10 property tips when buying
My thoughts from 30 yrs in the real estate industry.
Tip 1: Contact your broker, don’t wait for them to contact you – Good properties always sell even in a tough market. Your ability to buy the best properties that tick all of your boxes comes down to the relationships you have with the local brokers, so take the lead and make sure they always think of you first when they become aware of that perfect property.
Tip 2: Buy when you can afford to buy – You will never get (1) High growth, (2) High rents, (3) Low interest rates, (4) Easy to borrow from the bank and (5) Easy to buy property all at the same time, so buy (1) when you have the money and (2) the buffer to hold on for the long term. As long as you’re buying at a fair price, I wouldn’t worry about trying to pick the peaks and troughs of the market, as even the experts can’t do this accurately.
Tip 3: Maintain close relationships with Lawyers, Brokers, and Bankers – Trying to get finance is one of the toughest issues faced by property buyers and investors these days, so the relationship you have with your bank or broker could mean the difference between pushing forward or being forced to sell. Plan well in advance as there are often delays. Remember lawyers can help you word special conditions of sale and payment terms that can protect you if problems arise.
Tip 4: Identify all your major risks and deal with them early – Most things in a property investors journey are controllable, so be prepared. If you buy the right property, in the right area, for the right price and you present in the best condition with the best property manager, you should always get paid 90-100% of what it’s worth. Rent should cover the mortgage. For any gap, make sure you build enough cash buffer so that when interest rates or exchange rates change or you lose your job, there’s a special levy or some major maintenance, you’ll have enough money to hold on.
Tip 5: Buy blue chip properties – We all know by now the phrase location, location, location, it’s been around for decades for a good reason. If the market turns down in the future, many properties will drop in value but conversely, many median-priced, blue-chip properties in blue-chip suburbs will hold their value. If you buy quality property, it will often rise higher in the good times and fall by less in the bad times.
Tip 6: Focus on capital growth ahead of rental return – Whilst having a higher rental return does make it easier to cover the outgoings, it’s unlikely to make you rich. Whereas capital growth or a property doubling from $500k to $1m or $1m to $2m will really add something to your retirement fund. Capital growth is only taxed when you sell and often you can extract the equity with minimal costs by refinancing and use that to continue to build your portfolio.
Tip 7: Use multiple lenders – Many borrowers think that if they have all their loans with the one lender they’ll get a better deal on mortgage rates but it’s often not the case. It can actually be the opposite in that it creates a risk if one or more of your properties drop in value, they may consider there is too much risk so if you sell one, they may keep any profit to offset against your other loans. Don’t forget to consider asking for a vendor mortgage in a tight market for finance. Also consider using another property or asset as part payment if the market is illiquid.
Tip 8: Always get an independent valuation – It’s very easy to fall in love with a home or investment and to pay the wrong price, especially if you’re competing against other buyers. By getting an independent full valuation where the valuer spends 2-3 hours inspecting the property and doing his research on comparative properties, you’ll almost guarantee you’ll never overpay for a property. Not all valuers are created equal so choose carefully.
Tip 9: Get good advice and follow it! – experts are experts for a reason – they’ve often spent over 10,000 hrs practicing and studying their subject to become that specialist. More than 50% of potential buyers get their advice from friends and family that aren’t qualified to give advice. The other quarter gets specialist advice but then don’t follow it. So that only leaves 25% of the buyers that get professional advice, pay for it and then heed it and then implement it. They’re probably the 25% most wealthy people (in time, freedom and money) in the country.
Tip 10: Just Do It – you’re never going to know everything, so don’t wait until you’ve got perfect knowledge before making your move as you’re going to miss the opportunity. Some property education is very advisable as following these tips will ensure that you’re not going to go too far wrong. At some point, you’re going to need to jump in though and buy something.
Sure, you might make the odd mistake but often it’s not that bad if and when it does eventuate.
I still believe in any market, investing in the median priced blue-chip areas is good practice. There is usually few properties for sale and there will always be a certain level of demand.
Property is what you make of it and you can profit from that in any market.