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Question to ask when buying a property | Renovating Made Easy

5 key questions to ask when searching for an investment property

I used to be very scared when searching for a potential investment property.  Paralysing questions would circumnavigate my head.  How do I know I haven’t missed anything?  If it’s such a good deal then why hasn’t it been snapped up already?  Why would a vendor accept a low offer from me?  On and on and round and round they’d go.

When I realised that my self-sabotaging questions were holding me back, I formed a new set of questions that enabled me to move forward positively in my investment journey.  And I’d love to share them with you.

Real estate agents are your best friends when purchasing a property.  Of course, they are working for the vendor so they may not be willing to divulge everything.  However, by having a friendly chat with your key questions in mind, you’ll be surprised how much you can learn and how much this will benefit you.

1.  Why is the vendor selling?

Knowing a vendor’s reasons for selling will place you in the strongest position when writing your offer.  Here are some tips on using this knowledge.

  • Relocating – If the vendor has already committed elsewhere, they are likely to be after a quick sale.  Offer a short settlement period in your terms and conditions.  This will appeal to the vendor’s desire to move into their new home without delay.
  • Upgrading – Who wouldn’t be excited about moving onto bigger and better things?  If the vendor is upgrading they are excited about their new home and will not want the hassle of fixing maintenance items in the old one. Offer a low price while pointing out items that need attention.  Accepting a lower sale price will look more appealing to this vendor than a list of items that need fixing.
  • Troublesome tenants – If the vendor is an investor who is experiencing tenant trouble they will be keen for the problem to “go away”.  Make a low offer with a quick settlement period to create a win/win for you and the vendor.
  • Deceased estate – If there are multiple beneficiaries, try making a low offer. Tying up legal loose ends may well be more appealing to a group of beneficiaries than quibbling over a slightly reduced portion of the end sale.
  • Down-sizing – The vendor might be selling their much loved family home.  Stating your intention to breathe fresh family life into the home will allow your offer to be more warmly received.

2.  How long has the property been on the market?

If you have been following the property market in your target area you should know exactly how long a property has been on the market.  However, it is still worth asking this question to gain further insight.

The property may appear to be new to the market but may have been offered for sale months earlier without success.   Or it may be advertised as “new to market” when in fact the sales campaign has merely been taken over by a new real estate agent.

There is a perception amongst vendors that the first offer is often the best.  Know your numbers, get in first and you are likely to be rewarded.

Conversely, desperation starts to creep into a seller’s psyche if the property has been languishing for too long.  If this is the case, write your terms of sale to suit you – whether that be a lower purchase price, a longer settlement period or addressing property maintenance issues before settlement.

Assuming you have asked the first question and understand why the vendor is selling, knowing how long a property has been on the market strengthens your position when placing your offer.

3.  Has the vendor received any offers?

Obviously, if no offers have been presented already, you are well placed if you are the first.

However, if offers have been received, and the property is not yet sold, finding out more will provide valuable insight that will help you immensely.

  • Offer rejected by vendor –  the vendor may not be willing to budge on price so you probably can’t make a low offer.  Try offering terms to suit you instead.
  • Finance not approved –  the bank may have valued the property lower than the offered purchase price so delve a little deeper into reasons why.
  • Structural report showed items requiring attention – will point out areas where you may need to budget for hidden costs.

4.  How old is the property?

Finding out the property’s age will open your mind to many considerations when estimating your profit on a renovation.

  • Was it built in the 1950’s, 60’s or 70’s when lead and asbestos were used extensively?  Asbestos removal can be expensive so make sure to factor that into your figures.
  • Is there any heritage listing on the property that could restrict your planned improvements?
  • Is the property more than twenty years old?  Remember to check for wood rot, rising damp, termite damage, salt attack and cracking in your initial inspection.
5.  If this property were renovated similar to… (the renovated house around the corner) how much do you think it might fetch?

Naturally, you will have done your due diligence but it is also worth asking the agent, the one on the ground, for their opinion on an expected re-sale price.

This will either confirm or contradict your own estimates and provide you with the confidence to proceed with the purchase.

How this worked for me

Last year, after building a genuine relationship with a real estate agent in my target area, I was first to know that a renovatable property had just been listed.

By asking my questions, I discovered:-

  • the vendor was after a quick sale as they lived interstate and had troublesome tenants.
  • The property was new to the market and the tenants would not allow anyone into the home.
  • The property was 20 years old and screaming out for a cosmetic renovation.
  • I needed to pare back my original renovation plans once the agent advised me of the projected end re-sale price.

This knowledge worked in my favour when I made a low offer with a quick settlement (making the investors’ problem “go away”), scaled back my renovation ideas to suit the re-sale market, completed the renovation in four weeks and sold the property for a $37,000 net profit.  Happy days.

Why will the agent love you?

In my experience, agents love intelligent property investors who understand the market as well as they do.

Besides, by treating them as “an expert” in the field, they will feel their time and expertise are valued.  Everyone needs to feel appreciated every so often, don’t you think?

By doing this you will find that the agent is more willing to present your offer, even if your terms are a little out of the ordinary.  And you will be first in their mind when the next perfect property becomes available.

What now?

1.  Find three properties that fit your investment criteria.

2.  Ring all three selling agents now.

3.  Be genuine and start asking questions.

4.  Comment below and let me know how you went…