Property gurus like to make a lot of noise about what it is that they do. They continually publish blogs and adverts, talking about the techniques that they use to make money in real estate. And they make it seem as if anybody else can do the same.
But actually making money in property isn’t something you can do overnight. Most property gurus have been in the business for more than twenty years. And it takes some of them a lifetime to build their portfolios. It’s not easy.
In this post, we take a look at some of the secret techniques that property gurus use and how anyone can learn them. You don’t need any special insights or experience. All you require is an understanding of the market and your place in it.
So let’s take a look at some of these techniques, shall we?
Get To Know The Market First
All markets have specific characteristics. Buying a property in a large coastal city, for instance, is different from purchasing a cabin in the mountains. And purchasing a beach property is nothing like letting out a commercial office space. The buyers are different, and so are the dynamics.
Once you have a good picture of the market, though, you can make some sensible decisions. For instance, if you know that an area is up and coming, it makes sense to buy into it, instead of looking for cheaper deals elsewhere. The property itself might be quite expensive. But if the asset value is going to rise strongly over the coming years, that doesn’t actually matter. Your balance sheet position will improve anyway.
Fact gathering can also help you find out more about which types of accommodation are likely to generate premiums in the area. For instance, perhaps there is a local school that is rising through the league tables. If so, then it could indicate that families will move to the area, pushing up demand for family homes.
Another example would be a company setting up offices close to a residential area. This might push up demand for apartments occupied by young professionals. You get the idea.
Get Used To Walking Away
In the real estate market, walking away is the most powerful tool you have. If a deal isn’t quite what you want, then your best move is to let the deal go and accept it for what it is.
Remember, if you pay too much for a property, that’ll eat into your returns. The goal of property investing isn’t to own a bunch of beautiful houses – it’s to increase your bank balance. So if you’re paying over the odds for a property, that will slash your long-term returns and make the entire experience less rewarding.
Walking away from a deal isn’t necessarily the end of the matter. In fact, you don’t have to walk away at all. You just state clearly the price you’re willing to accept and then allow the seller to come to you. Most of the time, your will as an investor will be stronger than theirs as a seller. And so by merely making an offer on the property, they will consider that option going forward. The longer they go without a buyer, the more appealing your proposition will become.
Check The Condition Of The Property
There is nothing inherently good or bad about a perfect property or a fixer-upper. What matters is the condition of the building and the opportunity to turn a profit.
Let’s say, for instance, you spot a new build with no construction issues that you want to rent out to tenants. It’s unlikely you will have any trouble with the foundations or roof. But the cost is a higher upfront price.
Now let’s say that you find a completely dilapidated building that requires expensive repairs. Here the price will be much lower. And depending on the nature of the repair work, you’re likely to get a much better deal. The market for fixer-uppers is much smaller than for regular buyers. And so investors often find opportunities to snap up something fabulous and rent it out to multiple occupants.
If you come across a dilapidated property, write down exactly what is wrong with it and how much it will cost to fix it. Then compare the total price of the house and repairs together to the price of a regular property of similar specification. If it comes in significantly cheaper, then it may be worth taking the risk and investing in it. That’s what a property investment guru would do.
Be Prepared To Act Fast
When it comes to buying property, there’s no advantage in waiting. If you spot a great deal, you must be prepared to go for it and be courageous in your decision-making. It is critical, therefore, to have spare cash lying around at all times so that you can put down a deposit when you need to.
Acting fast helps you take advantage of situations where sellers need cash quickly. For instance, crises or deaths can often force people to sell their homes and move on. In these situations, they are often willing to accept substantially below the market price – sometimes as much as 20 percent. This way, you’re able to get a property for a bargain.
Don’t expect them to advertise their situations, though. That’s something you’ll have to find out for yourself when you meet them for the viewing. Just engage in casual conversation with them, finding out more about why they are selling. Doing this can give you clues as to whether they will be willing to accept below the market price.
Get Your Agent Working For You
Property gurus like to give you the impression that they do nothing but spend all their time scouting for bargains. But more often than not, their agent tips them off.
Agents like maintaining relationships with property investors because they make a lot of money out of them. In return, they will often provide advanced warning of bargain properties coming onto the market, including the circumstances of the sellers. This allows investors to sweep in, buy up a property and make handsome returns.
In other cases, agents may be able to broker “off-market” deals that work out cheaper than auction or open-market. Again, savings opportunities here are on the order of 5 to 20 percent – a substantial sum of money.
Property investors also have a knack for being creative in how they approach deals. If they can find a way to sweeten the transaction for both buyer and seller, they will.
For instance, let’s say they are buying a property from a tenant who is planning to move into rented accommodation. Here, they could offer a special deal where they buy the property for a lower price but also give the owner the opportunity to rent one of their properties for less than the going rate for a year. That way, both parties benefit. The property investor has a smaller capital outlay. And the tenant gets cheaper rent temporarily.
It’s worth pointing out that property gurus will often make a lot of noise about how easy it is to make money in the real estate market. But the reality is different. Many gurus get into the coaching game precisely because they can’t make their real estate investments work. After all, if they were doing so well, why do they need to flog bad advice to the investment community?
If a property investor tells you that you can make money without any capital in the bank, run away. In economics, there’s no such thing as a free lunch. So if you choose not to put down any money on real estate, your balance sheet will suffer.
Down payments are essentially a way for you to build equity upfront to start your property investing journey. So even if prices fall, there will still be some buffer between your home’s value and what you owe various lenders.
But when that disappears, your investment position becomes much more precarious. Any slight changes in the underlying market could lead you into negative equity. And you’ll wish you were putting your money somewhere else, such as stocks.
Property investment, therefore, is mainly about being clever with the opportunities you take. It is about recognizing that each investment opportunity is different from every other. The best gurus treat each on a case-by-case basis, weighing up its merits.
If there’s an issue with the property, they will ask the seller to reflect this in the price. This way, they can protect their expected returns.
The secret of property investing is that there is no secret. The best investors combine education with hard work to figure out how they should proceed. Quick profits are largely a mirage, although they do happen occasionally. Sometimes, you can build an entire career on a single event. And that can pay off massively in the long run.
So what will you do with this information? Will you invest in property more or less?