Join Australia's most dynamic and respected property investment community

Do you aim for BMV or Market price, Now?

Discussion in 'The Buying & Selling Process' started by Truly Exotic, 16th Oct, 2015.

?

Have you changed your purchasing mindset

  1. no, I always buy BMV regardless of market

    6 vote(s)
    42.9%
  2. yes, I will now be willing to pay market price if im confident of sig growth

    7 vote(s)
    50.0%
  3. yes, Have done market price in the past but now BMV only

    1 vote(s)
    7.1%
  1. Truly Exotic

    Truly Exotic Well-Known Member

    Joined:
    21st Aug, 2015
    Posts:
    225
    Location:
    16.4944° S, 151.7364° W
    Hi ! im sure everyone has benefited and missed out of the recent sydney / melb booms,

    there are properties that I tried to negotiate and got close but ended up not buying,

    I had I even paid market price for them, id be laughing all the way to the bank

    so....poll
     
  2. EN710

    EN710 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,162
    Location:
    NSW
    I don't see reason not to buy market price it that gets the deal through, especially if it's a good property and the number works
     
    Observer and Propertunity like this.
  3. Truly Exotic

    Truly Exotic Well-Known Member

    Joined:
    21st Aug, 2015
    Posts:
    225
    Location:
    16.4944° S, 151.7364° W
    my philosophy has been and still is to buy below market value , this reduces my risk exposure, if the market drops or flattens in the short term, then I can sell with minimal losses,

    however missing out on some CG due to the recent boom has made me rethink
     
  4. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,596
    Location:
    Adelaide, SA
    Every purchase has been BMV and always will be.
     
  5. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,521
    Location:
    Sydney
    How about the option for:
    Have paid market price in the past, but would only pay BMV in future.

    I'd guess many new investors pay market or above when starting, but as they get more experienced, seek out only BMV deals.
     
  6. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,279
    Location:
    Sydney
    I don't believe BMV exists.
    A property is worth what someone is willing to pay.
     
  7. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,521
    Location:
    Sydney
    One person does not make the market.
     
  8. silverman47

    silverman47 Member

    Joined:
    23rd Jul, 2015
    Posts:
    12
    Location:
    Sydney
    All depends on which market you are talking about? Different markets require different strategies. When a market changes ie. the Sydney market recently, you have 2 options, change your strategy and continue buying in the same market or use the same strategy but choose a different market. ie. QLD.
     
  9. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,279
    Location:
    Sydney
    One person does not make the market, but there is only ever 1 buyer for 1 property.
    There is never an identical property, there will always be differences, whether it be one level up or down or different facing aspects (eg North east vs south east).

    That said I do believe in buying a property with the view of manufacturing capital growth - whether it be fully reno, extensions, lick of paint, updating garden etc.

    The term BMV is used by spruikers too widely these days and implies you can by a property for $X and sell it the next day for $x + $50k without lifting a finger.

    Hence why i say BMV does not exist and the value you pay is simply what someone believes its worth.
     
    juzzy likes this.
  10. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,521
    Location:
    Sydney
    Not all properties are advertised for sale publicly.
    You can ask your next door neighbour who you get along really well with if he'll sell you his property for $600k, quick sale.
    Maybe he's got some new plans and figures, yeah, why not, good timing.
    If his property is worth $650k on the open market, is this not a below market value purchase?
     
  11. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,596
    Location:
    Adelaide, SA
    https://propertychat.com.au/community/threads/real-life-example-of-buying-under-market-value.2908/ So in this thread, where the bank was willing to do a reval day after settlement for 30k more, do you think it was bought BMV or are you of the belief that bank revals are above BMV?
     
  12. tess_

    tess_ Active Member

    Joined:
    21st Jun, 2015
    Posts:
    44
    Location:
    Sydney
    I bought at auction in mid last year as Sydney was heating up. We battled it out at auction for our PPOR and ended up paying exactly on our limit (which was a bit above what we thought it was worth). The valuation came in under too. However I have never regretted paying what we did for our PPOR as we knew the area was heating up, and not paying that extra $20k would have seen us lose about quite a bit in CG...
     
    Last edited: 16th Oct, 2015
    wylie and MsAli like this.
  13. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,279
    Location:
    Sydney
    From what I've read from other brokers posts, banks will only ever place the value at contract price.

    So in this case, 1 day after settlement you were able to get a valuation done and it came in at 30k more? Would have thought you would have to wait a little longer than that.

