There is a fine line between finding and snapping up an investment property bargain and buying a lemon. If a property is selling cheap, there is usually a pretty good reason why. Sadly, some things can really be too good to be true, and it is not always obvious to the inexperienced eye. This can be a costly trap for new homebuyers or someone buying their first investment property. So how do you spot the difference between a bargain and a lemon?
Here is the checklist on how to avoid any nasty surprises that can leave a long-lasting bitter taste.
Recognise Red Flags
There are definitely warning signs to look out for when you think you may have found a bargain. Ofter, one or more factors can indicate a property has problems, such as:
Know What Can And Cannot Be Fixed
Some problems are bigger than others. However, in some cases, a property that needs a little work can actually increase the value of your investment. Generally speaking, here is how to know the difference:
What you can fix:
What you cannot fix:
In saying that, some lemons can still make lemonade, and the juice is worth the squeeze. The danger here is that some investors try to compensate on what cant be fixed by over capitalising on what can. It is also worth noting that just because something can be fixed, doesn’t mean it should. For example, a property with structural damage is certainly fixable, but the associated costs could far outweigh the gains. If you decide to purchase an investment property with obvious drawbacks, be sure to research which renovations off the best return on investment.
Research The Area
It is not necessarily about price; it is about getting the most bang for your buck. Therefore, opting for something cheaper may not be in your best long term investment interests. Stretching the budget for a slightly more expensive property in a quality area with higher growth potential could be a smarter option. Do you homework, not just on the property, but the location. Research the average price of similar properties in the area, and what they have that yours does not, or vice versa.
Crunch Your Numbers & Compromise
It is important you know what your financial limits are and work within that budget. If you’re buying a fixer-upper, factor in the cost of renovating the property to market standards and know your deal-breakers. You should begin your investment property search only when you’ve considered all the corners you are prepared to cut and the sacrifices you are willing to make.
Get Expert Advice
Spotting a bargain from a lemon sometimes requires and expert eye. Before signing on the dotted line, seek professional advice from a property or building inspector. An experienced inspector can give you accurate information on the extent of any defects in your property of interest, as well as ballpark repair costs.
Not all cheap properties are lemons. Reasons for under-pricing can be because the owners need an urgent sale or the property is part of a deceased estate. However, savvy investors are always on the hunt for genuine bargains ad often snap them up quick. So the more prior research you do, the better chance you will have of avoiding a costly mistake.
Before you buy, contact Barb Thompson for an honest, independant opinion of what the property could rent for, and a copy of our Management Plan. We’re here to help you achieve your Real Estate goals