Searching for a good investment property

In the last article, I shared my tips for planning for your purchase. Now it’s time to go for a hunt. By now I assume that you know what you are looking for in terms of price range, type of house and areas, yes?

Believe me, if you seriously want something worth your penny and will outperform in the long run, be patient and be disciplined.

1. Online search

In australia, 2 most popular property websites are https://www.realestate.com.au and https://www.domain.com.au, every country has websites like that for property search. Set a filter for your areas, price range and type of property (including number of bedroom and bathroom..etc) and set an alert to notify you weekly for new properties.

2. Go to inspections

Once you marked some properties that you think match your criteria, go to inspections. If you are investing for the first time, prepare a checklist for things you need to ask the agent at the inspection, these include:

• Check the entire property inside out, see if it looks like the online listing, some properties may not be as spacious as they look on the photos, take note of any cracks, damages or non-functioning devices (light, air-con..etc.)
• Why is the owner selling? Don’t overlook this one, there could be a red flag in there for you.
• Is there any existing issue with the house? And don’t forget to mention the issues that you found out yourself earlier
• When was the house built and has it ever been renovated? The more you know about history of the house the better
• What is the timeframe for settlement? This could help in negotiating
• Ask the agent to send all revelant documents, including contract of sale, building permit, council rates, types of tax, insurances ..etc.

3. Make an offer

So you really liked a property that you inspected, then it’s time to make an offer. Some aspects that you need to consider:

• Price: everyone wants to buy property as the most affordable price possible right? But don’t be cheap, be reasonable instead! Do some research on the average price range of similar properties in the same area, consider the current market, and list all the issues in your offer.
• Building inspection: put a condition that offer is subject to building inspection. This inspection will check any building defects, water damage, visible crack and structural damage, roof, basement and any potential risk. Then book a specialist to conduct inspection for you.
• Finance: when you borrow a loan to buy, the offer should be subject to finance. This means if the bank doesn’t approve your loan then you have the right to withdraw your offer and get your deposit back.
• Issues in the house: if there’s any issues with the property that the agent told you or you found out during inspection, you should put a condition that the seller has to fix them before settlement, or they will give you back some money for you to fix if they can’t arrange it
• Settlement time: some sellers prefer short settlement, some prefer longer. If you are flexible on settlement, you could use this to your advantage, say the seller wishes to hand over the house in 6 months while most buyers would want to settle in maximum of 3 months, then you could use this to negotiate a lower price.
• Final inspection: by law you are entitled to a final inspection around 7 days before settlement. It’s worth putting a condition that the house must be professionally cleaned, all issues mentioned in offer have to be fixed and everything else in the house must be the same with photos.

4. Negotiate

Whenever you make an offer, always expect objection or rejection. Remember, there’s always better options out there, so keep looking and keep offering, don’t limit yourself to just one property.

But let’s say there’s one property that you’re really really keen to buy, you made and offer and the agent came back saying that the owner is not happy with it.

It’s ok, don’t worry! It’s how you handle objection that matters. So, don’t quit yet, keep the communication going, a few key points:

• Mention the findings from your research in the area to justify your price
• Mention the issues of the house
• Ask the agent what you could do for the owner to accept your price
• Find the middle ground: increase your price a little bit.

Bonus: Use an advocate

There are many names for this job: buyer’s advocate, buyer’s agent, property advocate or sourcing agent.

But basically what they do is that they will find the property for you based on your criteria, they will recommend the best options, and they will assist you in making offer, negotiating and settling the property.

So why should you consider using them? Here’s the reasons:

• They have years of experience in hunting for properties, they will save you a lot of time for searching and inspecting the property.
• They can spot issues of a property that you may overlook
• They have network of agents which is useful in finding off-market deals
• They can negotiate the best price on your behalf
• They will help you review the contract and other relevant documents
• They will make sure all the essential steps for inspection and settlement are properly followed
• In some cases, they can even help you find the best property manager

How much do you pay them? A typical advocate would charge you 2~3 % of the purchase price. But make sure to search around to find the best one.

I used an advocate for my first investment property and I never regret that decision. He found me a 2 bed townhouse in an excellent location that performed strongly even during the pandemic and has consistent growth of 11% annually compared to average 6% as real estate websites indicated.

Alrighty, hopefully you will find the right property for you, good luck! Next I will share with you some tips for managing a property once you’ve acquired it.

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