    Btw, I would consider this a case of manufacturing growth as you did fix the hotwater system and patch it up. The other guy was only willing to offer $135k. The vendor was super happy you offered $147k. You made this a win win situation for all parties, you price you offered was fair in light of what was required. What it cost you to fix is not part of the equation for the seller or others.

    Reading through that thread you said so yourself (in response to some other comment).

    "Not everyone has the skill to identify or the means / personnel to implement"

    That in my opinion is the value add. Different to BMV.

    I've got a few scenarios others might consider to be BMV, but i still don't because work had to be done. While the cost of works was minimal, the value add was greater.

    Eg. Bought duplex in Sydney for $475k. Other side of duplex for $555k before settlement was even completed.

    Truth, the duplex was run down and not taken care of. Kitchen had to be ripped out and redone. Market also had not fully picked up yet. It was market value at the time of purchase. My analysis was that the market was picking up hence the push to secure the deal. Total cost of works was 25k, - new kitchen, new tiles bottom floor, new carpet top floor. Brought it to a standard beyond what next door was (next door was original but well maintained). Subsequent sales in the estate for similar properties started from $600k with the highest at $770k over the next 18 months, but that was just Sydney growth.

    I simply refer to these as understanding your market and buying well. Not buying below market value.
     
    Last edited: 16th Oct, 2015
  14. Fargo

    Fargo Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    234
    Location:
    Vic
    Markets are irrational. I don't take much notice of the market. I have seen the market let good properties slip by, and pay too much for other property. I buy a property on its merits and whats its worth to me, not on what it may or may not be worth to some-one else at a particular point in time. I have paid above market price for 3 properties, to insure securing them. The last one grosses 9% yeld and puts money in my pocket. One I was told I paid too much for one , but paying 90k for it instead of 60k was insignificant when I sold it for 380k 20 years later to the guy who told me I paid to much for it.
     
  15. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,107
    Location:
    Melbourne, Nationwide
    Possible but unlikely. The price you paid for the property has a significant influence on valuations shortly afterwards. Valuers will see what you paid for it and use that as a reference point.

    My observation is that most people pay a fair value for their purchases. It's rare that I've seen someone pay well below the market, even though many think they have. The valuations I see often have reasonably solid comparable sales included which support the price that was paid.
     
  16. Simon L

    Simon L Investment Property Buyers Agent Business Member

    Joined:
    18th Jun, 2015
    Posts:
    186
    Location:
    Sydney, Brisbane
    I have had one property recently where the bank val came in higher than the purchase price

    Even a property that's 'run-down' in an area or less desirable has a market value that may be lower than the suburb median. If you are purchasing below the market value for that individual property, under whatever circumstances, that is buying below market value.
     
    Sam Yue likes this.
  17. Truly Exotic

    Truly Exotic Well-Known Member

    Joined:
    21st Aug, 2015
    Posts:
    225
    Location:
    16.4944° S, 151.7364° W
    thats a tough one in my mind

    if someone offered you a $100 note for $50, to me thats $50 BMV, since I could sell it for $100 the next day

    so what do you do if its a old $100 note that for example isnt accepted at 99.9% of the stores, then what is the MV.

    for me , I put MV at what ever it would sell at in a reasonable time frame

    Doneski!!
     
  18. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,279
    Location:
    Sydney
    Not sure if that's quite the same.

    Can one buy shares at "Below Market Value"? In my opinion you can't because the price you bought it for is the market price.

    That said, you can buy below "Fair Value", however fair value is merely someone (including your own) interpretation of what it is worth based on all the other variables around it.

    For me, I would accept something to be "Below Market Value" if I was able to secure a property at $500k price, then within a week the vendor has an offer of $510k and are now asking me if I would allow them to rescind the contract and they would pay me $5k - this is because all other variables have remained the same and I have others bidding more on an item that now is legally mine.

    Another example could be a silent auction where the owner is given multiple offers (all with the same conditions), but picks Person A (who offers $500k) over Person B (who offers $510k) simply because they wanted to.

    Another example, could be i buy property which i know has been rezoned and worth more than what is advertised. I could buy knowing that I have another buyer lined up within the week that I can sell it for way more and i haven't needed to do anything.
     
  19. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,521
    Location:
    Sydney
    I believe you can.
    How about those scamsters preying on little old pensioners where they send them an official looking letter to buy out their shares at a fraction of market price.
    The poor old people have no idea and sign the papers giving the shares to the scamsters at a fraction of market price.
     
    Truly Exotic and neK like this.
  20. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,279
    Location:
    Sydney
    Good point Ace.
    How would that work for property though in an open market (ie through an agent)?