Have you been told to look for the elusive below-market-value property deals?
Have you been told to look for the elusive below-market-value property deals? Find out why they don't exist!
As a seasoned professional who has been investing in property for years, owning and renting out properties and buying new ones to add to your portfolio, you will likely have missed the recent trend of "property gurus". As an experienced investor, you may not even be aware of these gurus as you are definitely not the target audience.
But, over the last few years, several names seem to have exploded onto the property investment scene, spouting their knowledge and experience of deals they've made and showing off the wealth they've created for themselves. They sell training courses and books, podcasts and youtube channels to teach novice wannabe investors who are desperate to begin a property portfolio and an investment journey to create wealth for themselves, just like these gurus did.
And if you are looking to dip your toe into the property world, I'm sure you will have come across them and perhaps even attended some of their courses?
During the pandemic, these trainers turned to online learning to teach their methods, and the audiences grew as so many things online did during this time.
And their favourite buying method is to always buy Below Market Value. And it does make sense; buying something at a price lower than its value will always be a good idea. But property prices are not fixed, and there is no exact science to guarantee a price, so how can you be so sure that the property you're buying is genuinely below market value?
In a challenging property market, this may be possible - a seller in desperate need of a sale might be willing to accept an offer that is less than their advertised price in return for your purchase. If they are in a rush or particularly distressed, your offer could be a beacon of light that could get them out of a tricky situation.
But is that realistic? Unless you are desperate, would you be willing to sell a property for less than it is worth? No, probably not.
So, the question is, what is true 'below market value'? And how do you know?
Fresh from their course, many intrepid property investors have come into the estate agent's offices asking to see all the properties below market value. The truth is, there is no exact science to deciding the value of a property; it's down to your opinion of the value and what a property is worth to you.
Perhaps you can get a bargain by making a low offer, and the seller might accept. But more likely, your offer is the property's actual value anyway.
If the old adage is correct, that anything is only worth what someone is willing to pay, then your offer is the actual value, no?
Ask yourself, if no one else has made any higher offers, is your offer below market value or simply the market value?
The only way to truly know that your offer is below market value is if there was another offer, of a higher price, from someone in the exact same circumstances as you, and the seller selects your offer over the other one - not likely!
So, is the concept of below-market value property purchases a fallacy? Something that property gurus tell their students so that they have something of interest to say?
And where does it stand from an ethical perspective? The endless pursuit to only buy properties if they are below market value can lead to you trying to hoodwink a seller into selling the property to you for less than they could get otherwise. Many training courses recommend cutting out the estate agent and going direct to the homeowner to try and get an offer accepted that is lower than the actual value - hoping the seller won't find out that their home is worth more.
Of course, everyone's circumstances are different, but I would have said that making a fair offer is better for your karma than preying on people's desperation for the slim chance that you might gain an extra pound or two.
Property investment is generally considered a long-term strategy, with most wealth generated by holding the properties for many years, not flipping the investments quickly. Therefore, buying a property at a fair price, with growth potential, is probably a sounder investment than trying to deceive a seller into accepting your low offers.
As with all things, buyer beware. You need to go into an investment with your eyes wide open and think if you have to be so creative that you have to screw a seller out of every last penny they have, perhaps this is not the correct investment for you?
Real wealth will be made over many years, not by following the get-rich-quick style methods of the course trainer - if they made so much money by doing these types of investments, surely they wouldn't be selling training courses?
A healthy dose of trepidation in your first foray into property investment is probably not bad. Get in touch with our team of property experts to find out more. If you have any questions, we are always happy to help.