It goes without saying that the goal of property investors is to secure the best deal possible every time a purchase is made. No one wants to give away more money than necessary and everyone wants to see a smart return of profits.
Questions to ask when analyzing your next investment purchase:
Does the property have subdivision potential or is it going to be re-zoned for higher density? If yes, this is potentially a great investment. Sub-dividing and then selling or developing the additional lots can be very lucrative. However, developing property takes some considerable knowledge and skill, so be prepared if you decide to tackle this task.
Is the property a diamond in the rough? Many properties that appear to be “fixer-uppers” can put off buyers and go unnoticed in the market. If the cosmetic problems are easily fixed, it may be worth investing a little into improved aesthetics for a significant return.
Does the property have a below-market lease in place? Often owners will accept lease terms below market value to secure a high quality corporate tenant or long-term lease. This can impact the value of the property’s re-sale price based on achievable yield in some locations. Buying a property with a below-market lease in place is quite often a great way to secure a good buy. You may have to ride out a number of years at a lower return, however once the lease expires, the rate can return back to market and instant equity is achieved in the property.
When you’re happy that the property meets your specifications, you need to consider how much you would be willing to pay for it and any opportunities that may enable you to lower the price.
Research both the market and the seller. You need to know the amount of buyer interest in the property, how long it has been on the market and what similar properties have sold in the area to establish market value. Just as importantly, you need to know about the seller. What is his or her motivation for selling? Is it urgent? Has the price been lowered in the time it has been on the market?
Flexibility is important. Often, the price is not the only important thing in negotiations. Many sellers will value a fast and unconditional settlement. Ask what other terms are important to the seller, as this may help negotiate a better deal.
Hold your cards close. Keep a poker face and do not let the seller know your position. Instead, let the seller know that although the property may be suitable, you are also considering other properties.
Are there any other ways you use to identify great investment properties?