By Rich Harvey, CEO & Founder, propertybuyer.com.au
It almost seems like a million years ago now when property markets were incredibly flat and virtually all of the power rested in the hands of buyers.
You could drive a hard bargain, set the terms and walk away if need be and shop around for a better deal. There was little competition and things moved slowly, giving shoppers time to find the perfect property without having to compromise on much.
It was barely nine months ago, but when you look around at current conditions – frenzied auctions, rapidly rising prices, a scarcity of listings and a whole lot of competition on the ground – it might as well have been a lifetime.
When there’s a great deal of heat in real estate, what should you be willing to compromise on? And when should you absolutely refuse to budge?
Time for some soul-searching
Whether you’re an investor looking to expand your portfolio or someone on the hunt for your dream home or an upgrade, you’ll have a list of priorities in mind that guides your journey.
You might be bound by budget. You’ve got a set amount saved for a deposit, or a certain chunk of equity in your portfolio to fund the next investment, and that dictates where you’re looking and what you’re looking for.
Or it might be you’ve got a young family, and so a bit of space inside and a patch of grass or easy access to a park are important.
It could be that you’ve got a long-term plan which requires targeting particular growth areas. Perhaps an investor looking for a faster accumulation of equity, or cash flow to keep your holdings ticking over without having to pour much in.
You might be a first-time an owner-occupier who wants to be able to move up the property ladder down the track.
No matter your position now and in the future, there’ll be some must-haves on your wish list.
But there’ll also be other selection criteria that can be open to self-negotiation.
When to budge
In market conditions like these, there are some unavoidable factors working against every buyer.
There’s an imperative to act a little quicker than this time last year, given how many buyers are about and the low number of listings. It means the luxury of taking your time is no longer assured.
There’s also a price premium placed on really good properties, so if you don’t have the extra budget to throw at a deal to get it across the line, you might miss out.
This is when compromising becomes essential for many buyers.
But where should you compromise?
First and foremost, you should be prepared to compromise on elements that can be changed later.
This includes cosmetic alternations in the form of the look and feel of a dwelling. You can always repaint or change the furnishings, like carpet or window coverings. You can put in a new kitchen or bathroom when the time is right too.
And you can always get your hands dirty at your own pace to overhaul a jungle of a backyard or rip up daggy old concrete slabs to put in outdoor living spaces.
The actual layout of the place is also changeable in many cases. Shifting a wall or two to turn a rabbit warren into open plan living is a good example. Moving some plumbing to a different part of the house – tapping into existing facilities near a bathroom of laundry, for example – to relocate the pokey little kitchen to a more usable space is another example.
Don’t be put off by the looks. Or, as the old saying goes, don’t judge a book by its cover. Consider the potential of a property and what you can alter in the future to boost its appeal and value.
If there are things that absolutely can’t be changed and which the market would consider a drawback, don’t compromise. You can always renovate, but you can’t move that smokestack or electrical tower next door, nor can you relocate six lanes of traffic.
And that brings me to the next crucial point.
Never, ever compromise
As I said, the cosmetics of a property can be changed to improve its value in current terms. Ditching awful green carpet, updating an orange laminate kitchen and removing garish wallpaper are all possible in a short timeframe.
But improving the status of, and services in, the property’s actual suburb? Well, that’s out of your hands and can be something that takes years, often decades, to evolve.
Don’t compromise on the location of a property. Focus on suburbs that offer the best growth prospects in the mid- to long-term. These are areas that are in demand with a big buyer group now and into the future.
That doesn’t mean you should write off an ugly duckling suburb – these can still be an excellent ‘locational’ proposition. During your search, just consider areas that aren’t hot right now but are showing signs of gentrification, urban renewal, infrastructure investment and generational change.
It’s also unwise to compromise on position. By this, I mean the location of a property within a suburb. Blue-chip suburbs have undesirable pockets within them, due to either high traffic flow, proximity to noisy rail lines or off-putting facilities like 24-hour service stations and fast food restaurants, and so on.
When searching out opportunities in suburbs, be they blue chip now or on the cusp of change, look at where a property is positioned in relation to lifestyle amenity, shopping strips, cafes, parks and good schools.
In a property itself, don’t compromise on structural elements that are difficult to change. A tiny living room with an internal wall that’s load bearing, and therefore near-impossible to knock down, is a good example of an unusable space that will remain that way.
Consider the block itself if you’re buying a detached dwelling too. Look at the slope and elevation to get a sense of whether the patch of land you’re paying a big premium for is actually worth anything.
And in busy suburbs, in big cities especially, consider parking. If there isn’t off-street parking available, does this matter? Will it matter in the future? If an area is becoming family friendly and there’s nowhere for a future buyer of your investment to garage their car, that could be a problem. On the flip side, if it’s a young and trendy pocket that’s well serviced by public transport, not having parking mightn’t be an issue.
Consider what matters
Deciding when it’s wise to compromise – and unwise to do so – comes down to your priorities now and in the future.
But it should also be decided with future buyers in mind. When it comes time to capitalise on your investment, think about who you’ll be targeting and what will matter to them.
There’s a lot to consider and many moving parts of the real estate engine to keep in mind. It’s why utilising the services of a qualified, experienced, independent and well-connected buyer’s agent is well worth it. They’re there to help you sort out the deal-breakers from the deal-flexers in your real estate wish list.
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