What does it mean to buy at the right price?
Do
you know what the prevailing prices are in the area you are targeting
to invest in? Do you know if that is the right price for you to buy a
property, at that rate in this time? Or by how much can a Seller revise
his price if you bargain? Once you have determined how much you can
afford for a property, you can start the hunt. Before making a buying
decision, it is essential that you know how much the property is worth
and its comparables by checking market prices in the area to make sure
you are not paying above market, but securing it at the right price.
Buying right will mean your property is well placed to appreciate in
value in the years to come.
Here are some tips to help you make the best decision:
- Never pay for potential alone. Pay true value now, then realise the potential and pocket your profits.
- Avoid
property with major structural defects unless you have the expertise to
rectify them at a very reasonable rate. Always check the property out
first. You are looking for potential that can be realised with minor
improvements (a coat of paint, new fence, gardens, etc)
- Get
in touch with the local estate agents to ask them about vacancy factors
and rents in the area you are looking at investing. They do know better
than anyone.
- Find
out asking prices and selling prices (transacted prices) of properties
in the area. There is always a difference between the two. Properties
being advertised for sale are usually asking prices. In most instances,
asking prices are higher than transacted prices. The local estate agent
will be familiar with these figures. If you are not completely certain
of values, you can always approach a Valuer to carry out a Valuation.
- An
investor friend of mine shared with me an interesting tip. I quote:
“Look for the worst property in the best street.”
- Check
with your friendly Banker/Valuer on the property value before you
invest. Their values are usually based on transacted prices, which
serve as good guideline for you to justify your offer to purchase.
- Wherever
possible negotiate with the vendor. Get advice from the Estate Agent
before making your offer and use their service to present your offer to
the Vendor. There are always advantages in getting a professional to do
the work than to do it directly most of the time.
- Make your offer an odd amount-it makes it look like you have a valid reason for the price.
- If your offer is rejected by the Vendor, ask for a counter offer.
Tips to make sure the purchase price is right:
Recognise that housing markets are local
Property prices are very different in different areas. In addition,
demand will change depending on the price range and even the
neighbourhood. You need to know the demand for property in the area and
look for comparables for similar properties. Study asking prices and
transacted prices from as far back as a year, six months ago, three
months ago and currently, and also how long properties are being put in
the market for sale before they are actually sold. This is to ascertain
if there is a shift in the market.
Analyze who is buying and selling in the area you are looking at investing; assess the market you plan to invest in
What’s your competition? Who are the buyers, and tenants? How has the
area been performing over the years? If it is a new location, what are
the factors that contribute to the potential capital appreciation of
the property? Are there new proposed highways and amenities to spur the
neighbourhood?
Ask the local Real Estate Agent
Interview your local Real Estate Agents, ask them about asking prices
of properties in the area, transacted prices, vacancy rates and
absorption rates (how fast similar properties are being transacted from
being put in the market for sale). These are very useful information
before making your decision.
Getting the right price
The
right price is relative. To some investors, the right price would be
based on a certain percentage on the Return on Investment of the
property while others would top a little extra for its potential, and
still others on their personal wants. Whichever the case, necessary
homework and research must be done before investing.
Chan
Ai Cheng is general manager of S.K. Brothers Realty (M) Sdn Bhd and a
registered real estate agent with the Board of Valuers, Appraisers and
Estate Agents Malaysia; a member of the Malaysian Institute of Estate
Agents (MIEA); a member of the Institution of Surveyors Malaysia (ISM),
and a registered Financial Consultant with the International
Association of Registered Financial Consultants (IARFC). If you have a
question or suggestion on property investment, or feedback on this
article, please write to aicheng@skbrothers.com
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