Investors do, very often in fact, why you might ask? Because it’s a numbers game, whether or not the property is viewed before you make an offer is not as important as ensuring the numbers crunch out and you are going to make money.
A fine example of this is a company in the US that is on the MLS system (Multi Listing System) sending out a hundred properties at a time with the asking price being 25% less than the valued price, occasionally a few sellers would accept his offers, but he never viewed the properties. How he did it was to ensure he had a clause in the contract called “inspection and approval” which meant that when he viewed the property he could back out, this strategy was his way of finding the sellers that were really motivated.
This example shows that with a couple of extra clauses in the contract you don’t have to be concerned when making a blind offer, if the property is not as it was advertised then you would use the clause to say thank you but no thank you, with no loss to your investment funding.
There is of course reasons why you might not even look at the property, it may be in the right area, at the right price and the demand to move quickly may determine your need to move quickly to close the deal, it may be that it is so far away from you that you are happy to take a punt, however, I would NEVER recommend this to anyone as I firmly believe as I said above that inspections and surveys are what protects the investor.
An investor should always verify the income that will be derived from the investment – check the rental incomes that are being asked in the areas you are looking at, you can see from local media coverage as to how much different types of properties are commanding in the way of rents, this will help you to decide on the area and the income you will receive – beware of areas which have many properties for rent in the local papers that appear week after week, the asking price is either too high or the area is not desirable to prospective tenants.
Verify all expenses with other investment properties in that area. If any expenses listed by the seller seem unusually low, they most likely are. Just substitute your own best guess in place of any suspicious numbers.
When investing in property remember it is a numbers game, use all the tools you can to determine your outlays and returns. Jamie Johnson of FJP Investment said “I would certainly suggest talking to your local commercial brokers for each area as they have to have their facts and figures up to date to answer all investor questions”.
If you are intending to use a loan as opposed to a cash purchase then ensure you calculate your loan repayments v your income, use an online calculator, simple and it will tell you how much cash flow you will have, by doing this you can then divide the cash flow by your investment and you will see if it is a viable proposition. If the numbers work for you then you are on to the next step, find the property make an offer, always go in low, you can always go up but never come down, so as everyone expects you meet somewhere in the middle between the asking price and the offer and then way to go.
Always make the inspections a part of your offer, if the inspection throws up anything you are not happy with then go back to the drawing board or renegotiate with the seller until you are happy to proceed.
FJP Investment is a leading provider of UK and Overseas property investments. Opportunities include care home investments.
