Savvy property buyers understand they can increase their rate of returns by purchasing property that is located in popular suburbs. The only problem is is they cost more. We look at how to identify a good suburb and how to buy below market value.
Identify A Good Property In A Growth Suburb
Stay away from new land releases. Outer suburbs of any major city have new developing areas. Usually, buying a property in these areas seems attractive because prices are lower and houses are brand new.
Some common setbacks that property buyers can encounter, is slow or no capital growth for many years and developers soften land prices by releasing new land.
It can take decades for a suburb to fully complete. It could take a lifetime before a suburb can offer things like a train station or access to a major highway.
Look for lifestyle amenities – Who doesn’t like a coffee made by a barrister on a Saturday morning?
Things like coffee shops, boutique shops, shopping centers, restaurants, walking tracks along a beach or creek all create demand. House prices can increase the closer a property is to these types of amenities.
Good Schools – If real estate is located in a highly rated public school zone, this can increase property prices from 5% to 12%. You can check the ratings of public school and check there zoning on the MY SCHOOL website.
Close to a train station or major city – The rise of population around the suburbs of any major city has created traffic problems for locals.
Real estate located within walking distance to a train station, major employment suburb or a CBD increases rental yields and purchase prices.
Tips On Buying Below Market Value.
A Renovators Delight: Every real estate buyer wants to purchase a property that requires no work. These homes always sell for a higher price, even when prices are going down.
Buying a home that is structurally sound, yet needs work, creates an opportunity to buy property at a large discounted price.
The sellers of these homes are also more inclined to negotiate as they understand the property needs excess money spent on it to bring it up to standard.
Target Properties That Have Spent Time On The Market – Buyers assume if a property doesn’t sell quickly there is usually something wrong with. If you look closer this may not be the case.
Real estate agents can over price a property to win business. This can burn buyers and increase a seller’s time on the market.
Other problems that can stop a property from selling are:
- Vendors don’t give the agent a marketing budget.
- A property is not presented well.
- Vendors think their property is worth more than the market value. Once a ‘for sale’ property price eventually comes down to market-value, buyers are no longer interested. This is called a stale listing.
This creates an opportunity for a skilled negotiator to bring the price down further and sellers at this point are usually motivated to move on.
Target properties that are not listed for sale (off market).
An off market listing is a property that is for sale without the public selling camping.
The benefit to a buyer is there are no other buyers pushing prices up. This is a great opportunity for any buyer.
How to find this kind of listing:
- Buyer’s agents and real estate agents have access to these types of listings.
- Doors knock a street you like.
- Web sites like ‘Buy My Place.’
Use A Buyer’s Agent.
The main purpose of a buyer’s agent is to buy a property at a cheaper price. They’re former real estate agents that look after the needs of the buyer rather than the seller.
How do they do it? They’re trained negotiators that know how to play the real estate agent’s game. They’re not emotionally attached to a property hence have a greater ability to focus on the facts and are not afraid to walk away at the right time.
Spot A Quiet Achieving Suburb – Popular suburbs increase in price quite quickly, while the neighbouring suburbs are the quiet achievers. It’s only natural for buyers to default to the next suburb if prices are too high in the boom suburb.
Buyers can achieve better capital growth in these types of suburbs because they don’t have the premium price to begin with and growth rates are still very strong.
Leverage a negative building and pest inspection. A good negotiator / property buyer will put a condition of sale that is subject to a building and pest inspection.
If the building inspector discovers a minor problem with the property, this can create further negotiating opportunity.
Bank Sales – Otherwise known as mortgagee sales. This is when a property owner can’t meet the obligations of their mortgage, hence their bank evicts the owners and resells the home at auction.
Some benefit of this type of sale:
- Less buyers/competition. Properties are not polished listings which can put buyers off. Usually they’re presented poorly as the bank doesn’t want to spend any more money on the property and cut their losses.
- A lower reserve price.
- The property must sell.
The hardest part of a real estate agent’s job is dealing with emotional sellers that think their property is worth more than the market value.
Many retirees or deceased estates are handed over to ‘State Trustees,’ which is a government organization that manages the sale process on behalf of the vendors.
The benefit of state trustees is they’re not emotionally attached to the property and will sell a property for a fair market value.
Checkout the State Trustees website for current properties that are for sale: State Trustees Property For Sale.
Create Your Own Luck.
Buying a property below market value in a growth suburb is possible. It takes a bit of hard work by focusing on the facts and figures and not letting your emotions take over.
Some of the strategies used in this article are what expert buyer’s agents use to target a potential bargain.
If you’re interested in finding out more about how a buyer’s agent can help, WREA offers you a complementary first consultation.
In the meeting your consultant will establish your buying criteria, assess your ability to enter the market and give you a few options of the type of property that suits your criteria.
For more information on the service please call us directly on 1300 00WISE (9473) or leave your details on the enquiry from below.