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Don’t Let Presentation Fool You

Once again when buying an investment property we have to say as we always have, “Don’t get emotional”. Making to wrong judgment about the appearance of a property can cost you the negotiation.

When you are looking for properties to inspect, doing your initial research, always keep your buyers brief close at hand and in your mind at all times. 

As Buyers’ Agents we have to be aware of all aspects of the property and that also includes what other potential buyers are thinking and saying to the agent. One of the most important things for me to do at an open house for inspection is not to look at the property, but rather walk around and keep my ears open to all conversations.

I recently had the opportunity to inspect a property off market. The vendor was based in Qld and the property in NSW. I don’t think the vendor had been to the property in many years and could not fully appreciate how bad it looked and was left by the tenants.

LESSON 1

The agent decided the best way to put the property on the Internet was to get digital furniture placed in the photo. This attracted many people to see the property. On first opening the door and walking through the property most of the people were shocked to see he condition of the unit. The walls were not washed, carpets stained and the blinds were dusty.

Most of the buyers got emotional about the interior surface of the unit and forgot all the basic principals such as location, size and layout of unit, quality of the building, potential rental yields and most important of all, the potential capital growth of the unit for the future.

This plays a distinct advantage to us in the negotiation phase. Most of the buyers’ first reactions were to make an offer insulting the condition of the property and reducing the amount they were prepared to pay. Sticking to our due diligence and valuations we were able to make our offer which was to the vendor at the time, much higher than the first three that came.

Not only is our offer higher and still within a fair market price, but it came with a signed contract, 66W and a Cheque for the deposit. This makes it very difficult for a vendor to reject.

LESSON 2

Always look at your numbers. A property sold in a building that was 10 square metres larger than one that was for sale. An investor had looked at both but did not want to buy the smaller one that was available.

The smaller one actually landed up being the better investment based on numbers. It was on the 3rd floor of the building, which captured more light and had some ocean glimpses. Because of the layout the useable floor space was actually better than the larger unit, which had a long hallway, which was generally useless. The bathrooms, bedroom, kitchen and living areas were for the most part similar in size.

Because of the brightness and outlook, the smaller had a better gross rental yield. Given that the units were both in the same building, in theory the long-term Capital Growth prospects should be the same.

As can be seen from the two points above, always go back to the numbers. What may seem on the surface, as a negative thing may not necessarily be one.


By Saul Rudnick

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