12 13 RECOGNISING POTENTIAL 1 Book Companion Course

Finally, it's time to hit the streets. In chapters 12 and 13, I talked about my experience of inspecting over 170 properties to find the right property for renovation. In this video, I'll share with you what you need to know when it's time to hit the streets. You also see below my very own property inspection checklist, which allows me to quickly assess a property with profit potential. So how do you recognise a property's potential? The ability to see through the ugliness and recognise potential to add value is a key skill in the renovation game. The answer is often right in front of you. You need to know what your target demographic is after. So. So once you've selected your five or so areas, start visiting open homes 10% or above the median for that area. Check out the finishes, what is typical and start making a list, because this is how you start planning the renovation you want to do. So what do you record? What you include in your inspection checklist is important. Use the checklists in the bonus section. Begin with the basics. The address, the date, the date of visit, the age of the property. Then you need to make note of the property's most distinctive features. This is important because if you notice something good or bad, a potential buyer or renter is likely to notice the same thing. What stands out about the property? Does it have a distinctive design? Is it between two terrible buildings? This information will not only help you remember the property, it will help you gauge the profitability of the property. For instance, a distinctive design may help the property sell faster. Being sandwiched between two distressed properties may keep the property from selling altogether. Ask why the owners are selling. This information can also be important and give you information you don't already have. If the homeowner is selling because the neighbourhood isn't what it used to be, you might want to think twice about buying a property there. So what to do in the walkthrough? Take your time and walk through each property. Use your checklist. Make note of what rooms each property has and the specific features of each room. Make note of what is needed or desired in your repairs and renovations and give the property an overall rank for appearance. List everything that might affect you. For instance, an older house with one power point in the bedroom might require a second power point after pulling off the skirting boards. The electrician's time. Repainting, replastering. You might be lucky if it only cost you $500. You need to be thinking about this, or at least know this ahead of time. Now, don't forget the exterior assessing the exterior of the property is just as important as assessing the interior. Begin with an overall description. How many storeys does the property have? How close is it to the street? Is there parking? Pay attention to expensive features. Is the roof in good shape? How about the mortar between the bricks? Is it missing? Is there a fence? Does the property need one? Now check out the neighbourhood features. You may need to drive around to do this. Are the roads in good shape? What is the condition of the surrounding properties? How close is the property to schools, shopping and transportation? The more information you record, the better your analysis of the property. You'll learn as you go along what's important and what's not. But for now it's best to err on the side of caution. Have too much information than not enough. So let's look at making a list and checking it twice. It might seem anti climatic, but now that you've visited what seems like a thousand properties, you want to go back home or to your office and sift through all those spreadsheets. If you've followed the plan, you now have a lot of information. You. You will need to sort through all of this information before you forget any specifics you may have missed during your inspections. So let's go back to the beginning. There were three things you needed to base your pre inspection decisions on. Your property investing strategy, your buying criteria and what you could afford. Now let's once again look at your property investing strategy. What was your property investing strategy? Did you want to buy and renovate? Buy and sell? Buy in a high yield area, Buy with capital growth in mind, Do a knock down and develop, buy and build or something else? Think about your strategy. Keep this in mind as you go through your spreadsheets from your home inspections. Once again, go back to your criteria. What was your property purchasing criteria? Once you have this, you need to make it specific for you. This is your property purchasing criteria. Your criteria are based on what you can afford and the property investing specifics. And should read something like I'm going to buy and renovate and hold houses in the $400,000 price point with a capital growth of 7% per annum and a yield of 5% per annum, spending no more than $40,000 on my renovation. We need to be specific, remember? So let's do a recap. We're going to buy in the median. Remember our discussion in Module 2 about buying in the median? Here's a quick recap. Buying in the median means purchasing a property within the median price range for the area you select. If you look at a bell curve. Most activity is around the 80% mark. That means that 80% of the market is operating around the median. Some people buy high, some people buy low, but most people buy in the median. That's the middle. The same goes for renting and selling. This is also part of your low risk strategy. You need to keep a median in mind because if you need to get out of your investment quickly, then you will be targeting the largest part of the market possible and you should be able to sell quickly. The same concept applies to renting your investment property. Property investors are not in the business of losing money. But you can't make money thinking you'll rent at above market rates. Assuming your property is similar to others in the area, similar size, area, number of bedrooms, condition, etc. You should be renting at a rate that is similar to the surrounding properties. In other words, the median. If you're pursuing a renovate to rent strategy, you need to go out and actually visit rental open homes and look at what's on the market and what people want. Now, for every 10 properties that I inspect to buy, I look at one open home for rent. Have a look at the potential tenants and what they're looking for. Discuss with the agent how much properties are renting for and how quickly they're renting. Get to know the rental market really well as this is where your property will end up. Buyer Objections Buyer objections are the things that prevent prospective buyers from considering your property even if you're not selling. These objections have to be recognised because the valuer will certainly recognise them and adjust your valuation accordingly. Buyer objections are things like a busy road. Are you being overlooked? Is there an ugly facade? Is it an awkward layout? Is it situated on the low side of the street with potential water issues? Is there a proximity to power lines or a proximity to industry? While some buyer objections cannot be overcome, such as an extremely bad location, for example overlooking a bad vista, or an incurably ugly house, there can also be an opportunity to see value where others can't. Building a portico entrance or rendering might rectify an ugly facade. Erecting some privacy screens may overcome a minor overlooking problem. The trick in overcoming buyer objections is to think outside the box. You may create a feature and an asset out of solving a problem. Of course, you have to be sure of your ability to overcome these problems. Otherwise they'll become your objections when it comes time to sell. So don't walk away as others may, as you could get yourself a real bargain. Rather, look to see what could be done to overcome these issues.