Finding Property

The property market

Why do I say that property is the best asset class? Here I will explain.
The property market operates in cycles, which lag behind the economy in general. In the long term the trend is usually up. So you will always invest in the long term. This is different from short term trading, where you can get caught out buying high and selling low.

The second thing to remember is that we also want our property deals to make sense now. They should be cash-flow positive now. IE your rental income should exceed all the expenses.

Always track the market. If you are prepared you can buy when there is a market crash. IE you will do the opposite of the masses.

The next rule is crucial when buying property. Buy in a good solid area. Draw a ring on a map, one hour’s drive from where you live. This will be your territory. Within this territory you are going to hunt for good areas. Translated this means an average houses where average people live. Not too high end and not to scruffy. You then want to find properties in the area where there is value you can add. This is a polite way of saying that perhaps the house needs a bit of work doing on it. It is cheap compared to the surrounding area.

How can you tell if you have a house that you can add value to? Go to Rightmove.co.uk, then go to the house prices tab and then just look at previous sales. You can then see what the average house price is for the type of property you are looking for, in your chosen area. Then go hunting for deals.
Location-location-location is the key. Within your one hour’s drive territory, first look for areas near to where you live. Are there any areas where there is more demand, due to better schools, transport, shops, parks etc?

Online Property Search

Your first point of call will be Online property search. You can set up email alerts on the best websites, where you stipulate the area, type and price of property you want. You then get an email notification as soon as the property is listed for sale. Estate Agents will also list the property online before the street sign goes up on the property, so you get first dibs.

Next ask to be put on your local Estate Agents list, to be notified as soon as a likely property becomes available.
Take care with Estate Agents and their websites. These are all price at above market value. Remember to check the real market value, so you can put in an appropriate offer at least 20% below market value.

As you are out and about, keep an eye out for the signs going up in your preferred location.
Also if you can always buy directly from the seller. Bypass the estate agent and the competition.

You may need to go door to door leafleting to see if people are willing to sell. You will obviously get many rejections with this method and you may have to develop a thick skin. However, out of every ten offers you put in, you may get one acceptance.
Before you buy a property, your due diligence should include planning for the worse case scenario with a property.

Auctions are a great place to find bargains, but always view the property before-hand because once that gavel drops the property is yours.

Hunting for properties.

You should always be open to new deals, either for buying properties or raising cash. For instance if you are at a networking event or social gathering and someone asks you what you do for a living, you could say “Hi I’m Mike, I’m a Salesman (Or xyz) but I’m also a property investor as well”. This could open up a conversation around property investment. You could follow it up by saying “yes I’m always on the lookout for new properties to invest in”. This can also work on twitter, facebook or any other social platform, as you could have your profile detail that you are into property investment.

Always look for at least a 20% discount on the market price. Look to pay wholesale prices not retail. This might mean not going through the estate agents. There is a saying ‘The bigger the brochure, the bigger the bullshit’. If you do look at on-line portals like Rightmove.com look for properties with just one picture of the outside. It is guaranteed that these will require improvements to be made to them and so is an opportunity for you to add value.

Adverts

You could use adverts to find your sellers. You could put an advert in the local paper, which says:
“I will buy your property, for cost, in seven days. Call 07……”
If someone rings, find out where the property is and work out the market value.
Offer them 25% below the market value. If they say no, shake hands and walk away. Go on to the next deal.
If they say yes, then you can go about raising the capital.

Buy for cash-flow

Positive cash-flow means that once you have rented out the property, you should make a profit after all expenses are paid. You should also allow for void periods, say 10%. Therefore you should only buy properties for cash-flow. That means the deal needs to make sense now, today, not in six months time. If it won’t make money as soon as it’s let out, don’t do the deal. This is because you haven’t got a crystal ball and you can’t influence the property market, the price of the property after the deal isn’t your business. If it goes up, great that’s a bonus, but it isn’t your business. If the market goes down – that’s great too, as it means you can buy more property cheaply.

Your business is cash-flow. You can influence and control the income you generate from the property. This is your business.