The heaviness in your stomach when you’re in a choppy real estate deal is not fear.
It is your body’s way of letting you know that there’s an incongruity. The deal sounds too good to be true and you should probably walk away. In that moment, you’re the patsy that Warren Buffet was referring to when he said “if you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.” Have you felt like this before?
Fortunately, there’s a way around it. By buying properties at wholesale price as a developer, you get to beat the market every single time. By the mere metric that such properties always have capital growth inbuilt.
The good news is, there’s a way around this…to buy property at wholesale prices.
You need to educate yourself on how to invest in property, how to find the deals that will accrue a return on your investment. Most of all, you need to know how to acquire high performance properties “at wholesale prices.” The emphasis is on the how.
Here, I want to show you how to buy properties at wholesale prices. They are some of the ways we help our clients get great deals.
Make money when you buy, not when you sell
What you make off wholesale property deals is determined by the price you buy at. So in essence, you make your money at the buy rather than when you sell. It is, therefore, paramount to improve your advantage in whatever way that you can. Every dollar you knock off the asking price means more money for you.
One way to look out for properties that have development applications with the Planning and Land Authority. With a good offer in hand, subject to planning permission, they are most likely to accept. And if planning permission is granted, the upside is yours to savor.
Auction Buys
The house auction is a good place to pick up a bargain. An auction is a public sale of an asset, the house, and is usually conducted by an auctioneer in the form of an estate agent. It is governed by a set of strict rules to ensure fair play and good conduct throughout.
At the auction, make sure that before you bid:
- get familiar with the market, scour the internet for information, attend similar auctions, consult with estate agents and monitor auction results
- get an expert independent opinion on legal, finance and building matters.
Remember, there’s little room for negotiations after you’ve accepted the terms of the contract on display before the auction. So you have to get a way of getting your price right every time.
Pre-auction offers
While auction clearance rates in Sydney have hovered between 70 and 73.2 per cent, hitting a low point of 67 per cent in September 2017, the median auction price has slipped and this has given room to an increase pre-auction sales. According to Domain, pre-auction sales soared 33 per cent in the second week of September from 109 sales in the previous week to 145. Rather than letting the gavel decide the fate of their homes, most sellers are finding pre auction a more palatable option.
A case can be made for securing a home before it goes to auction. Here you have more room for negotiation; you can get good terms such as longer settlement period which can increase your upside. Further, you’re more likely to get the house within your budget and you get to knock out your competition.
The dilemma is usually at what price to bid at:
- research by looking at past pre-auction data to come up with a realistic offer
- have your offer in writing
- have your finances ready pre-approval
- negotiate with the vendor’s agent
Private Sales
In a private sale, the property is advertised and prospective buyers, usually property developers with a reputation, are invited to make offers. The seller sets their sale price and you negotiate, usually in the presence of an agent.
The private sale offers you what is called a “cooling-off period” of three clear business days during which you can withdraw from the sale; a good time to review your options and change your mind if anything is not to your liking. Which is not the case if you’re buying at auction.
You have to keep your ears out for private sale. Also, the internet is a good resource. There are always people posting on forums looking for a buyer to sell their house to privately.
Foreclosed Property
Another pot of gold for property developers to the foreclosure property market. Mortgagee-in-possession or foreclosure property is a prime opportunity for developers to buy into high-growth markets below market value. Albeit, there are dangers associated with targeting these properties without adequate research. Few things you have to keep in mind if you explore this option:
- Organize finances early. Since you’re buying the property from a bank, the settlement period is likely to be short and inflexible. Have your finances in order before you go shopping to avo+id overspending and being caught out.
- Foreclosures preclude quick settlements. There’s only one goal for the seller in a foreclosure: to sell the property as quickly as possible. Settlement is quick.
- Big repairs should be expected. If the last owner wasn’t able to pay their mortgage, chances are high their home wasn’t well maintenance.
- Do not buy without seeing the site. Perform an inspection before entering the deal. You’ll be tempted to do the deal online, especially if the price is low, but refrain
- Stick to the basics of investing in property. There’s no point on skipping on tried and tested methods of investing simply because you’re bagging a bargain. Check the location property prices, growth opportunities and local vacancy rates and rental yields. Make sure everything to your plans checks out before committing.
If you work with a property advisor firm such as us, these are some of the ways we help to secure good deals for our clients. To find out more get in touch with us…you’d be surprised how affordable our services can be.