It takes a lot of hard work, especially when you don’t know anyone in the industry. You don’t have a proven track record of buying lots of properties and you don’t have clear buying criteria.
When I started out years ago I did the hard yards of building relationships, getting educated and doing research to find the great property deals. As you develop relationships based on trust and business acumen then great property deals will come to you, even in buoyant markets.
So whether you are a first time investor or long time investor, I have listed below the top three strategies I use to differentiate a great property deal from an average one.
What I want you to remember is that your buying criteria must match your personal investment strategy.
A decision to purchase should not be based on a slick sales presentation or another person’s opinion.
An agent may be excited about the deal but you still need to determine for yourself if it is a good property deal or a great property deal. Take the emotion out of it and do your numbers. Make fast decisions and clean offers to get great properties under contract.
Every investor has their own way of choosing a property but these are the three ways that I select a great property:
The level of hidden value and my ability to convert that into profit is the single most important way that I determine a great property deal, see my blog on True Value. Every investor adds value to properties differently. Also, value can be added actively or passively.
Examples of actively adding value are raising rents, renovating, adding bedrooms or converting garages, building minor dwellings, developing land or changing use.
Value is added passively to properties due to say increasing population, infrastructure spending or increasing employment opportunities.
To benefit from this requires researching and choosing areas that have a higher than average probability of long term capital gains.
Every investor needs to develop their own strategies through both education and experience and then target properties that match those strategies.
When selecting properties this way you don’t necessarily need to buy at a discount to make money. Also deals regularly present themselves even in booming markets.
A great property deal that generates a high net yield will likely be a great property to put into your portfolio.
Again, it may not have to be at a discounted price.
It is critical to analyse the numbers though and double check that all the expenses have been taken into account and that the rental income is realistic.
Ultimately, you make your money when you buy! Always aim to buy properties at a discount to market value.
This is much more achievable in a depressed market but if you are prepared to develop relationships with real-estate agents and generally work hard scouring real estate sites and putting in solid offers there are always discounts to be had.
Every investor sees properties and areas through a different set of filters. The great NZ Real Estate mogul Bob Jones. He will look at a building or a site very differently to you and I.
We should constantly be challenging ourselves to improve our filtering process. Then we can make faster decisions on whether to pursue the deal or turn it down, better value decisions and most importantly better purchases.
We only get to do a limited number of deals in our lifetimes. A really bad one can set us back decades but consistent good deals will create you massive wealth.
Remember finding great property deals takes time and patience so keep persevering.
I have been a property investor for over 13 years and have created a multi-million dollar portfolio including residential and commercial. I could go on about this but I’m not here to impress you but to impress upon you that YOU TOO can create wealth through property whether that be $100K or $5 million. I've been through the boom - bust - boom so I know what it takes to stay in the market. I live locally in Otahuhu with my wife and new baby boy. I love to help and teach people about buying well and for long term. We can all make a quick buck but the real strategy is creating long term wealth.
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