The property market is a complex beast that can chart a steady course or lurch into the unpredictable. You can make all the best plans for your investment future but success really comes down to good timing and smart choices. Being clear and decisive is key. Many buyers can get intimidated in a seller’s market and become reactive rather than reflective. There are some common mistakes that can be avoided however, so before you take the leap, take in these important tips and save yourself time, money and heartache.
1. The One Who Hesitates is Lost
Competition is your enemy in a seller’s market. Too many investors have been caught out by not being prepared and, as a result, missed out on their dream property. If there are more buyers than properties, your pursuit of just the right property could become an exhausting game of cat and mouse. Hesitation is the biggest danger in this situation. Get really specific about what you want to buy so that as soon as you find it you can make an offer immediately. To do this, you should have your finance sorted out – a deposit ready to go and approved loan – and be ready to act immediately with whatever paperwork and inspections that are needed to close the deal. A moment’s hesitation can mean the contract goes to someone else while you’re still making up your mind.
2. Desperation Breeds Impulsiveness
As you ride the time-sapping roller coaster of deciding, making offers, being rejected or changing your mind, it’s easy to start to get discouraged and just want to finalise a purchase on anything. Avoid this at all costs. Even in urgent situations, where your accountant is breathing down your throat, it’s better to find a property that ticks all the investment boxes rather than jump into something that you think ‘you could live in’ but which is in the wrong location from a tenant’s perspective. Additionally, don’t jump into making an offer on a house that you fall in love with at first sight, without doing the background checks and getting the necessary inspections. Remember, if your investment is going to be a financial success, it’s not about you loving it anyway. It must appeal to your target tenants. There will always be auctions where you get outbid, but these are important learning experiences and essential parts of the process that lead you to the investment property you are meant to buy.
3. You Think You Know Better but the Market Always Decides
Researching the property market and understanding the trends is a smart approach, but it’s not the only thing you should do. The Australian property market is relatively stable but even it has its moments. So certainly, apply what you know, but also pay attention to what is going on week to week. Just when you think you have it nailed, something will shift and you may find yourself back at square one. Your safest position is to move forward with a clear idea of what type of investment property you want, how much you want to spend, and what your long-term investment goals are. The property you need is out there, but don’t succumb to the pressure of a seller’s market and try to outbid for what you think is the perfect property. If it’s not in your budget then it’s not perfect. Sometimes the timing is just wrong and if you understand how the market is evolving you can adapt your plans to be able to buy the right property at the right time, even if that is later than you planned.
4. Your Budget is not a Guessing Game
Getting your budget together is a great achievement but the biggest challenge is making sure you can pay for the property today, tomorrow and decades into the future. You can’t predict what will happen in 20 years of course, but you can certainly make a solid plan based on your financial life up until now, and then be in control of how to sustain that to support your investment. Go through all the details of your budget – from coffees and gym memberships to mortgage payments and life insurance. Crunch the numbers and work out where you can save, where you can increase your income and be really honest with yourself about how much you can afford. Twenty-five years is a long time to go without Sunday brunch so consider your lifestyle, decide on what’s important and build your investment budget around that. If you know precisely how much you can afford, you are empowered to bid freely within certain price ranges and will know wisely when to step aside.
5. Don’t Become ‘A Wood Duck’
Hunting for the right investment property is time consuming and frustrating, especially when a large proportion of your weekends will be eaten, for months potentially, while you look around, decide on something, miss out, and get frustrated at the mounting costs of due diligence. Straight after missing out on a property that you thought was ideal is the point at which you’re most in danger of becoming what is know by agents as a ‘wood duck’. This is the frustrated and angry buyer that has just burnt another $1,000 on pest and building inspections, only to see themselves out-bid at auction or gazumped by a more emotional ‘owner occupier’ buyer. That’s when you’re in danger of paying an over-market price just to get a property secured.
There are lots of support options available to help you avoid common mistakes. Investing in property is a big deal and should not be undertaken without a patient and considered approach. Take your time, get prepared and know your game plan inside out. Let your agent know exactly what you want and work together with then to get alerted to listings as soon as they hit the market (or before). Talk with them about what the market is doing – how quickly properties are selling, what competition there might be for the kind if property you’re looking for and where your budget sits in the current asking price for properties on the market. You can also call us to ask for your local First National Real Estate member on 1800 032 332. Or, Google your closest member office and register for Utopia VIP Buyer Alerts via their website and know exactly what’s happening before everyone else does!