You can get some great tips and also share your experience with fellow property investors at www.thepropertyinvestorforum.com.
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How do you buy below market value property
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That forum is a deadzone. Here's some of my best - I am a bit uncomfortable sharing, but hopefully some others will share their techniques too.
1. Deal direct with the seller - agents will take a commission off you and drive up the price for their client. Too easy!
2. Make offers on properties that you know are vacant - the vendor is losing money hand over fist with rates and other outgoings and you can save his ass while giving him a haircut at the same time. I find this is very effective, but there may be reasons that the property is empty - can be very risky, so take care! I have been burnt this way.
3. Buy apartments off the plan that you are comfortable with - but don't buy a shoebox and check out the developer and the plans/specifications first. This is probably my personal favourite because I am buying something brand new and secure, exterior and gardens are taken care of and it complies with the latest building requirements - no surprise maintenance costs. But you have to do your research.
4. Offer people a finders fee if they know about properties that are about to be released to market.
5. Keep an open mind. If you believe that all the good deals are taken, you won't see any bargains unless they bite you on the ass - and they never do!
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Make good friends with agents as they can tell you where a deal is likely to pop up or pay them a finders fees for one. They will also be able to tell you if there is an existing property which has been around, when will their contract expire.If I have seen further than others,
it is because I have stood on the shoulder of giants. Isaac Newton
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Originally posted by martypartyI find this is very effective, but there may be reasons that the property is empty - can be very risky, so take care! I have been burnt this way.
would you mind sharing your experience with us in that particular case?
Thanx
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I am buying in the US and am working on undervalued foreclosure properties. There is an ample supply of properties and they are normally in a distressed condition and will need to be rennovated. You should have at least 20% equity after rennovations. 30% is not uncommon and higher can be done.
Typicaly purchase and renno with cash then get say a 70% lvr and you can keep going.
Key points:
you need a good source of foreclosure in the area that you are working
you need a trusted guy on the ground who will check the location, provide a renno quote and rental assessment before you make an offer and do the renno after you get it at the quoted price.
comparable sales figures are availibe on the net and from RE agents
you need to have some spare cash under the mattress just in case there is some unforseen renno works
One other upside is that these properties also tend to be cash flow +ve with rental yields up to 45%..... mimimum is 30%
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Originally posted by OopsickHi martyparty
would you mind sharing your experience with us in that particular case?
Thanx
A painful experience that made me very wary of buying anything but new or near new property. Luckily my best friend was a builder and he did work at mates rates, but I think it is very important ot know exactly who built the property you buy.
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Originally posted by OopsickWOW!
Well... this is US
How about Aucklanders? What are your best recent buys?
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you make your profit when you buy, but there is no profit until you exit - a valuation is only a guestimate
If you can purchase a property below value, improve it or convince a valuer that is it worth more than you paid for it (in a willing buyer/willing seller situation) and get your deposit back then great. That enables you to do another.
But the real measure of success is after-tax cash flow. For me this is key to the value or profit of a deal. What passive income will this property provide on 100% finance?Anybody can... not everybody will
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Yes a valuation is only a professional lenders appointed valuers guesstimate but it gives me confidence that I have done well on the purchase and can get my money out (as I buy and rennovate with borrowed cash)and repeat the process. I am content to safely assume that I have created equity should I have to sell but dont plan to sell in the short term and am operating on a buy and hold basis.
I am using finance that equates to 60-70% LVR as the lender wants me to leave 10% of my money in the deal.
Also the 10% that is left in plus all costs are also borrowed ie no money down.
The yields of the three properties are:
duplex approx 50% nearly finished
triplex actually 45% now rented after tax cash flow will be Us $7072 per year
triplex approx 36% nearly finsished
Just picked up another three this weekend for our investor club the above ones are mine, one of them was duplex buy 14.5K spend 5K easily rent 800 per month appraise at 40,000 50% yield and 50% equity not a bad starting point for the lady that bought it.
All figures in Us $.
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Those are good returns on paper, but I figure that you get what you pay for with secondhand houses and structure - there are the same risks you have with second hand cars- increased repairs, obselesense, the costs of revitalising a tired asset, not to mention problems with leaky building syndrome, geotechnical issues that may pop up later on etc.
I'm not poh pohing the notion that you should buy forclosure properties, but you need to take care and realise that buying property on the bums end of the market may lead to you being in the poo! Do your homework and have a builder and if necessary an engineer to check it all out, you might be the next one selling under a forclosure!
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