Hi, my name is Matt. This is my first post and have some general questions.
I currently rent with my wife and I own one IP which is rented out. I am looking to buy a second IP this year – most likely another 2 bedroom unit.
When submitting an offer on a property that is up for sale through an agent, what is a "good" way to determine the price of my offer. Obviously I want to pay the lowest price possible but I do not want to give a ridiculous figure.
If a property was up for sale for 200K and given it was in good condition, would an offer of 170K be reasonable? I know it is not this simple so if anyone has the time to give me some advice here that would be greatly appreciated.
You need to base your offer on what you believe it's worth and what you're happy with paying.
It should be based on a comprehensive due diligence process that involves assessing comparative sales within the area, the demand for the property, the sellers motivation for selling, the condition of the property – the list goes on and on.
Use the REA's price as a guide only.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
As per what Jamie said.
Being an IP, it's a business decision and you shouldn't ever get emotionally attached to a property where you end up paying over the odds. Do your research and come up with a figure that you're comfortable with.
It doesn't also hurt to come in with an initial lowball offer either. You may be surprised at what may be accepted in this market.
Cheers
Tom
I would invest in APM or RP Data reports which will show you recent sales. This can help you do 2 things:
1. Help you determine a reasonable price based on recent sales in either the street or surrounding streets
2. Help you justify why you are putting a potentially low offer.
At the end of the day if the vendor wants to sell the property for $100k more than its worth then there is not much you can do.
Real Estate agents are professional negotiators – you cannot 'beat them' at neogitating but having some stats and information will help your confidence and case.
Most brokers and bankers can run these reports for you for free.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Definitely found out why they're selling up because you could possibly throw in a few other incentives with your offer that may make it more attractive – such as a longer/shorter settlement, allowing them to rent it back for a period of time, etc.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Mat, firstly welcome to the forum and I hope your time with us.
I always apply the same logic when making an offer on any new property and that is to accept the deal is a investment and if you miss out there will always be another opportunity.
Set yourself an upper limit and try not to go above it.
If you make an offer at $170K with an upper limit of say $190K accept the fact that the Vendor may countersign your first offer and this will now act as your new upper limit. You know the likely price is between $170K and the countersigned amount.
Get your Mortgage Broker to run you off a Comparison Report from Day 1 (I do them all the time for client's) so you at least have another measure of valuation.
The other consideration is how the loan is structured.
You mentioned that you are still currently renting so from that i assume one day you may decide to buy your PPOR.
Assuming this i would be looking to possibily borrow 100% either by accessing equity from the existing IP or alternatively offering your cash savings as collateral security and borrowing the full purchase price.
Your Broker should able to guide you accordingly.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Mat, firstly welcome to the forum and I hope your time with us.
I always apply the same logic when making an offer on any new property and that is to accept the deal is a investment and if you miss out there will always be another opportunity.
Set yourself an upper limit and try not to go above it.
If you make an offer at $170K with an upper limit of say $190K accept the fact that the Vendor may countersign your first offer and this will now act as your new upper limit. You know the likely price is between $170K and the countersigned amount.
Get your Mortgage Broker to run you off a Comparison Report from Day 1 (I do them all the time for client's) so you at least have another measure of valuation.
The other consideration is how the loan is structured.
You mentioned that you are still currently renting so from that i assume one day you may decide to buy your PPOR.
Assuming this i would be looking to possibily borrow 100% either by accessing equity from the existing IP or alternatively offering your cash savings as collateral security and borrowing the full purchase price.
Your Broker should able to guide you accordingly.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Welcome to the Forum Matt : )
Like all the above.
You need to do your own DD.
Sometimes "low ball offer" will p*ss agent off. but what's the "low ball offer" is really depend on the market, the agent, the seller….. all factor are relevants.
If I was you, I would ask the agent see if he think about the offer. most of the agent will give you some feedback about your offer.
Good luck
Taylor
Agree here, you want the agent to be friendly. When I make an offer that is significantly below asking price I make sure I explain why the offer is so low. Being reasonable in a negotiation rather than just trying to rip off the vendor.
For example, my partner and I recently purchased a modest block of land in a regional town. Our offer was $30k, $10k below the asking of $40k (25% discount).
Explaining the offer;
- this is the most we can afford to pay for the land, when building a house to rent out profitably
- we purchased similar land near by last year for a similar price
- we had a bank valuation for a refinance on the similar land (with completed build) that came in quite low
- it has been on the market for a long time and we can settle in 60 days
- there is other land we can buy and other offers we have made
That being said, don't be too afraid that'll you'll piss off the agent. Negotiation can be uncomfortable but $10k is a high price to pay for a warm fuzzy feeling
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