Buying first IP

Ok, I'm just going to ask the question, it may be a silly one but here goes;

Can someone please detail how you go about purchasing a property. I mean the actual guts of it.
The reason for my question; been researching and learning hard over the past 4 months, I feel like I know a good amount about the theory of investment but the idea of moving forward, contacting an agent, knowing what to offer, making an offer, negotiating, knowing how to do any of that scares the bejesuz out of me to be honest! Yet I am excellent at buying and selling and cars for example!

I've spoken with MB to firm financial position and have a deadline to purchase by the end of the year (asap), but I am now at the stage of do I go through a BA or just trust in myself and what I have learned along the way to make the right first purchase. (purchasing in Brisbane, so sight unseen)
So I'd like to put the question out there for those experienced investors; could you please share some of your wisdom for this newbie to get the balls to make this happen.

 

If you've been learning a lot over the last 4 months It should be a great start. I'll keep this really simple. After you work out where you want to buy, price bracket (determine finance available from good finance broker), dwelling type, then just jump on to domain and REA and;

1) Look for properties that meet your buying criteria, eg (dwelling type, price range, meets your strategy eg long term hold, add value potential etc)
2) Inspect properties, or get agent, friend etc to inspect for you if your not able to
3)Make lower offers on multiple properties you think meet your buying criteria and wait to get a bite. Do not appear desperate if you want to do well. Stay unemotional. It will come with practice and conscious effort.

I recently recommend 2 negotiating books o the forum I think will be of use. Just do a search.

Good luck mate

 

Thanks, I've got that far already, have a few short listed properties, I was more wondering about the process of making the offers, how low is too low? Is this offer made verbally or in writing? At first contact or is it better to try to develop some lines of communication?

Then what happens? Does the agent negotiate or are all offers presented to the vendor first before negotiations begin?
What happens once you agree on a figure?

I'm sorry if I was wasn't clear in my original question, I've never purchased property before and don't want to be that to be taken advantage of by an agent so just trying to get an understanding of the process and the variations that might present so I'm aware of what to expect.

Thanks, I think I saw your post on the books earlier today, will definitely get onto those.

 

I usually ask the agent what is the vendor is hoping to achieve and also if there are any offers on the table. Agents can often give you some good indication of where you need to be, but just remember that they are working for the seller, not you, so they are wanting to get the most out of you as possible. Don't worry about offering too low, in fact I would recommend probably throwing a few low ball offers around to begin with in order to get a feel for things. All offers must be presented to the vendor, but if it's a really good property you may risk missing out to a higher offer if your offer is too unrealistic. Good luck

 

[QUOT"Gruber, post: 66740, member: 3090"], I was more wondering about the process of making the offers, how low is too low?
This will depend on the market and current demand for the type of property your buying.
I would do the comparable analysis eg if the type of property you want is roughly selling between 450-460k, assuming everything is being equal I would offer probably 380-400k or there abouts, but I would do it on say 5,6,7 similar properties where all are acceptable. They might reject you outright or counter, You can choose to counter back or stand your ground and wait to see how the other offers go. If you do your research you wont be able to be taken advantage of because you will know comparable prices for what has already sold.

Is this offer made verbally or in writing? At first contact or is it better to try to develop some lines of communication? Different states do it differently. In NSW you can make it verbally but usually the agent will want something in writing like in an email to confirm your intention. Whether you make an offer on first contact or not the main thing is not to appear desperate. Once the agent smells that, its all over.
Then what happens? Does the agent negotiate or are all offers presented to the vendor first before negotiations begin?
What happens once you agree on a figure?
In theory the agent should take ALL offers to the vendor but personally I don't think this happens all the time. They will take any offer they think has potential to the vendor imo. Don't forget that price is only 1 thing out of many to negotiate on. If you plan on doing a reno you might want a longer settlement but willing to pay 5k more for example. So don't just focus on price.

, I've never purchased property before and don't want to be that to be taken advantage of by an agent .

1. Never trust an agent.
2. Never believe anything at face value they tell you
3. They wont do what's best for the vendor or you but for themselves. So win the agent over and you increase your chance of success, eg let them know your finance is ready and you definitely are going to buy as long as it meets your criteria. You wont be wasting their time. Agents hate it if they think your gonna be a time waster. Be firm, upfront and 'honest', but not honest, if that makes sense
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Awesome info thanks @Leo2413 one more question about the negotiations for longer settlement, are you saying it's possible to do the reno before you actually settle?

 

If you know the prices in the area your targeting go back and check sale prices and also the vendor discount % to see what they actually sell for. Work out what you think a place "should " sell for then knock a bit more off to get the ball rolling.

 

Do you have a friend (ie someone who has bought properties before) who can sit with you through the process of negotiating with the agent? This will give you confidence in understanding the process. He or she would not make the decision for you but could point out what is really going on and what the options could be. I think if you are able to negotiate car sales you are half way there. Everyone has their own style of negotiating.

