You should always do your homework before buying any property. Here, we discuss various things you need to consider before and during your property purchase.
Firstly, if you have little time to run around yourself, you may want to hire property agents and finders to do all the research for you. A finder will scout for properties that suit your needs both in terms of price and any specific details of the property, for example size, style, location of the property etc.
A finder can save the property investor a lot of time especially, if they are looking for property in unfamiliar territory. When I use finders, I usually state a minimum of 15% below market value (bmv). However, in today’s market, I would prefer a minimum of 25% bmv as the market is depressed. In depressed markets, there are more deals available; however, financing those deals has become more difficult.
To get the best deals, your relationship with your property finders needs to be a good one – this you can develop over several months. Once you’ve bought one property via your property sourcer and in accordance with agreed terms, you will find them wanting to deal with you further.
This will save you time, money and effort in the long run. Property finders can also offer advice when it comes to financing and conveyancing your purchase – a lot of finders and deal packagers will prefer you to use their team as a condition of the purchase.
It is sometimes advisable to be armed with an option to purchase the property. This will offer you security that the property will be on hold by virtue of the option contract. An option agreement binds the seller to you; however, you are not obliged to exercise the option, i.e. you may pull out of the purchase for whatever reason further down the line.
There is a lot of noise around property options and buying a house for a pound at present – however, please note that you don’t actually purchase the property for a pound – you are merely buying controlling rights to that property which could lead to purchase at a later date if you choose to.
If you are buying the property using external finance, it is always wise to have a financial adviser run through the numbers for you. You need to do this before the purchase, not during or after you’ve bought the property! Please note that property investing is a business – buying a bmv property which is not cash flow positive could become a financial strain on you especially in today’s market when it may be more difficult to sell.
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