Do You Buy in a Hot Market? – Absolutely!

Investors often ask us if now is the right time to buy or should they wait for the market to cool down. Will the prices come back a bit and the competition die down. The press fuels a lot of this questioning. Obviously a journalist will not write about a sideways market or anything that does not have a catchy headline.

So how do we as buyer agents see the market in relation to speculation? What we do is to isolate properties that potentially will sell for much higher prices than a valuation and steer clear of them. These anomalies do happen occasionally and it is exactly these properties that people hear about in the news.

For every property that appears in the news, there are many others that are selling at normal prices.

Be in control

Do not enter a negotiation unless you have done your entire due diligence. Primary to this is a valuation. Keep in mind that valuations and property price are NOT exact sciences. Knowing the range of your valuation gives you a higher level of control. In many instances the vendor may not be aware of the valuation and their expectation of sale price could actually be lower. This does not mean that you will offer what they want just because their asking price is lower than the valuation.

Demographics

Buy in areas that have low supply and high demand. Yes this means you will be paying a higher price but what you are paying for is a more consistent long-term growth. The positive side to this is that vacancy rates with be lower as well.

Reasonable Vendors

In every suburb you are looking to buy in, the attitude of vendors will differ vastly. It is up to you, the buyer to make sure you are NOT buying emotionally. Similar properties in similar style buildings in one location will for the most part preform in a similar fashion over the long-term.

Pay enough to buy the property

Sometimes you will be faced with a situation where the vendor will come back with a counter offer that is a few thousand dollars more than you offered and a bit more than an offer by another buyer. Don’t say no until you have looked at the numbers. Is it within your valuation range and can you afford it?

Off Market Properties

We are still being shown, and buying many off market properties. There are still vendors whom, for what ever reason, still need to sell without a public campaign. The positives of this are that the property is exposed to far less buyers and the negotiations tend to be more controlled.

Long-term mentality

5 years ago I bought a property that was under instructions by the vendor to sell by COB Friday night. My due diligence said I could comfortably go up to $720,000. My approach in this case was to go to the agent’s office 15 minutes before COB with my client. As much as I wanted to get the lowest possible price for the client, we also did not want to loose the property. Basically I kept offering amounts in small increments of $3,000.00 until he agreed this was the highest offer and we exchanged straight away. We paid $665,000. The valuation today is in the early to mid $900,000’s 5 years later.

Given the facts above and looking at the long-term plan, would I have made a big mistake not to pay an extra $5,000 or $10,000 more?

In this type of so-called “hot” market there is not need to stop building your property portfolio.

Share this post