Top property-buying tactics for savvy investors in a booming market

There’s simply more demand than there is supply.

With property markets tipped to increase further amid strong migration, stable economic conditions and profit-taking from the sharemarket into property, buyers will need to pull out all the tricks in the book to secure a good property at a good price in the current market.

I regularly work with clients purchasing property as part of their overall wealth creation strategy. In the countless property transactions I have been involved in, there are certain things that I observe savvy property investors do better than the average property buyer.

As that saying goes: “You make your money when you buy, not when you sell.”

Savvy investors strive to buy a property for less than any other comparable property over the past 12 months. That’s easy to do in a slow market, but much harder to do in a highly competitive market.

And if you are not sure what a property is worth, try benchmarking prices. Create a list of similar properties that have sold within a 2km radius over the past two years and sort by price. See where the property you are interested in fits on the spectrum and you will get a good indication on estimated value.

It is also important to look for skeletons in the closet when buying property. If it’s an apartment, make sure you pay for a strata review and scrutinise the financials.

Is there a healthy balance in the sinking fund? Are there any unfunded special levies on the horizon? Is there anything else from the minutes of concern?

If you are looking at a house, is there a sewer main that runs through the middle of the backyard that prohibits future development such as a granny flat construction, or is it in an environmental zone, which would add significant cost to any future building works?

Understanding the ownership history and usage of the property is important for buyers too. A property that was owned by the same family for 40 years is likely to be in a much better condition than a property that was used as a long-term rental.

Top property buyers also understand the seller’s motivation and use it to their advantage. It may sound cruel and heartless, but sales that occur due to death, divorce, financial stress or ill health tend to favour the buyer as the property needs to be sold.

In a flat or falling market, this can result in a significant discount for the buyer, but in strong markets like what we are experiencing now, there is less chance to snap up a bargain due to the high level of competition from other buyers bidding the prices up.

When it comes to the physical property itself, the aspect matters. The sun rises in the east and sets in the west, and north to rear properties are generally the most desired. Visit the property at different times of the day to see how the natural light hits each room. This is important for liveability but also to pre-empt any dampness and mould issues.

Do not rely on the written building and pest report and instead place more emphasis on a conversation with the building and pest inspector. The physical report is full of disclaimers. However, over the phone the building and pest inspector will usually be more candid with regard to the true condition of the property and their honest thoughts and opinions.

Also consider trends such as changes to school catchment rankings. In my local area property prices have gone through the roof due to the academic rankings of the local public high school improving dramatically in recent years.

Families have gravitated to the area in order to send their children to a top-performing, government-funded local high school, and property prices have benefited.

Lastly, use contract conditions to make your offer stand out above other buyers without having to offer more money. Seek legal advice on the implications, but are you willing to release the deposit to the vendor who may really appreciate this if they are buying another property concurrently?

Can you offer a settlement period that better suits the vendor, which may be longer or shorter than usual depending on their circumstances? Are you in a position to waive the cooling-off period, which provides the vendor with greater comfort that you cannot back out of the deal if they accept your offer.

And when dealing with real estate agents, Sydney-based buyers agent Judy Ayoub from Advocate Buyers Agency says there’s five things that will put you in a better position to secure the property.

1. Be quick. Make sure you are ready to buy, have your finance (pre-approval) ready and select your conveyancer before you start looking, so you can move quickly on properties and make an offer to the real estate agent.

2. Be kind and respectful to selling agents. Although they represent the vendor, you will be more favoured as a buyer if you are courteous.

3. Be direct. If you are interested in the property, don’t play games. Let the selling agent know you are serious and ready to buy although do not give out your top budget.

4. Be the best offer. A well-structured flexible offer can get you on the top of the list. Ensure you include the price, deposit amount and any conditions.

5. Be strategic. Ask smart questions to help you gauge where the other offers are at. “Will this amount get me to the top of the list?”

This article first appeared in The Australian as Top property buying tactics for savvy investors in a booming market

James Gerrard is principal and director of financial planning firm www.financialadvisor.com.au