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 firstname.lastname@example.org