- How Much Money Is Needed To Invest In Rental Property?
- Should A Real Estate Investor Get An Agent’s License?
- 5 Big Factors That Affect The Costs Of Renovating Your Home
- SIBOR Hike – What You Can Do With Your Current Loan
- 6 Basic Don’ts Of Real Estate Negotiation Tactics
- Will New Condo Relaunches Trigger The Great Property Sale We Have All Been Waiting For?
- 10 Proximity Amenities That Add Value To Real Estate
- How To Get Personal Loans More Easily With Good Credit
5 Laws Of Investment Property Hunting
Many people say that property investment are meant for those with too much time in their hands. How does anyone find time to view properties everyday, negotiate deals, and travel around all the time? Well this is only half true. For beginners who might take a very hands-on approach, it can be a very tiring process indeed to invest in properties. But for investors who have made it a habit out of buying properties, the process of property hunting is systematized to stream line workflow so that the hunt will be as hassle-free and efficient as possible. Follow the 5 laws of investment property hunting.
Law #1: Clearly define what properties you want and the type of sellers you are looking for
There are so many types of properties around. You can easily get overwhelmed just by taking an interest at anything that looks like a good buy. There are countless pros and cons between completed and under construction properties. There are many different things you can do and cannot do between residential and commercial properties. And what about differences between an apartment and a building? You simply cannot take a look at everything even if you stay awake 24 hours a day.
To manage information overload, clearly define what type of properties you are looking for. Decide on 2 or 3 types. Pick the types that you are most comfortable and knowledgeable with. There is not 1 particular type that has the best deals. All kinds of properties have good buys.
10 category filters you can use to help narrow down your choices:
- Residential, commercial or industrial
- Completed or under construction property
- Landed property or apartment
- Town area, outskirts or heartlands (CCR, OCR, RCR)
- Purchase price
- Types of tenants you are targeting
- Within how much distance to amenities like MRT station and schools
- Freehold, 999 years or 99 years leasehold
- Minimum market rental rates
- Seller is owner or investor
You will have mastered the skill of screening once you have the ability to immediately decide whether a potential deal is a “Yes” or “No”. Properties either meet or do not meet the criteria you have set. There is no “Maybe”.
Law #2 – It is always better to walk away from a good deal than to buy into a bad one
Remind yourself that you are looking for properties to buy. You are a logical investor. Not an emotional buyer. Be very clear that numbers are all that matters. A great view of the ocean will mean nothing to you if the investment yield does not meet your numbers.
Have fun on your hunting activities and never get complacent due to too many choices or get frustrated due to too little. Refer to law #1 – either a property meets your criteria or it does not. If you go about investing with logic, you fully limit yourself from exposure of paying over the market.
Always enter into any negotiation with the mindset that the seller is trying to pull a fast one. You will be correct most of the time. Properties in the newspapers are just text listings. None of them are properties until they pass your criteria. You just window shopping without not intention to buy.. yet. Having this mindset will help you approach any negotiation fully knowing that you have the open option to walk away. How this ability can swing discussions has been documented in negotiation training for as long as anyone can remember.
Also remember that you would not buy a shirt with loose threads. So if the seller is not the type of seller you are looking for, feel free to walk away from the deal. You will of course make what you think is a fair offer with no room for negotiation before leaving. Turning around to negotiate when the seller is not willing to meet your price is just wasting time. You are not going to commit to a deal that does not meet your criteria.
A lot of people say that every property buyer is an investor. This cannot be further than the truth. Investors are those who make calculated decisions based on information and numbers with the sole objective of making good returns. Not someone who buys property based on herd mentality or to house their families.
Law #3 – There are 3 types of offers: First offer, last offer, low offer
No one has the ability to time the market by buying at the bottom and sell at the tipping point. So save yourself some headaches by accepting this fact. Being constantly active in the market will give you the biggest chance of catching a wave or otherwise. Do not even entertain the thought that if you hold off making your offer, the price will drop in a month or so. Because by next month you will think the exact same thing and wait for another month. A year later, you will have made no offers and prices are now over your budget.
Being the first person to make an offer has it’s advantages. You represent the chance for the seller to make a quick sale without the tiring process of negotiating with 10 other buyers. The seller will also have no idea how other buyers value their property which could be much higher than you.
Have you ever received flyers in your mailbox from property agents asking if you would like to sell your property? Well we keep receiving these flyers simply because these methods work in finding sellers. This means that a lot of sellers actually have no idea that they are sellers until a buyer with a concrete offer comes along. You can either do your own marketing for leads or build your relationship with property agents.
Being the last offer also has benefits. If indeed you have the opportunity to be the last to make an offer, it is very likely the case that there are no serious buyers around. You will now represent the last chance the seller has to let go of the property. If a seller is desperate,he will be more than willing to compromise at this point. Judge the situation and make your offer.
A low offer is made typically when you have actually made your way to a stage where you have done your research on the property and it does not meet your criteria. You are going to walk away. But it does not hurt to make an obscene offer in case a miracle occurs. They occur more often than you think.
Law #4 – There is no one-shot-one-kill
You cannot go into property investing holding a sniper rifle. Even Warren Buffet have his wrong picks. You have to approach this with a general purpose machine gun. View as many as those that meet your strict criteria. When you do this correctly, you will soon find that there are more good deals available than you have money for.
The more properties you view, the more agents you meet, and the more sellers you negotiate with. You will become a machine pretty soon. This also widens you chances of unearthing a killer deal. You may start off viewing 15 properties before finding one that is worth making an offer. But once you get enough experience screening potential buys, you will be able to better identify which properties are worth looking at and what is simply not worth your time.
Don’t let property agents and sellers pressure you into making an offer. You are making a million dollar decision and it makes no sense to buy on impulse like an energy bar at the supermarket cashier. Go through your proper screening and decide whether to make an offer on your own time and terms.
Law #5 – Set up systems
You have to take steps to systematize your property screening activities. There are definitely processes where you have to exercise your brain. But before you have to even get there, a potential property has to meet all your specified criteria to deserve your personal attention.
Target a specific number of listing directories to go through each week. Set a number of property viewing to go to each week. Set aside a specif amount of time to conduct each activity. Track and follow up on your leads systematically like using email blast of SMS blast. Monitor your activities and keep to your schedule diligently. It will be worth the effort if all these activities nail you one killer deal.
As you immense yourself into the property market systematically, everything will become easier and easier in no time.