A guide to spotting a bargain when you see one
There’s an old maxim in property investment that goes as follows: ‘If you don’t get it for a bargain, you’ve already lost money’. While this seems like it puts a lot of pressure on buyers, what it actually does is open their eyes to the fact that with an investment property, the returns start before you’ve even signed the contract. Bargain the owners down an extra $5,000? That’s $5,000 you’ve just made. Have your first or second offer accepted when you were willing to go higher? That’s money in the bank. As soon as you start thinking like this, the importance of nabbing a bargain really hits home, which is why so many buyers are asking the question: ‘How do we spot a bargain when we see one?’ While it’s always difficult to tell for sure, here are 4 signs that you might be onto a winner…
1. It’s Dropped in Price
One of the benefits of doing your research well before you’re ready to buy is that you can get a feel for the market and the houses in it. Often, a house will take your eye when you’re doing some preliminary research–take not of the price. If you see the house advertised again a few months later for a reduced price, you know that they’re eager to sell.
2. There’s no Agent
Private sales, while they can be difficult and more awkward, can save a lot of money for both parties. Because a private vendor doesn’t have to pay an agent a commission fee, they can afford to lower the price by around 3%. This can add up to a lot of money, and big savings for you.
3. It is A Deceased Estate
When a property is a deceased estate it’s usually being sold to pay off the existing mortgage (many no longer have them) and then for the money to be distributed between the beneficiaries. Because the sale is usually handled by lawyers for the beneficiaries, there is less emotion involved in pricing, and a quick sale is often in everyone’s best interests.
4. Its Rental Yield Outweighs its Repayments
If the rental return on a property far exceeds the amount your mortgage repayments will be per week, you know it’s a bargain–in fact, this could be the biggest saving of all. If you buy a property that brings in $550 per week in rent, and a 25 year mortgage at 7.5% interest would cost you $400 per week to repay, by putting the extra rental income towards paying your mortgage down more quickly you could actually shave a whopping 10 years and $136,000 in interest off our mortgage. It pays to think long term on property investment like this.