How To Find A Property Under Market Value In A Good Area

[youtube id="DzADCpyN8Ts" align="left" mode="lazyload" maxwidth="500"] How do you find investment properties that are under market value but are also in a good area? "I would much rather pay full market price, give the vendor what they are asking and so get a foot in the door of a great market rather than get a bargain and then just see that walk out by third of price falls over the next 12 months or whatever." A lot of investors are talking about buying property under market value, but how do you buy property under market value that is also in a good area? Hey! I am Ryan from OnProperty.com.au, helping you find positive cash flow property, and I want to start out this video a little bit different to how I start out every other video which is just an introduction that lead into the answer and to actually help you to question yourself and to say, "Should I actually be looking for properties under market value or should I be taking a different approach to this?" So, I am going to play a short clip for you, of an interview that I did with Jeremy Sheppard from DSRData.com.au. Now, DSRData is an awesome research tool where you can see the demand for an area, and that can help you assess whether or not an area is a good area to invest in. So I will play this clip where we talk about this under--market-value idea, and whether or not people should be approaching it, and then I will come back after a couple of minutes and I will talk about 'Okay, if you still want to go ahead and do it, how can you find properties that are under market value in good areas.' ------ Jeremy: So, I would much rather pay full market price, give the vendor what they are asking; so I have a foot in the door of a great market rather than get a bargain and just see that walk out by third of price falls over the next 12 months or whatever. Ryan: I think that is good for people to get out of their mind that because a lot of people do teach the best way to invest is to buy below market value so you can get instant equity in an area and look, I am sure there are ways to do that. But it just sounds so much easier to identify good markets, markets that are solid, that are likely to grow, get in there at market value, and see the market rise. And if you really want to create equity then you can do things like renovation or create opportunities within that property yourself. Jeremy: Yeah. That whole instant equity thing, if your strategy is entirely based on buying below market value, then why would you hang on to a property once you have boarded? Your strategy has now come to its fruition. You have bought below market value, so why is there not a discount flip? You know, there is a renovation flip; you buy, renovate, sell. There is no such thing as a discount flip because as soon as you have settled on that property, it is new value -- whatever you paid for it, and that is what other buyers are looking at. This is now the new benchmark. So, if you can and if ever you buy in that area, you can get a bargain, the prices are heading down. They are not heading up and I remember seeing one property educator complaining about Sydney prices this last year and they are saying that people are paying too much; too much being above valuation. But unless people buy above valuation, capital growth does not take place. It has to be someone forking out a little bit more money and then you have a new benchmark which becomes the standard, and people continue to buy above market value. That is the only way capital growth happens. So, if you are buying in a location where it runs paying fair market value, you are buying in a stagnant location. You have to pay more to get into these hot markets; that is the unfortunate side effect of getting into the market. ---------- Okay, I thought it was really important to play that video because often when other investors or mentors or coaches talk about buying under market value, you think, "Okay, that is the exact way that I should invest. I need to invest in property that is under market value," and that becomes the most important thing to you and you start to neglect other areas of research like, actually trying to determine whether or not an area is a good area. And this question came to me - I think it was from David, who asked this question. And it is so hard to determine whether or not an area is a good area. Just because you think it is a nice, you think it is a good area, does not necessarily mean it is a good area. So, I really like the approach that Jeremy took to where he said, "Yeah, you can try and buy property under market value but what is the point of doing that if you do not actually do your research and invest in an area that is likely to grow?" Because if you buy under market value in area or a discounting properties anyway, where it is a slow market; and that is it, it is going to stay stagnant or decrease, then you are not going to get the return on investment that you would have had if you invested in an area, paid the market price for that property or even over market price if the demand is there, and that is what you have to do. But you are getting into an area that is going to grow, so I think when you are thinking about purchasing a property under market value, you need to assess what you are actually trying to gain from that. What sort of equity are you trying to gain? What is your long-term plan? Is that actually helping you move towards that? I think so many people get caught up in the mindset of 'I want to make money out of thin air' from absolutely nothing. And I can see why that is a huge draw for people. In a way, capital growth ad market growth are kind of like that: you buy a property, you get into that market, you do nothing to that property, the market goes up and you make money --- basically out of thin air. You have not created any value for the world; you just kind of held onto a property that is going up in value. And I feel like it is the same sort of approach buying under market value; you do not want to do anything to the property. You do not want to be an active investor; you just want to click your fingers and make $20,000 in instant equity. Look, I think if you can get it, if you know how to get it, great. But I think going after this golden goose of free money from doing nothing is probably not the best approach if you can take a more strategic approach to your investment. Say, "Okay, what is the goal? What am I trying to achieve? What is my strategy for getting there? And what can I actively do to improve the property that I purchased or what can I do to buy in a good area so I can get the growth that I want or create the growth that I want by doing improvements to the property? Or see if ... cause them, finding solutions to people's problems. So, I just want to - I guess, set the tone for this episode and just question whether or not this is the golden goose that you think it is, or if you should actually be spending more time doing more research or having a strategy where you can achieve your goals without buying property under market value. And if you happen to find one under market value that also ticks all the other boxes that goes with your strategy, then great! It is going to help you move towards your goal faster. But if you cannot buy under market value, you can still achieve your goal anyway. I do not know. I just feel hesitant in recommending things to do because I feel like people will just go out and this is a one strategy to achieve financial freedom, to achieve success when really, it should just be a small portion of your overall strategy. So in saying that, how can you purchase properties under market value in good areas? If you believe that you have done the research, you have looked at DSRData.com.au, you have gone through the 18-point checklist that I recommend or you have your own research that you do into an area; if you have done that and you are thinking, "Okay, yeah. I am happy with this area. I think it is a great area to invest in. How do I find the property that is under market value?" The first thing to look for is to find problems that you can fix. So looking for a property on the market that has some sort of problem with it that you can fix to improve its value; obviously, you want to fix this problem for less than the value that it creates. But often, people will steer away from properties that have problems with them. One example is, I remember walking past this one house every single day, that has been on the market in the area for like 6 to 12 months or something like that in an area where property is selling 30 to 60 days. I did some research into it and thought maybe this has a problem that I could solve; it turned out that this property had concrete [[counter]] and it would be a difficult problem to solve. But let us say you did have a solution to concrete cancer. You knew how to fix that. Whereas everyone else, investors will get scared. No one wants to buy a house with concrete cancer, but if you knew how to fix that how to fix that on a budget, then you could get that property severely under value because no one else wants to touch it. So it is that sort of approach. Obviously, I am not saying go out and buy  a property with concrete cancer, but find properties that have issues and then find ways that you can fix those issues. I think it was Robert Kiyosaki who talked about him and his wife. They went on a trip to the countryside and they decided to look at property because that is what they do. And they found this property that had been on the market forever and no one wanted to buy it. And when they - I am going to paraphrase and I may get some things wrong, but when they inquired about why no one was interested in this property, they discovered that no one was interested in this property because it did not have access to water.