You have to study the market and know what your money can get you - that is how you know when something is potentially a good deal.
Let us go through the steps of how you do this:
Go and look at some properties!
You have to get a sense of what the properties offer, the size, the volume the amount of work needed if any. At least see a handful of properties at or close to your criteria. The knowledge you absorb from this will be invaluable.
Take copious notes:
Note down all the oddities, unique features, potential issues and so forth. Have a look at the brochure before you do a tour. This is not one of those property TV shows where you get surprised with some houses to look at. Note down things that might differ from the brochure or perhaps some positive elements are not shown in the particulars.
I once viewed a project with a client that had left out the staff quarters from the plans (that was two bedrooms two bathrooms and a living area) Granted, things like this are rare, but they do still happen.
Review your notes & thoughts:
When you completed the viewings, write down any further thoughts and or questions you might have had, review your notes, and make sure you know all the details.
Rank the value:
At the end of a day of viewings, lay out all the properties and rank their perceived value based on their asking prices.
Rank them on a scale of One to Five.
- One is terribly overpriced.
- Three is Average value.
- Five is an excellent deal.
Do this enough times, and you will know what you can get for your money.
Why do this?
You will now be able to more quickly & accurately:
- judge a property when you are searching online
- judge a property when being sent listings by agents
- decide if a property is worth looking at, or worth viewing again
- find the right deals
Lastly, just because a property has an eye-watering asking price, doesn't mean that you should not look at it. Should you have a quick look and think, it’s a One, speak with the agent and ask:
- if something is missing in the info
- is the seller negotiable
- why is does it appear to be so expensive
The answers to these questions will help you decide to bin it or view it.
With Viewings, Notes & Your value ranking, you will be well ahead of the competition when it comes to buying investment properties.
I'd love to discuss other ways of how you study the market to get an understanding of value. Please leave them in the comments section below or message me directly.
Bonus Step: Research Reports / Market Reports, most larger agencies publish local area reports, it’s well worth digging these up, even if they are old and dated, it will provide you with some extra insight on historically what an area did, or where an area is expected to go.