If you have been to an auction at any point since the dawn of time, you will have heard all about the 3 P’s of buying property…because the auctioneer told you that buying property was all about POSITION, POSITION, POSITION.
So what then are the 2 P’s of buying property? And why are these P’s more important to take into account when you set out to buy a property – whether it is to be a home for you to live or an investment. I believe the 2 most important P’s of buying property are: Preparation & Patience.
Sure, many of us know someone who rocked up at an auction and bought a house on speculation almost sight un-seen and it is now worth 20x (I exaggerate) what they bought it for…but that is pure luck and most of us cannot afford to take such a punt with our precious savings. For one thing, for every such triumph there are at least as many stories of tragedy and failure from such decision making.
Secondly, in a property market where prices are rising rapidly and consistently this strategy would probably work with almost any property…but we are no longer enjoying these conditions. Property prices are all over the place. Prices in some areas are falling, elsewhere they are steady and then in some instances they are still growing. It is not a market in which to easily find sense at present.
So in such conditions, I recommend Preparation & Patience. But this is not just a mantra to recite to yourself as you stand at auctions or walk through house “opens”…although it will work excellently as one. The 2P’s represent a sound process for your property search.
Preparation
As buying a property will be one of the biggest decisions you are likely to make, treat it accordingly. It is not like deciding what to do on Sat night or even where to go for holidays this year. It is a 5-25 year decision. My grandfather lived at the same address for over 45 years.
I suggest that you probably should not be buying property unless you think you are going to hold it for at least 3 years given the costs to buy (stamp duty, conveyancing etc) and sell (real-estate agents fees, conveyancing etc).
When planning to buy property you need to:
1. Confirm that lenders will give you the money you will need to borrow by obtaining a proper pre-approval (not one you get in 2 mins over the phone).
2. Be sure that you can afford the repayments on the loan you will take out.
3. Take the time to find a product and loan structure that will suit your needs, now and in the future.
4. Identify what you are looking for in a property…think about the following: location (relative to family, friends, schools, shops, public transport), size (internal and external), number of bedrooms/bathrooms/living areas, condition of the property (ready to live in/in need of renovations/ready to knock down and start again)… and work out which property criteria are non-negotiable and which are flexible.
5. Learn to ask the selling agent the right questions (the topic for a whole article in itself).
6. Take the time to look at as many properties as you can in the location you want to live in and in your price range (+/- $100K). Become the “expert” on property prices in your area so you are confident when bidding or negotiating to buy the property what you are prepared to pay for it. Looking at 20 properties is a good start. Bythe time you have looked at 50-100 you will be close to a “local real estate expert”.
Patience
Finding the right property AND successfully purchasing it at a fair market price can take time, effort and a measure of luck. So it really helps to be patient and keep persisting. You might miss out on a few properties along the way, expect that. Try to take it in your stride when it happens. It helps if you can avoid getting emotionally attached to properties you inspect and are interested in.
The shorter the time period you expect to own a property for, the more you need to focus on purchasing a property at or below its market value as you have less time for the property to appreciate in value sufficiently to cover your entry/exit costs. Conversely, if you are buying a property with a 10+ year time frame in mind, paying an extra $10,000 to secure the property is not a big concern provided it is still within your budget.
Be prepared to stop bidding or walk away from negotiations on a property when it reaches your limit for that property. In a buyers market, “walking away” may actually help you to secure the property for a better price if there are no other interested parties.
Some clients are lucky enough to find what they are looking for in a matter of days or weeks while others may take 18 mths-2 years to find the right home and buy it.
Along the way this latter group have ups and downs. Sometimes they stop looking for a period and then return. Through persistence they eventually get there. When they do finally purchase, they end up with a property that really suits their needs and budget. The effort was worth it.
For most people it takes 1-5 months to find and buy the right property. Sometimes people start with unrealistic expectations and then have to work out that they cannot get what they want, where they want it or for the price they want (can afford). Expectations may need to be adjusted but with patience and persistence, the right property will present itself at the right price.
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