Property is ubiquitous and the Keys to Find Great Property Deals are available to any committed property investor disciplined enough to set off after their goals unwaveringly. If you are at that point in life where it has dawned on you that your current financial resources may not be sufficient to keep up with the lifestyle you desire or to meet the growing financial needs of your family, then this is for you. And if you are simply looking to increase your income and work towards financial independence gradually, then read on.
Keys to Find Great Property Deals: Everyone Loves A Bargain
At least all investors do, and they realize that bargains equate to profits, plain and simple. The most prolific bargain-hunters are capable of fashioning some sort of a win out of calamities, whether theirs or those of others. In this series, we explore how seasoned real estate investors seek out bargains to grow their wealth through bare-knuckled, unabashed opportunism – taking a regimented approach to achieving their goals.
Keys to Find Great Property Deals: The Story of The Vulture and The Hyena
In African anthology, certain animals are disparaged and vilified for their opportunistic nature. So to be compared to, say the Hyena, or the Vulture, is most disagreeable. Scavengers are tenacious and in the natural world, they possess some of the most unique and amazing qualities. They have guts, literally, comparable to none others in the animal kingdom. Hyenas organize socially in matriarchal societies and have the strongest jaws of any animal on the planet. Like vultures, they have an acute sense of smell. Vultures have eyesight only comparable to that of their higher-flying ornithological compatriot, the eagle.
Becoming a great real estate investor is in part a study of the amazing qualities these creatures possess. Much like the hyena and vulture, the success of bargain-hunters is achieved through tenacious effort, knowing where to rummage for opportunities and learning how to sniff them out. Their overall success is not built on overwhelming strength or dominance of the food chain, but rather on their opportunism, vision, and tenacity. Much as how these creatures are able to pick up the scent of a fresh kill miles away, real estate investors learn to hone-in on investment opportunities. Bargain-hunting, tenacity, and opportunism are synonymous, there can’t be one without the other.
Whether you are looking at meeting additional financial demands for the educational requirements of your children, or you are considering the resources you will require for your retirement or whether you simply want to have additional cash to spend on your lifestyle, learning how to invest will be critical. Real estate is a great avenue to pursue these goals.
Keys to Find Great Property Deals: What are your Objectives?
The goal of any investment strategy is profit. Setting out clear objectives of what you want to achieve gives your investment clarity and purpose. Your objectives will then determine the market segments you will be focused on. For each objective, you will be looking at properties in different market segments best suited to achieving the objective.
For long-term capital growth, for example, you may consider vacant land in a rapidly developing area that can provide capital gains (appreciation) within a reasonable period of time. While for income, you may consider rental property. Success will lie in aligning your acquisitions with your goals – the right property for the specific purpose
5 Keys to Find Great Property Deals
The intrinsic properties of real estate make it one of the best investment tools for wealth creation available in any investors toolkit.
Here are 5 tips on how you can find an investment property.
#1. Find the Motivated Seller
In the world of real estate, profit is made at the point of purchase and not the point of sale. Otherwise, as the investor, you will be obligated to hold the profit for an inordinately long period of time before you can cash out. The motivated seller represents the single best opportunity to strike a big bargain. When the seller is motivated, half the task of negotiating a great deal is already accomplished.
Wherever you see the phrase ‘quick sale’ or ‘distressed property’ right there is your motivated seller! This individual is hard-pressed for liquid resources (i.e. cash) to finance some other priority which itself has been triggered by the occurrence of some unprecedented/unexpected or unplanned event or circumstance.
Unplanned events: An individual may accrue additional financial costs associated with the relocation of family out of the country for reasons of employment or to meet the cost of additional financial burdens associated with, hospitalization or educational requirements for a family member and so on. This, in turn, may necessitate the disposal of assets within the shortest possible time to raise the funds to make this possible.
Calamity: this includes the loss of income, hospitalization and even loss of life. For instance, an individual who has lost their source of income is highly motivated to make a quick sale of a mortgaged property at a time of sharply spiking interest rates.
Sometimes, quick sales are driven by a combination of events; individual circumstances unique to a seller which are then aggravated by occurrences in the market. For example, an investor who purchased a property on a mortgage may want to sell the property before racking up stiff penalties and interest – and well before the auctioneers come calling – in the event that they have lost their income. A combination of events such as the loss of a job combined with a mortgaged property in a scenario of spiralling interest rates and growing family needs may necessitate the quick disposal of that property to enable the investor cope in deteriorating circumstances.
