The advent of the Internet has been a blessing for many time-poor investors. From one single location, a savvy investor can research and review multiple properties, check Council zoning regulations, assess current vacancy rates, and look at recent capital growth. Of course, even for a seasoned investor, the risks of buying property sight unseen have to be carefully considered. Proper due diligence requires more than a few Google searches.
Sometimes, it’s just not possible to get the full picture from behind a computer screen. Things like wide-angle camera lenses are now used to make properties look significantly larger, and clever editing can hide many undesirable features of a home. Furthermore, no photo or virtual tour can let you know about issues like traffic, unusual odours, or neighbour noise levels.
If executed intelligently, buying sight unseen can be a terrific strategy for property investors. However, I would recommend always keeping these things in mind:
- Do your research
I don’t need to tell how important it is that you do your homework. Luckily, there’s an amazing range of online resources including CoreLogic RP Data, virtual tours, real estate websites, and Google Maps. You’ll want to consider things like:
- The area’s growth drivers
- Supply and demand
- The amount of rent you can expect
- Your purchase budget
- Your desired range of growth
- Any upcoming infrastructure or development projects that might affect the area
- Have a physical presence
Regardless of whether you ever see the property, you should always have someone inspect it on your behalf. Even if that person is just a relative or friend, you will want someone reliable to look at the physical aspects of the property.
On a professional level, look at enlisting the services of an independent property or building inspector, and have them create a full Building Inspection Handover Report. Don’t ever rely on the advice of the selling agent – after all, it’s in their best interests to position the property as favourable as possible.
- Put a contingency plan in place
When it comes to protecting your personal interests, a contingency clause will always serve you well. Essentially, it states that a predetermined condition or action must be met before the property contract becomes binding.
An “inspection contingency” gives you the right to inspect the home within a specific time period, and protects you by allowing you to cancel the contract or negotiate repairs based on your findings. You could also ask for a “walkthrough contingency” that allows you to do a final walkthrough of the house before signing the papers.
Of course, it’s important to remember that (as with all contingencies), these are subject to the seller’s agreement. You can also expect a higher purchase price to offset the potential risks to the seller.
- Buy new
This one is a personal preference, but I know many investors who recommend only new properties when buying sight unseen. Arguably, with a new property, you’ll know the specifications of the property, and also covered by the builder’s warranty insurance. As such, there are more safeguards in place than when buying a second-hand property.
- Weigh up all the risks before proceeding
In the end, after you have done all your research and calculations, what it really comes down to is you. Often the most overlooked aspect of buying sight unseen is the risk profile of the buyer. You can do all the research in the world, but if you’re someone who is risk-averse, you’ll never be comfortable with buying property sight unseen.
Although the thrill of discovering a property and negotiating with agents can be exciting, if you want to optimise your time, money, and effort, it’s worth consider engaging a buyer’s agent. Alternatively, if you’d like to keep learning about property investment, you can download The Effortless Empire.