The key to making money in real estate is to buy at a cheaper rate. In real estate investment, this means that you must find property you can sell for a higher price when you buy it. For most real estate investors the road map to high return on investment is paved with finding properties at lesser value, then sell for a higher price. This necessitates the questions: when and how do I go about finding cheap property to buy?
One way to buy a property you desire cheaper is through negotiations. You must have a strong negotiating power to be a successful real estate investor. Many successful real estate investors like Donald Trump, have found cheap properties through effective negotiation. You should be conversant with some negotiating techniques in real estate, such as:
- Letting the seller initiate the offer;
- Staying calm and silent when the seller is talking;
- Understanding why the seller is selling;
- Pushing for further concessions;
- Not being unnecessarily friendly;
- Be all right with potentially losing the deal.
These method will give you leverage to get the seller to lower the rate.
2. Early Bird/Pre-launch Buying
In real estate, time is critical and one day often makes a difference. Early bird pricing is always low. The quicker you are able to see a property and deal, the better your chances are at being able to negotiate a deal. The price of property is usually cheaper when it is first introduced to the market. For example, I consult for a real estate firm that traditionally offers 25% discount to the first 50 subscribers in any of their estates. You probably can strike a bargain and get a great deal at the initial stage of a property. To attract investors, developers usually offer percentage discounts at soft launch. Because developers use soft launch to generate cash flow, they use pre-launches to offer clients a cheaper rate.
3. Buying During Recession
Recession is a period of generally economic decline. A recessionary environment sets up a buyer’s market. Prospective investors have an edge in a down market. During recession property prices always nosedive and become cheaper. The demand for real estate is usually low. Property sellers drop their prices and you can get to see tangible bargains. For those who can afford it, recession is a good time to take big financial risks. Business cycle is recurrent and fairly predictable. Your ability to foresee the trend is key to success in real estate.
4. Outright Purchase
Cash is king! Paying outright has definite advantages in today’s real estate market. With outright payment you will always buy cheaper based on sureness of a sale. You generally have dominance during negotiation when you are doing outright payment. Outright purchase will most definitely make your offer more attractive to sellers. You might be able to acquire a property at a cheaper rate and also receive a discount with outright purchase.
5. Buying During Rainy Season
In Nigeria especially, property sales tend to fall or be stagnant with rainy season. Demand is usually low at this period, property prices also tend to be low. Sometimes developers sell below market value to be liquid during this season. If you want to get the best deal, your odds are at best during rainy season. To entice buyer to buy, property owners lower their prices or sell at discount. Buyers who buy during this period are able to negotiate a better and cheaper rate
6. Buying During Promotions
Most promos go with reduction in price (price discount) or through quantity discount. For example, you can be given a 10 – 20 per cent discount; or you can be asked to buy 4 and get 1 free. Buying during promos makes it cheaper for you. Promo drives customer decision through limited availability offer which creates a sense of scarcity in you.
7. Short Sales/Foreclosure
In a short sale arrangement, properties are listed significantly below the actual value. A short sale is an act of selling a property for less than the amount the owner owes their lender. Many short sales properties present a solid opportunity for real estate investors. Buying a short sale property can save you 20 – 40 per cent in some cases.
If you plan to benefit from low property prices, you must be aware of the developments in the real estate market. Talk to a good property dealer; ask them to keep you updated on latest developments. Being prepared and relying on trained professionals for guidance can help you get a great deal in real estate market. Buying through foreclosure is another way you can acquire property cheaper than the actual market value. It can have big potential, but it takes real effort and careful research into local property listings and economic trends.
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