Im looking at buying a particular property as an investment.?

Question

It has a decent gross rental return (6%) but has been on the market for 6 months and has not risen in value over the last 5 yrs (as stated by the real estate agent). It is close to the town centre of a growing town, and has a very steep driveway. It is 10 years old. I intend to get a soil inspection to ensure the ground is ok, as the house is on a high. Should I make an offer, say 5% less than the asking price? Why wouldnt the property increase in value when all other properties in the area have?

The asking price is 235,000, rental income is 270 a week. So a bit over 6% gross return. The current tenants have been in there for 5 years and are happy to stay longer. It is through a commercial realtor. I probably wont use a property manager as it is low maintenance and there are existing tenants. It is a quiet street, which isn’t far walk from town centre. I will get a building inspection

Answer 1

A few things first. Have you done the numbers? You know what the gross rental return is, however do you know about expenses, reserves and repair reserves. Does it still cash flow? Don't buy property for appreciation, it doesnt spend well at the power company to pay your bills, buy for cash flow. Otherwise...well...dont do it. Dont even consider making an offer until you get the financials on this property. ARe you using a commercial realtor? You need to have the rent rolls for the past 2 years, taxes on the property, expenses.........and then a 5% deduction for 6 months on the market, how long is everything else on the market...Do your Due Dilligence.

Answer 2

Location. It's not a great investment if it's on a main road or has crummy properties around it. Make sure the plumbing and roof is sound without leaks and check for mold. Find out what the appraised value is and try to buy it for well under. If so, you can pull equity out and make repairs or upgrades. Then get it rented and pay a management company to take care of it. Great long term investment.

Answer 3

ALWAYS have at least ten properties to choose amongst. So hurry out and find 9 more, maybe this is the one, but you won't know until you have checked.

BTW, how do you know the property hasn't increased in value? It sounds to me like the estate agent's estimate hadn't gone up in ten years, or maybe the current people just paid more than it was worth 10 years ago. Remember to distinguish between price and value!!!