A few weeks ago, I held a MasterClass with my students about a very timely topic: The Art of Negotiation.
I was training my students, who are investors at various points in their property journey, about how to negotiate a strong discount on their next deal.
So, I’m in the right frame of mind to tackle Hilda’s burning question this week, which is simply: “Where would you buy for capital growth and liquidity?”
To address the first point on capital growth: I advise my students to run through a fairly strategic process to work out the ideal locations to invest in. There are so many variables at play such as your budget, your deposit, your buying strategy, your goals and your risk profile that I can’t really give you any specific locations.
Needless to say, there are opportunities all around Australia right now if you want to invest in suburbs with good growth potential. My book How to start creating Real Wealth through Real Estate offers a step-by-step process for finding your next personal hotspot!
However, I’d love to address the second part to Hilda’s question. If you want equity in the deal, this is certainly achievable – but you are going to have to negotiate your pants off.
Right now you can actually buy in capital cities, where you can get some good capital growth prospects, and with interest rates so low, you can get decent cashflow too.
But these deals aren’t just sitting on the market, waiting for you to come along. You need to negotiate really well to buy under-market value.
For example, if the asking price on a property is $500,000 and your research tells you the home is legitimately worth that much, then you aim to negotiate down to $450,000 or $460,000. That way, you are negotiating your next deposit on your next property into the deal.
How do you do this?
You need to add in terms and conditions that make the deal more attractive to the vendor.
- Do they need a quick settlement as they’ve already committed elsewhere? Offer a 21-day settlement.
- Are they moving overseas and want to rent the property back from you for 3 months? Write a rental period into your offer.
- Does a longer settlement suit them better than a shorter settlement? Be flexible on your settlement date.
- Personally, are you in a position to put down a cash offer? This may give them confidence if they’ve had experience with collapsed contracts.
There are a number of factors at play when negotiating a property deal and price is just one of them.
So never, ever, ever be afraid to ask for a discount.
What’s the worst that can happen? They could say no!
But the best possible outcome is that they lower their price, and you build some instant equity into your portfolio.
One little question could see you build your wealth by thousands (or even tens of thousands) of dollars, so isn’t it worth at least trying? You have literally nothing to lose, but everything to gain!
Does this advice resonate for you if you’re buying now? If you’re at a different stage of your journey and you have a burning question about your investments, I’d love to hear from you! To add your query to the pile, please click here. And look out for my 2 Cents reply in an upcoming episode of my 2 Cents Tuesday podcast!