Ten weeks after attending the property seminar I made my first investment property purchase. While 10 weeks can seem like a long time to wait to get started, if you use that time to become knowledgeable in your area of choice you will be able to find a deal that meets all your criteria.
Once I got started I put in an average of 15 offers per week, and out of these I wound up buying maybe one property every five weeks.That’s a lot of rejected offers! Just remember, it’s a numbers game and it takes time to get it right. The more offers you make, the closer you will get to the deal that works.
My first deal was a road frontage property with a large outdoor area but no fencing, which made it unattractive to young families because they wouldn’t want to take the risk of their kids running out on to the road and getting hit by a car. I knew that the area was starting to pick up thanks to quite a few new townhouses that were currently being built and I could also see that down the track there might be an option of selling the property to a developer who would then put units on it. Meanwhile, I found out from the agent that although the vendor had owned the property for years, he was in a bit of trouble with the bank and needed to get out.
The property had a Government Valuation of $130,000, but I knew it was worth around $155,000, so I rang the agent and told her I’d give her an offer for $130,000 right there and then. She told me there was already a contract on it and that the vendor was not interested in any other offers. My next move was to ask her if it was her own agreement, and when she said ‘no’, I asked her why she would do herself out of a commission by not putting in a back-up offer as so often deals like this fall over. She wouldn’t tell me how much the deal was for, and so I began a guessing game.
‘Is it for $130,000?’ I asked ‘No,’ she said.
Success at last! Then I told her I’d put in a back-up offer for $130,000.
‘Why not $135,000?’ was her response.
‘Because,’I said,‘the Government Valuation is $130,000,and if you are sure the $135,000 contract is going to go through, what does it matter?’
Well, the other offer did fall over and my back-up offer for $130,000 was accepted.
When I had the property under contract I went to have a look at it to see what needed to be done. It was in pretty good shape; all it really needed in fact was that fence, and I knew by erecting one I could increase the rent from $200 to $260 per week.
By the way, in case you’re asking yourself why I wasn’t interested in developing the property myself, i.e. building units on it, the reason is very simple: I never have and I never will get involved in developing property because in my experience all developers go broke at some point.
The above post is based on the book “The 15 Million Dollar Man” by Sean Wood, to read more click Property Investment and download 2 free chapters.