When it comes to buying a rental property, experts in the field often say that the most money  made is when a property is first purchased – because hopefully you’re buying at the lowest possible price

Buying a rental property at the very best price can be difficult to do if you happen to be buying in a seller’s market.

With Sydney property prices still rising (albeit at a slower rate) and Melbourne property enjoying strong growth, there are some real challenges for property investors wishing to snag a bargain.

How do you find a bargain? Well, residential real estate is readily available in hundreds of different markets across Australia. If you check real estate listings at your preferred price point in Realestate.com.au or Domain.com.au you’ll find properties in less heated markets where negotiating a lower price is much easier.

So, if you’ve been thinking about buying a rental property for a while, and wondering about how to negotiate buying a house, we thought you should begin by knowing about some pitfalls that you need to avoid:

Falling in love with one property instead of having alternatives

As an investor, this can create a lot of anxiety because you have a fear of missing ‘the big one’. The result can be overpaying while just around the corner there could be similar properties available.

Having alternative properties on your wish list is a great way to keep emotions in check so you negotiate with your head and not your heart.

Not understanding the seller’s situation

Negotiation is not always just ‘about the final sale price. The seller may be committed to another property, or have circumstances where they may wish to stay on and rent the property.  Having a good relationship with vendors really helps to build trust and empathy – allowing open and honest negotiation and achieving the best possible deal for both parties. Understanding the seller’s motivations for selling gives us the focus to help them achieve their goal, whilst achieving ours.

Not doing your homework and trusting the asking price

It’s critical that you understand the fair market value of the property, as usually the seller just wants to get as much money as possible for their property. While market value is based on recent sales of similar properties in the area, this isn’t always obvious to inexperienced investors, and even using the wrong professional help can lead to a poor result.

Here is a case study about Jane, and her experience of buying a rental property :

Jane* was a time poor investor who wanted to buy her next property in a growing area in Brisbane. Jane enlisted the help of a Brisbane buyer’s agent (non QPIA), who eventually found a property for sale with an advertised price of $420K. This price did seem a bit high at the time, however the property appeared to be well located and did have some nice physical features. The buyer’s agent managed to negotiate with the vendor to eventually have an offer accepted at $410K. Jane was very happy, as it appeared that she had saved $10K (which was also the buyer’s agent fee) and picked up a good property at the same time. After settlement, Jane approached us for a second opinion and after some market analysis, it was determined that this property should not have been purchased for more than $400K. This isn’t a disaster because this investment property should eventually grow in value, however Jane must be wondering why she paid a $10K fee to pay $10K too much for this property!

Negotiating on properties is a thrill for some people, as they can put their emotions aside and see it as a bit of a game. For many others though the buying process is too stressful or they just don’t have the time available.

If you’re in the latter category we would recommend that you use a buyer’s agent with a good track record of success for their clients and ideally QPIA  qualified for investment property purchases.

We are here to help.

*name changed for privacy reasons