Darren Palmers Tips on Due Diligence
Falling in love blindly with a property is a dangerous guessing game
The Start of Your Property Journey
To start us off I’d like to start you at the beginning - for your property journey, apart from realising you need to buy a home, that is deciding what exactly you want.
With so many properties on the market and higher auction clearance rates than we’ve seen in years it’s easy to panic and jump into the first property you fall in love with, but the love part is the issue. Falling in love blindly with a property without understanding what it is you’re loving is a dangerous guessing game.
The only way to have certainty around your property purchase is to know what it is you’re looking for and what you stand to lose, and gain from the transaction.
Knowing Your Market
If you’re unaware of the median house price in an area you may pay too much. If you don’t have an idea of what the upper price point of the type and size of property you intend to improve you may end up overcapitalising. If you don’t have a good idea of the value of your home in its current state, you may miss out on valuable sale profit.
The answer is due diligence. Looking at the market closely, in the area you’re interested in and comparing like for like is the best way to gain some insight into what’s happening in the market in your area of interest.
Look at the suburb, the square meterage and the amenity of your property, or the one you’re interested in and compare to the sales in the exact same area that are the same size with the same amenity.
Your Amenity Checklist
- number of bedrooms
- number of bathrooms
- inclusions & features
- close to shops/transport/schools
- lifestyle drawcards
You then have a snapshot of the value of properties just like yours. This will not only give you a better sense when it comes to negotiation on a purchase or sale price but if you’re considering renovation this information is very valuable too.
Are You Looking to Improve Your Property
If you have a property that you intend to improve you need to understand what you are able to spend to be able to recoup your investment and hopefully turn a tidy profit.
If you understand the value of properties just like yours, in the same condition as your own and then gather data on properties that are the same size, location and amenity but finished to a higher calibre you can see what the cream of the market in your area of interest is worth.
You can look at the inclusions and finishes that the upper end of the market respond to or expect, and you can get an understanding of what appeals to the people that you would one day be wanting to sell to. You can even see pictures of the style and mood of high end properties in the area which is valuable reference when planning your improvements.
How Much Should You Spend
This information gives you a target to aim for in your improvement and also a price limit that you can achieve.
Say your property was worth $500,000 and the higher end properties were selling for a conservative average of $600,000 you would need to work out if you can improve your property, to the same level, within a budget of $100,000 – or $80,000 if you wanted to make a $20,000 profit.
You can only truly understand the value of what you have, what you aspire to own or what you intend to create by having a thorough insight into the market you’re engaged in.
You can gather this information through sites likehttp://domain.com.au and http://realestate.com.au but my personal favourite, a site I refer to on a weekly basis, ishttp://apmpropertydata.com.au. They have loads of data from past sales as well as many other valuable functions for professionals in the industry.
Being armed with as much information as you can source leaves you in the best possible position to negotiate and achieve your most positive outcome. Gather as much accurate data and learn as much as you can. You'll be thoroughly glad you did.