Not everything is negotiable, but property prices are…
Have you ever called your broker to buy shares and asked for a discount? Or have you ever gone into Zara or Mr Price and tried to negotiate a lower price? Of course not… Because the price is not negotiable.
But in property everything is negotiable. Sellers don’t always act rationally, and there are many reasons why sellers urgently need to sell a property, and why they would sell it for less than its market value, including:
- Distress (Financial Distress)
- Downsizing / Upsizing
- Difficult Tenants
- Uninformed Selling Agents
So where do you find properties below market value? One can find these properties from real estate websites or online portals (e.g. Private Property), real estate agents, private sellers, bank repossessions, auctions, etc.
I often do not know whether a seller was “motivated” until after they have signed the offer to purchase. The key is to consistently submit signed offers to purchase at prices below market value until an offer gets accepted by a seller.
In our previous article, 12 Guidelines on Submitting an Offer to Purchase, we explain how to submit an offer to purchase.
Something to remember: in property, you make your money when you buy, not when you sell.
Imagine you can buy a property with a market value of R900 000 for R750 000. You finance the property 100% and only pay the transfer and bond registration fees of about R50 000. And even though you finance the property for R750 000, you register the bond for R900 000 (the market value).
Six months to one year later, you refinance the property for R900 000, which means that you get R150 000 in your pocket. With this you can cover the initial transfer and bond registration fees and still have R100 000 in your bank account. Of course, your monthly bond will go up with about a R1 000, but as your rental income increases annually, your cash flow improves on the property.
Want to know how to buy a property that will not cost you a cent and pay back everything you invested within one year?
With the R150 000 that you refinanced, you pay yourself back the R50 000 for the transfer fees and bond registration costs. You then park the R100 000 in an access or flexi-bond and withdraw your shortfall amount needed (if applicable) from your access or flexi-bond monthly. Your shortfall should become a surplus long before your R100 000 runs out as rental income escalates over the years.
Read more about this in our article, Start Using Your Access Bond Today.
Chester L Karrass said, “In business as in life, you don’t get what you deserve, you get what you negotiate.” So, get ready, set, and negotiate!