Before you start to look at investment properties it’s important to ask yourself a few questions. Work out what your budget it, what your overall investment strategy is and assess your risk profile. Once you have done this you’ll have a solid foundation to work from. You’ll also be ready to start looking for your property.
Finding the right property can be both exciting and overwhelming. Finding out as much information as possible about the property and the location is key to deciding if the property is a suitable investment.
These seven questions are provided as a guide to help you make your agent work for you in the investment process.
1. How long has the property been on the market?
You will get to understand the backstory of the property by knowing how long it has been on the market. Find out what the average number of days is in the area for properties to be on the market to give you some context.
If the property is new to the market then it’s experiencing its prime time. During primetime, the property will likely get the most enquiries and attract the most interest.
If the property has been on the market longer than average for the area then you need to ask why. Ask questions such as:
- Is there something wrong with the property?
- Is it in the wrong location?
- Why has it been for sale for so long?
There are many simple reasons why a property may remain on the market for a while, for example poor publicity or a price that is too high. There are also more serious reasons behind a lengthy stint on the market and it’s important you find out if there are any major issues preventing the property from being sold.
2. What is the zoning?
The zoning of a property can make all the difference especially if sub-division or development is important for your investment. Before you inspect a property do your research and find out the zoning information.
Cross check this with the agent when you see them, a good agent will have all the relevant details about the property including the zoning. They can sometimes be wrong or have been provided with incorrect information so it’s good to know the facts too.
3. Are there any easements on the property?
Again, do your own research in advance to identify any easements on the property. Then ask your agent to check your information matches up. Easements can have a negative impact on any future development so make sure you find out this information in advance of completing the sale.
4. What’s included/ excluded with the sale of the property?
It can be confusing to know what is included and not included with the sale of a property, so ask your agent to clarify the situation. This could have an impact on future expenditures you need to make.
At times the sale won’t include standard such as the washing machine or curtains. On the other hand, the property may come with aspects that are unexpectedly included such as an existing rental agreement or furniture which you don’t want and need to dispose of.
Be clear from the start so that you have all the necessary information to make a more informed decision.
5. Are there any issues with the property?
An agent is trying to sell the property and showcase the benefits and features of the building. As a result, they are unlikely share openly information which may prevent a sale. Don’t be afraid to ask if there are any issues with the property, being direct will encourage the agent to share information they may have.
Some of the issues should be picked up in the inspections. A building inspection will pick up issues such as major movement, cracking to the property or damp. A pest inspection will pick up termite damage. Even so it’s useful to know about these types of issues before you get to the inspection stage to avoid a shock.
More serious issues including chemical contamination or a death or murder at the property could seriously damage the investment potential. These properties are known as stigmatised properties and the disclosure laws around this information vary from state to state.
Essentially doing all you can to find out the history and previous or ongoing issues at the property will help you decide if this property is for you.
6. Do you have comparable sales for the last 6 months?
Comparable sales figures enable you to evaluate the market and the current prices and a good agent will have these figures to hand. Focus on what the properties sold for rather than what properties are on the market for.
If a property is listed at $750,000 it may not be worth this amount and it may not achieve this price on the market.
The agent should share comparable sale prices and provide relevant information about the similarities and differences with each property. There are many factors which influence the price and the agent should explain these to you.
7. How motivated are the vendors to sell?
Finding out the motivations of the vendor from the agent can help you understand the reasons for selling, and inform how you present your offer to get the deal to close.
Asking about the vendor’s motivation starts a conversation about how they are approaching the sale. The vendor may be testing the market and in no hurry to sell or the vendor may be keen for a quick sale to move on elsewhere.
By finding out about the motivations you’ll be building a backstory to inform how you move forwards with your investment. Taking your time to understand the situation can work in your favour.
An example of this is a vendor who is elderly and downsizing, who may find the situation stressful and overwhelming. Indicating in your offer that the vendor can leave any unwanted items behind for you may motivate them to go with your offer over others.
The goal in property sales is to get a satisfactory price for the property, but don’t underestimate the impact of making the process less stressful as this may clinch your deal.
These seven questions will enable you to gather key information about the property. During the building inspection having a Property Inspection Pocket Book on hand will add to your bank of knowledge as you discover more about the properties you may invest in.
The information and links provided on this website are for general information only and should not be taken as constituting professional advice. This information does not take into account the financial situation or particular needs of individual readers. Before making any decisions about matters discussed on this website, you should consider whether it is suitable for you in light of your own circumstances, and seek appropriate advice.