Harsh BMV Secrets Property Investors Should Know
Let’s face it, in the business world, everyone is looking for a bargain. One of the best feelings you can get as a property investor is when you close a deal on a BMV (Below Market Value property) that you know will sell for way above the price you paid. When these deals go according to plan, the return on investment can be phenomenal. That, however, does not mean that they always go according to plan. As it is with every other business venture, there is a lot that goes into making any of these deals a success. Here are some BMV secrets property investors should know about before delving into this world.
Research is key
Just because someone says that the property is selling for below market value does not necessarily mean that it is actually selling for below market value. You have to do your own research. The mistake that most investors make is to take sellers at their word and to fantasise about great profits in their future that they fail to see the reality through that haze of wishful thinking. The most important inquiry you can make is to find out how much similar properties within the same location have sold for in the recent past. And we are talking about months, not two years ago. Look at the records. Six months ago, how much were similar properties within the same location selling for? How had that changed from a year ago? What are the projections? Why is the property selling as a BMV and have you used an independent valuer?
What kind of arrears comes with the property?
In your haste to make the deal, you may not exactly have neither the time nor inclination to look at all these other factors that might potentially dull the shine of your new toy. But this is what being a mature and seasoned investor entails. You have to look at all the angles. For example, what kind of service charge arrears comes with the property? Are there any future earmarked works for which you will be expected to contribute?
What else don’t you know about the property?
Is there going to be a finder’s fee associated with the sale? If so, how much? Are you going to manage the properties yourself or do you intend to hire property managers? Unless you do a great deal of the legwork yourself and use several independent valuers, you may end up finding out that the property you thought was selling at BMV is actually selling at market price. Add on to that all the associated fees and you might actually be getting a raw deal.
These are all things you need to look at before you get swept away by the excitement of making money through BMV purchases. Take your time. Do your research and do not let greed or excitement govern your decision making process.
If you want, attending property-networking events can be a good way to fish for first-hand knowledge of properties, agents, buyers, or sellers. I have friends who have recommended me to PIN meetings, which is under Simon Zutshi, as well as the We Buy Houses Community Meetups, which is under Rick Otton, because they have multiple networking events lined up every month, so it’s easier to block your schedule in advance and include yourself to the party.