Cheers
Charlotte

 

@Gruber

Yes it's possible I have done it before, But it will largely depend on the vendors situation. They may have found another place already so they don't need to be the home physically, or a similar type situation is possible. I like to ask the agent "so what's the story with the settlement period? Would a longer period suit them? Would they be willing to offer X weeks longer with access to the property for an extra 5k?" Obviously don't just blurt it all out in one gulp to the agent. See what he says first if they are willing for a longer period settlement (if this suit you).

If the vendors are actually asking for a longer settlement (which does happen sometimes) let the agent know its not ideal for you at all but you may be flexible. (this allows you to make the concession later to them and lets you ask for something you want (even if a longer settlement suits you). So actually your conceding nothing

Just see how it unfolds and then take it from there. Be flexible but don't go below your bottom line for what is a good deal to you. Those books you bought have good theory that is very practical imo. The rest will come with experience. Good on you mate.

 

Unfortunately not, well at least none that have gone down the investment route, ppl that I know who own property own PPOR in Sydney and I've watched carefully as they have purchased inflated priced property with little market research and really no negotiations on price point, emotional buying mostly. In saying that tho I have learnt some things about how detrimental emotional buying can be!
My husband said the same thing, I'm a gun at vehicle sales and negotiation but it's generally because I know the cars inside and out. I think I'm mainly nervous because I'm buying sight unseen and so feel less in control. This forum is helping enormously and some of questions are very simple but the 'real experience' answers are getting are stoking my confidence, I know once I'm in the process the learning will be 10 fold

 

Cheers @Leo2413 all good advice, appreciate your thoughts.

 

Its different in each state and also differs under different market conditions.

Understand what both the vendors and sales reps motivations are, this will help you go far.

 

You can only do your research on sales of similar properties that you are interested in. Identify your target market so that you are clear on the type of tenant you want to have. Write a list of questions that you need answers to. I find that helps to keep focused. Just do it and see how you go. As you do you learn.

 

Yes in Qld it is certainly possibly to have an "access clause" written into the Contract but we are finding at the moment the market for under valued properties is so strong that either the vendor is not interested or in a position to agree to such a clause (especially if he lives in the property or there are multiple offers on the property and the cleanest contract will prove successful.

Which suburbs in Brisbane are you looking at ?

Cheers


Richard

 

Currently doing more research on 4054, 4021 or south 4077

 

I think people over complicate/think things.

You know the area you want to buy, you have a budget from your MB, you must have an idea of expected rent and cashflow positions from all that and what is acceptable.

Really the only thing to do is get an offer accepted on a property that meets your criteria, have B&P's done and a conveyancer to organise the nitty gritty of contract.

Low balling sounds great but all you really need is a property that meets your criteria. If it is listed at $400k and you think it is worth that and would be a good investment buy it.

 

I have been doing similar over the last 6 months, but I'm a little further along the road right now in going through the purchase now. To be honest, I would not try and set a deadline, because that may lead to some rushed decisions. But if something comes up that meets your criteria then go for it. Just don't expect others not to also be out there right now doing the same

Right now is going to be one of the most competitive to buy, with lots of PPOR buyers out there trying to secure a property and have settlement before xmas. They'll be buying on emotion and thoughts like "this place is perfect, what is an extra $20k over 25 years", etc - but as an investor, yours will be a more logical one. While I have just bought as something came up that met my requirements, I was getting to the point of getting over a few missed offers and the masses, and waiting until the new year.

I found that agents will treat you a little different if they know you are an investor, they'll try and play the emotion card a bit less. Also watch a suburb of interest like a hawk, see how long they take to sell, see the ones that don't (and get your BA's thoughts) and use it accordingly. Check rentals in the same area for similar condition to the place you're buying, and see also how long they take to disappear off the website, and which ones go first. A flight up and a weekend attending OFI's will probably tell you more than anything else about the area/market and save you many more hundred than it costs. Brisbanites are a friendly sort and pretty open with things, just get talking and you'll find out a lot.

So just put in an offer when you find something you like and see what happens. Over time from a few unsuccessful ones you'll learn a little about the market and the process. And if one comes through that "sticks" then congratulations

 

I agree that you do not want have a deadline or rush...

But in saying that.. I did dive into IP1... Learning by doing is great!

I went to 'practice' open homes recently.. I went for a drive in a suburb that I have no interest in... Literally just to practice talking to agents and sussing out what the vendors where after!

Practice makes perfect?

 

Hi Leo,

What happens if more than one offer gets accepted and you are only willing/capable to buy one? I thought contracts are binding, at least in WA unless finance or B&P fails. Interested in QLD specific ways of doing things.

 

You get out of the contract by exercising an escape clause you put into a contract that both parties have signed off on. A couple of which maybe ie subject to your satisfactory inspection, subject to partner approval etc etc.