Monthly Archives: February 2014

Real Estate Poker

There is another buyer…

Competition increases value. Agents know it, and they use it to achieve a better price. That’s their job after all.

What is harrowing as a buyer is trying to work out the legitimacy of the agents often made claim that “there is another buyer”.

As a buyer, if you swallow the “we have another buyer” message hook, line and sinker, it can cause you to react irrationally and potentially overpay. To dismiss the threat entirely can cause you to miss out on your dream home.

In a strong market, buyer competition is expected. There is little doubt that you will need to produce the goods in a timely fashion to secure your new abode. The reverse is often expected in a soft market.

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Experts Split, Confusion Reigns

The property market always seems to evoke strong and conflicting responses from the experts. Some economists and pundits have been tipping Australian house prices to drop for the past decade or more.

The resilience has baffled many market pessimists with US Demographer Harry Dent the latest to predict a catastrophic collapse of up to 50% in Australian house prices.

Counter that with renowned local analyst Louis Christopher of Sqm Research who forecasts 20% growth in the Sydney market in 2014. It would seem that one of these experts has it seriously wrong.

Depending on whom you believe, now is the best time to sell up and exit the real estate market or its time to jump into the market with both feet.

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The Offer

When to decline and when to accept.

Deciding whether to accept or decline an offer can be the most challenging of times for owners. There is no rule book to follow on how to play the offer scenario when it arises. Receiving an offer is good news when selling as it means there is interest in your home. But no one wants to undersell either.

It leads back to a simple question with a complicated answer – how do we extract the best price without losing the buyer?

Whilst there are no certainties in a real estate negotiation, there are some principles that will help guide you through the process.

Market Price  
What does the recent sales evidence suggest? As the seller, you may have a target number in mind, however how does that number compare with comparable recent sales? Does the offer seem fair, high or low?

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Investing in 2014?

Is now the time to invest in property?

After a healthy year in 2013, many are predicting 2014 to be another great year for investors. But come December 31 2014, will the promises and the potential align?

The key is to pick property that is going to rise in value as opposed to following the crowd into something that has already risen. This often leads investors back to what can be described as unfashionable investments. But unfashionable or out of favour investments is often where the best gains can be made.

2013 was a stellar year for Sydney. Many commentators have picked it to repeat the performance in 2014 too. Maybe it will, maybe it won’t.

In order to select the right investment property, it’s imperative to follow key data as opposed to sentiment. Following sentiment may result in a successful investment. But just like the stock market, once you read about it in the news, the value is already gone. The Sydney housing market was out of favour with investors from 2010 to early 2013, which ironically is when the market showed the most value for investors. Now, Sydney is back in favour and suddenly prices look expensive.

To help you select the right investment property at the right time, follow some simple do’s and don’ts

Do’s

Do focus on the net yield as opposed to the gross yield.

Do look for locations that have not yet boomed.

Do consider commercial property with a secure tenant.

Do consider employment and infrastructure in the immediate locale.

Do remember you are buying an investment and not an alternative home.

Do take a 20 year view to the respective investment property.

Do budget for interest rates rises.

Do remain patient during your search.

Don’t

Don’t take emotional home buyers on in a price war.

Don’t buy an investment property solely because it offers tax concessions.

Don’t buy a lifestyle property as an investment.

Don’t view the salesperson as an independent advisor on the merits of a property they are selling.

Don’t try to nab a bargain, you will probably end up with a lemon instead.

Don’t try to get rich quick from property investment.

Don’t buy just for capital growth, focus on the yield.

Don’t take property advice from whiz kids who have never seen a downturn.

It’s near impossible to get rich quickly through property investment. It’s frighteningly easy to go broke quickly though, particularly if you are speculating in a bull market. Stay calm, stay alert and stay grounded.