Auction or Private Sale

hi, I am looking for my 1st IP. Just wondering what is the best way of buying it.

Auction (at least I know the competition and what the market wants)

OR

Private Sale (how do I know that I won’t be paying to much?)

Suggestions please

Regards,

Ben

 

I would suggest that the method of buying would rank about 1,748th on the list of factors to take into account when selecting what IP to buy.

Who cares how you buy it - its the quality and price of the property that you should be focusing your time on!

 

Thanks for the reply. I am new to property inspecting so I guess I don’t want to pay too much for my investment.

The reason I ask because I attended couple of auctions, and I can tell what the market is willing to pay for the property. I also read couple books that suggest is not ideal to purchase IP through auction as we are paying what the seller wants.

I tried to make a decent offer on a passed in lot but the agent wanted money way beyond the highest offer during the auction, hence the reason I ask.

 

Whereabouts are you wanting to buy?

 

Looking around Ringwood East, Croydon and surrounding

 

Thanks @The Y-man . When I tried to negotiate with the REA he claims he has an offer that beyond the passed in price. Maybe it’s just a bluff or someone fall in love with that property but could not go to auction as the weather was terrible hence willing to pay 50k more than the passed in offer (sounds unlikely)

 

Really ? It ranked 1,749th for me

 

Really!!

As a buyer, it is not even on my list.

As a seller, that is a totally different matter.

 

Based on what we’re seeing, there are no bargains in Melbourne or Geelong at the moment. If something looks cheap, there’s a problem. Method of purchase makes no difference to price. And navigating the real estate agent’s playbook is just part of the game.

 

There's couple of things I picked up on based on OP description
1. He's inexperience. If I can pick it up, so is the REA.
2. Cautious. A good thing to have especially you are heading into a muddy water of property investment.

The fact that the property were passed in and offered a 50K more and still not accepted means either the REA is playing tricks OR the Vendor is as explained by Y-Man.
My advise is, tell the REA your budget be it higher or lower from the 50K and tell him/her that you are ready to buy if it agreeable by vendor. Politely hangup.

monitor the property but don't put massive hope on it. If it's still on the market, you have your answer, if the REA calls you - then you know whose the crook here.

With regard to finding property prices, there are plenty of free resources on internet that many dreamt of before the advent of free internet. Try Onthehouse.com.au for a start. If you have REA friends, they have access to rpdata or pricefinder, they can also give you good indication as well as how long specific property was on the market and if the prices have changed in the last X days etc

 

Thank you @ZhenLegend first thing is always the hardest

 

Spot on Kate I indeed try to secure a bargain

 

I think Bargain here refers to buying under market value. In our quest, we did found a few but often are distressed property, looking for quick settlement for cash. Though many of them were to do with dev running short on their cash or mis-calculating their feaso.

Most single property are really pretty market value, but many are now sliding with auction rates dropping.

 

There are two main things to keep in mind:

1) what is the value of the property? If ppor i might go over. If not i offer what i think its worth or lower. Just because someone else falls in love with it doesnt mean you should. Bargains either have lots of problems or are bargains only because the market is bad.

2) always be prepared to walk away. That might mean missing out. If you miss out too often, revisit 1.

 

The highest bid on auction actually way beyond the estimated price from RP and the bank self generated estimate, hence I was thinking hmm... not bad maybe market start colony down, but as@The Y-man said, the Vendor isn’t in hurry to sell, and I don’t want to pay too much.

 

If you want to be an astute investor due diligence is what you need to master. I would avoid auctions for that reason as it does not allow you the time to do a proper assessment and can get expensive if you are paying for pest and building inspections without knowing if you will be the successful bidder. I would spend a good amount of time reading this forum and books on property investing and really understanding what buying an investment property entails. What options you have, what are your goals etc. Learn also about lending structures... basically learn from the experts before you do anything! Some mistakes a lot of people make can be very costly and to avoid them you just have to know what you are doing and have the right people to advise you.

If you know which area you want to buy in, you can start by looking at lots of properties in that area and attending auctions, inspections and getting a feel for the market. Research properties recently sold in that suburb.

 

Thanks @pinewood for sharing your insights. My current amateur strategy is to buy an IP in a good location, ready to be rented and with fair size of land for future opportunities. The only problem with this is, most of them are auctioned rather than sold privately.