I shared this in our Facebook Group “Property Addicts Australia”:
“Everything sells in a hot market. The true test is whether the property you are buying, will have resale value in a slow market.”
One of our members asked: “Is the current market hot or slow?”
Australia is not one market.
There are markets within markets, with each at a different stage in its cycle.
Some markets are doing a bit of a catch-up given they may not have grown as much as some other areas.
Rising rents, rental yields are at an all-time high.
Some markets have growth upside over the next decade, attracting more people due to affordability, and livability factors, along with investment in infrastructure.
Add to the mix, the supply has been low. As part of our buyer’s agency services, we have found that big groups attending open homes. There are multiple offer situations.
As such, the rate rises haven’t had an impact on prices for the worse, and in fact, discouraged vendors from holding off from selling (if they don’t have to). This has put an upward pressure on whatever little that is available.
As there is less to go around, the market has been busy.
A busy (and hot) market is exactly the time you need to be extra careful that you don’t end up with a dud property in a dud location which has no resale value.
I get it, at times FOMO kicks in, and when a market is rising, you may have the urge to just jump in buy anything.
Even worse, if you are working with a buyer’s agent, and they convince you to buy a property, with little to no upside, and poor resale value, in a poor location.
I have seen where my finance clients have come to me with a contract of sale for a property, which I said no to for my buyer’s agency clients just weeks prior.
Why? Simply because it wouldn’t meet the Property Twins’ negotiable and non-negotiable criteria.
Additionally, I have seen clients purchase properties in certain locations, just because that location has been ‘popular with buyers’ agents’.
We have our own negotiables and non-negotiables when it comes to buying properties.
As our team scans through hundreds of properties every week, most don’t make the cut. Because we ‘discard’ them.
Everything may look glittery and gold if you have FOMO. You need to select the diamonds in the rough.
In the buyer’s agent circles the phrase ‘below market value’ gets thrown around all the time.
Yes, it is possible to do this from time to time. But you must wonder why would a property be ‘below market value’?
Maybe it has ‘W.A.R.T.S’ which will show up with time. Failure to do the right due diligence means you end up with a dud. I have heard from Property Managers who have clients who sold properties on this premise. Let me tell you, some of these people are incredibly unhappy and unable to get rid of these duds.
In future, such properties will continue being ‘below market value’.
Chances are you may have to sell such a property at lower price than comparable sales. It will always lag. Future buyers may see the downsides, which were not already covered off in your due diligence.
So next time you hear that someone is sourcing a below market value property, question if the due diligence has been completed to a high standard. Are there any downsides or doubts in your mind? Chances are when you come to selling it, your future buyers will raise the same concerns.
So, in a busy / hot market, you have two choices:
- Buy just any property, something which may get you in the market now, but in a slower market and if your circumstances require, you will be unable to sell it with ease. I.e., this won’t have any re-sale value.
- Buy the right property (and pay the right price to buy quality). Even if the market forces were against you, your property will hold value, and if required, you will have buyers for it in any market.
In our buyer’s agency, our goal is to put our clients in front of the queue for the right properties.
We undertake a thorough analysis of each property we purchase for our clients, ensuring that the property has resale value. It’s not groceries you are purchasing, with the wrong property you are putting your financial future at risk.
To speak with our team to discuss your mortgage loan structuring and/or seeking our buyers agency services, schedule a time here: http://meetme.so/propertytwins
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