How To Buy Property Under Market Value

Knowing how to buy property under market value has become a key tool for the experienced investor.

This practice involves purchasing a property for an amount less than what that property would usually sell for. 

Knowing how to find below market value property is a key ingredient of so many investors’ success, as it usually means the property growth will be far greater than if the property was purchased at a  market price.

There are plenty of reasons why someone might be willing to sell a property under market value.

The owner may be in a rush to sell the property as soon as possible. Perhaps they need the money quickly to pay off debt, and don’t want to waste time trying to get market price. 

Often it becomes about timing, with the owner preferring a quick sale over price. While this creates unique opportunities for buyers, these sales are always time sensitive and will require you to act quickly.

I’ll go through some of the key strategies to buying a property below market value, so that you can get a leg up on the competition.

Have A Good Understanding of the Market

To buy property under market value, you first have to know when a price constitutes “under market value.”

You’ll need to be able to compare similar types of properties, in similar suburbs. It’s no use comparing the price of a home in the inner-city, to an apartment on the outer-suburbs!

This requires research: both practical and theoretical. Analyse the data on a suburb to get an understanding of how it compares to similar suburbs. 

You’ll also need to explore different homes and inspections over a longer period of time to get an idea of what type of property is for sale at a particular price point. 

Once you understand how much a property is worth, you’ll know when there is a home being sold at an under market price point. 

For tips on how to determine property value, check out the video below:

Develop Relationships With The Local Agent 

It’s also a good idea to get to know a few local agents.

Developing relationships with the right agents in the right areas can give you quick access to these under market deals.

If agents know you and what you’re looking to buy, you could be the first one they call when something comes on the market.

Grab A Pre-Settlement Property

Another option when it comes to buying a property under market value is to keep an eye out for property that doesn’t make it through settlement.

In some instances, a buyer may sign the contract but will be unable to settle.

When this happens, the seller will need to look for a new buyer. 

Sometimes, the original purchaser will have to forfeit the initial deposit, and the seller may be willing to reduce the price as a result. 

Keep An Eye Out For The Right Seller

Developers, builders, divorcing couples, deceased estates may all be looking to make a quick sale and can be a great way to get a good deal.

Often a seller will want to hold out for the best possible price. But not everyone has this luxury and people will need to get rid of the property sooner rather than later.

Divorcing couples will often look to get rid of their home quickly. 

In instances of mortgagee sales and deceased estates, the seller will look to be rid of the property ASAP for a reasonable amount.

Developers will also look to move property quickly and the longer they can’t sell the lower they will go on price.

Know what you’re buying but also know who is selling and why. Understanding these motivations can present the best opportunities to buy undermarket value. 

Know How To Negotiate

Sometimes, the most direct option works the best.

Negotiation can be a tricky art to master, but it can also be a good way to get property under market value.

The key here is to know what is being sold and where there may be ways to lower the price.

Perhaps they need to make a quick sale. Or maybe there are some issues with the property that you know you fix cheaply, and are able to negotiate a lower price.  . 

Or maybe they are interested in a long settlement – other buyers won’t be willing to wait, but you may be in a position to play the long game, for the right price.

Knowing these things can give you an advantage in getting the best price on the right property.

Be In A Position To Buy

As mentioned, the art of buying property under market value really comes down to being ready to buy when the opportunity arrives.

Undermarket sales go quickly, so you need to be ready to buy at the drop of a hat.

There are a few things you can do to be in this position, including:

• Have a deposit saved (usually around 15-20% of the purchase price)
• Have your financial records ready to service any lending against the property 
• Carry out all the appropriate checks and analyse all the data available on that suburb so that you can be ready to pull the trigger and know it’s the right decision.

The Bottom Line…

All these strategies to buy undermarket rely on you acting quickly and leveraging opportunities where there is a quick sale.

That doesn’t mean you cut corners, but rather make the proper preparations so that you’re in a position to grab a property going at a good price. 

There will always be an opportunity to buy a property under market value. 

But buying under market should never mean you sacrifice the core pillars of good property investing. Cash flow and growth potential are still the priority!

Understand your situation, goals, resources and continue to develop your property education. This will give you the best chance of buying the right property at under market value.