In this post I’ll cover off what I’ve learned about buying in a soft market, and how Squirrel can help beyond simply arrange the mortgage. Between 2010 and 2013 I ran a service called first home makeovers. Its purpose was to help first home buyers buy well, and renovate to make equity in their new home. Along with a business partner I also bought, renovated, and traded a number of properties personally.
There’s three key points I want to make:
- It’s worth the effort
- Cast the net wider
- Everything has a price
It’s worth the effort
Getting a property for a great price is hard work. Most of our effort went into the buying. Finding the right property, at the right price. But it’s worth it. The key principle we learned time and time again is that you make your money when you buy.
Even if you can make $50,000 when you buy, that’s tax-free and has to be worth the effort. Think about how long it takes to save $50,000.
Cast the net wider
Finding a good deal means looking at a lot of properties. I would spend hours going through Trade Me at least twice a week. Properties I thought were interesting I’d put in my research folder. I’d then do preliminary research on them from my desk and draw up a short list to physically visit. I’d typically identify 50 properties a week that I would research and visit perhaps 5.
The first thing you need to do is work out how to search. It used to stagger me how often someone would show me a property deal I hadn’t seen in my own searches. Search comes down to key words like:
- “First time” on the market in fifty years
- “Do Up”, “Builder”, “Developer”, “Potential”
- “Urgent”
I’d often browse entire suburbs I liked, just to make sure I didn’t miss anything.
Once you get your search criteria nailed down, it’s time to identify opportunities. My research would involve the listing information:
- How old is the listing?
- Who is the agent? (Are they any good?)
- Is the agent selling outside their area?
- What other properties did they have?
- How is the property being presented?
Sometimes over-marketing can also help. There was a property heavily marketed for sale in Avondale clearly in need of a major do-up. Because it was so heavily marketed, I discounted it as an option. That was until I realised on the day of the auction that (1) it was at the same time as an All Black test match, and (2) the weather was miserable, and it was an on-site auction. I apologised to friends, quickly drove to the auction and won it.
Once opportunities have been identified, I then use a tool like Valocity or Corelogic to get a better understanding of the vendor’s perception of value and of its genuine market value. What you want is a perception gap, which usually means they’ve owned it for a long-time, or don’t live there.
- How long had the property been owned?
- What did they pay for it, and when?
- Who was the mortgage with? (Looking for non-banks or finance companies that might indicate urgency)
- Comparative sales in the area
If I was still interested, I’d then jump into the Auckland Council GIS Viewer and look at services, contours, aspect. If you haven’t used this before, just jump in and have a look. It's impressive.
Research helps manage the effort. If I had questions I’d call or email the Agent before even deciding to visit.
Everything has a price
There is no point doing the work and then not putting in an offer. You’ll never buy anything if you don’t put in offers.
In my mind every property has a price at which you’d be keen to buy it. On any property, just figure out what that price is?
But don’t be a tosser. Some people take the “low-ball” offer to the extreme and miss out on otherwise good opportunities. My view is put in offers that are capable of being accepted and don’t negotiate. I generally only ever put in one price.
This principle is also about not getting caught up on “the one”. You’ll feel a damn sight better knowing you got a bargain then thinking you paid too much for something.
How we can help
We can help with the mortgage but often will also need to help navigate property issues. Bargain normally also equals some sort of problem like a defective title, monolithic, consent issue etc. We’re used to navigating this stuff for our clients.
Beyond that, we have a unique product called the Squirrel Homeowners Loan. It’s a peer-to-peer personal loan with no fees that can be repaid at any time and it has a low rate of 7.95% interest-only for the first year.
Clients use the Homeowner's Loan to pay the deposit when buying, or to renovate when they settle and before they move in. Because it’s interest-only for the first year, it doesn’t impact much on cash flow, and it can be consolidated back into the mortgage at any time at no cost.
For further information, get in touch with one of our mortgage brokers NZ. If you want to find out how much you can borrow for the house, or what your repayments would be, give our mortgage calculators a whirl.