Striking a rapport with a motivated seller is a great way to establish a baseline for negotiation on price and other terms. It is equally important to establish the reasons for the sale as this will also provide you with more insight on how to negotiate the acquisition and possibly give you some more flexibility on the terms and conditions.
#2. Get Your “Ducks in a Row”
Develop and collate your sources of property information to create a list of potential properties that are aligned with your respective objectives. Your sources may include local real estate agents, online property portals, newspapers, real estate magazines, government websites, fliers, local events, your networks including investment clubs and SACCOs. Finding and identifying profitable deals takes a bit of experience so it is also strongly recommended that you drive around to actually visit the properties and to expand your information sources to include local agents who can identify motivated sellers.
Your local realtor will be able to identify investment opportunities and motivated sellers. They will be an integral source of information on comparable properties, accurate market valuations, providing you with networks to resource persons, undervalued opportunities and they will be an invaluable resource in helping achieve your objectives.
#3. Study the Market
To follow the money, you have to know where it is headed. You simply have to know where to look otherwise your search will fall short. Neighbourhoods with growing populations in close proximity to markets, trading centres, educational institutions, shopping centres, hospitals, and transportation hubs are ideal investment property locations for both income generation and capital appreciation. In these locations, there is high demand for tenant-occupied properties and because the neighbourhood is developing, there is also increased settlement in the area which translates into higher demand for housing and therefore a faster rate of capital appreciation even for vacant land. If the location is a low-income neighbourhood, there will be a sustained high demand for rental properties because of the relatively transient nature of low-income earners translating as well into good returns on investments and relatively higher growth in rents (compared to middle-income and upmarket neighbourhoods).
Understanding the markets is also critical to an awareness of when to invest. Like all markets, the real estate market is not immune to cycles. Markets go soft for a variety of reasons. Importantly though, it places sellers at a great disadvantage because demand becomes highly depressed. In Kenya, the season of political contest invariably causes the market to go soft leading to an oversupply of particular types of properties. With so many sellers trying to cash out in a market with very few buyers, prices become depressed and great bargains abound.
#4. Leverage Your Networks
More Keys to Find Great Property Deals include leveraging your networks. In addition to your local agent, making connections with bank credit officers and other professionals closely linked to the financial services industry may offer great value in your search for investment properties.
The importance of networking cannot be overstated. To sell, you need to create and hold the trust of your buyers. So your networks become the most important asset you own because they already know you. These include professionals working within the same industry from realtors to property surveyors, tenants, contractors, lawyers, accountants, other investors like yourself, financial services practitioners and many more.
The effort to building and maintaining contact with your network will align with your success as an investor and pay off handsomely in time. The great advantage of networks is also that they give advance information on opportunities even before they hit the market allowing you to be first to market with the information.
#5. Investment Opportunities Hiding in Plain Sight
It is not always obvious to the undiscerning eye, but there are opportunities that rarely present themselves as such because they are often couched in unpleasant situations. Family disputes are a case in point. They can take many forms from family feuds to disagreements over inheritance, lawsuits and so on. In these circumstances, a property owner may seek to dispose of assets in order to re-establish themselves elsewhere or to settle the dispute at hand. Usually, individuals looking to settle disputes via the sale of assets are highly motivated to get rid of the property.
Another opportunity is dilapidated, incomplete or even unused structures. Properties may fall into disuse for a variety of reasons, for instance, age, ravages of weather, partial destruction by fire and so on. When they become rundown, such properties become opportune bargains which can be collected from the market a mere fraction of their rehabilitated value. Obviously, a seasoned investor would know to assemble a team of professionals who can provide them with costs for rehabilitation before acquiring such property. In this way, they can make a fair estimate of the actual value of the property in its current state and therefore the capital gains they stand to make should they choose to acquire such properties.
Keys to Find Great Property Deals: More Options You Can Explore
There are other approaches to finding great investment opportunities depending on the requirements of the particular investor. These take a less hands-on approach to property investment through structured financial securities such as investment clubs, fractional (commonly referred to as time-shares) and sectional properties (REITs). Off-plan property investing is also a great way to secure property bargains in the market.
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Keys to Find Great Property Deals: Conclusion
- If you fancy yourself a savvy investor, above all else, you will be looking to grow and get paid to do it. That, after all, is the game – untinged by the moral dilemma of taking advantage of the market or other peoples’ circumstances.
- Find those perfectly scrupulous, legal and moral ways to strike bargains without distressing others or breaking any laws.
- The places where bargains are to be found are not invisible; they’re in the marketplace and if you develop the eyes of a seasoned investor, you’ll notice them staring back at you.
Do you have any additional tips? Please share them in the comments section below!