Buying a property at Below Market Value – or BMV – is a great way to build a property portfolio.
But woah, before you go diving in when you see a potential bargain, not all BMV properties are gold mines.
We all know that when something looks too good to be true… it usually is.
So how do you make sure you buy only the good BMV properties that will make you money, rather than the sort that will drain you of money, time, sanity and hope?
Here’s six ways to find good below market value properties:
1. Look for the below market value properties that others have missed – not ignored
If other developers have said no, then there will be very good reasons. Don’t think you can work some magic that they can’t.
Only look for properties that are either new to market, off market or that you have found through connections that others haven’t got (see point 7 for more on this).
2. Make sure the BMV property will be easy to sell or rent
Just because it’s a pretty cottage doesn’t mean it’s a good buy.The location may be remote and make it hard to rent.
Make sure there is a hungry market for the property or your shrewd investment may soon become a drain on your finances.
3. Find motivated sellers
There’s plenty of reason why someone may be motivated to sell quicker and therefore accept a low offer.
It may be they need to relocate soon, their property has been on the market too long, or a relationship has come to an end.
Keep your eyes – and your – ears peeled for these people… and don’t be afraid to ask around and haggle.
4. Make sure to consider all costs
Don’t just see the cheap sale price and think you are getting a bargain.
How much work does it need compared to the houses it will be competing with in the area?
Are you actually getting it below market value by the time you add on all costs?
5. Don’t buy hoping a bad area is “up and coming”
You often hear people say somewhere is going to be the “New Didsbury” or the “New Shoreditch”.
Just because an area is earmarked for development it doesn’t always mean this is going to happen.
These plans can easily fall through together with your profit.
Remember, until plans are concrete your investment is actually no more than a punt.
Don’t buy in bad areas unless you strong evidence it is going to be a good long term investment (and also pay for itself in the meantime).
6. Use a middle man
Many people are afraid of using a middle man to source BMV properties but they are missing a trick.
People can be wary of the cost of the middle man wiping out their BMV profit and also wonder that if it’s such a bargain why doesn’t the middle man wouldn’t want to buy the property for themselves?
It’s a good point but many people are quite happy to make their money from sourcing property for others and don’t want to be landlords or developers.
Also, using a well connected specialist means you can find properties you would never have had the chance to find as well as save lots of time, energy and stress searching.
The small fee that your expert may or may not charge (some only charge the seller) is often well worth it.
Plus if you also use the same expert to both source AND organise the finance on your purchase (as we do at M3 Commercial Finance) you can actually save even more time and money.
If you would like an informal chat about how we can help you just, drop us a line.