbane 4 Saturdays so far and seen about 40 properties, across two suburb areas. I think the number you need to see is based on how much research you do.

If you are only going to 100 opens, writing no notes, and just "looking" then yeah you might need 100.

But in our case we take alot of notes every property, plus research every one on RP Data, Pricefinder, comparable sales, our own rental appraisal, and then do our own self-valuation of it. Every time I do this, I learn the market better for that area.

Out of a single Saturday, I can see clearly which properties are well overpriced, and which ones are market, and which ones are good value (if any). Out of 40 opens I'd say there's only 1 that's well under market, and 10 of them that would take offers slightly below market ($10k-$20k or so). When I say market, I mean the comparable sales in the last 6 months.

Then after all that, the true value is still not fully known until the building inspection is done under contract. Sometimes that lays bare the real reason they accepted a low offer! A little disheartening when it happens but it's part of the process and you have to get back out there and keep trying.
 
my friend works for nab and deals with equity release all the time, he says they never even look at a release unless it's 12 months past settlement. the only time they would look at a release is if they have done a reno.

if the house is worth 300k and you pay 250k. the house is now work 250k from the eyes of the bank (this is what my friend at nab says)

so with my original question i was kind of hoping someone would tell me if they had any luck doing that equity release? within a short period

just because the bank values it at a certain value, it doesnt mean its market,

ive had some of mine valued, and sometimes its ridiculously low to well overpriced
 
I did exactly this - it was more like 150 before I made any offers. It took me around 6 months, and I consider it the best thing I ever did.

No substitute for knowing the market like the back of your hand.

I think different personality types comes into this as well. I bet your a good planned, plan everything to the last detail.

I do homework, when something feels right then I just go for it. If I waited a year on the first couple I bought, then i would have lost $100k each :)

How long did it take to go to 150 open homes?

Far out, I haven't been to that many in my life :eek:
 
my friend works for nab and deals with equity release all the time, he says they never even look at a release unless it's 12 months past settlement. the only time they would look at a release is if they have done a reno.

if the house is worth 300k and you pay 250k. the house is now work 250k from the eyes of the bank (this is what my friend at nab says)

so with my original question i was kind of hoping someone would tell me if they had any luck doing that equity release? within a short period

Equity release in short periods is pretty common scenarios brokers deal with - Ubank (one arm of NAB) don't like it at all - i believe they have a 9 month wait time before they can do anything.

Others have much more favourable cash out policies.

If you're going for this play, choose your lender wisely. ANZ are generally a good bet.

Cheers,
Redom
 
just because the bank values it at a certain value, it doesnt mean its market,

ive had some of mine valued, and sometimes its ridiculously low to well overpriced

Thats true TMNT - as someone that orders valuations every day - there are some really strange results that come through.

Its not unusual to see 15%+ differences in valuations for the same property!

Cheers,
Redom
 
just because the bank values it at a certain value, it doesnt mean its market,

ive had some of mine valued, and sometimes its ridiculously low to well overpriced

Hey TMNT,

sorry i meant more the equity out. I agree it's not market value a lot of the time. but you only really care what the bank thinks when you want to get equity out.
 
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