The 5 major mistakes that owners and investors shall avoid in today market.

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The real estate environment as we see it today is very different to that of early 2000-2004 when even Mum and Dad investors could make a profit from a property transaction. During that time, simply buying a property was enough to guarantee some form of capital growth. From 2008 to now, the market consolidated and the rate of growth declined but investors (and home owners) could still attain reasonable growth if they chose well and bought right. Since the Global Financial Crisis, the environment has changed dramatically and while we haven’t seen massive falls in property prices (at least not across the median price spectrum) liked USA or UK, the prospect of attaining capital growth has become slimmer.   Mistake No 1 – Over-Capitalising.   This is the number one error that we are seeing time and time again. Typically, it’s in the form of renovations to an existing dwelling and generally comes in two forms. The first is simply spending far too much money on improving the property and expecting that the increase in sale price will equate directly to the amount spent on the improvements. You may think the gold taps are simply a “must-have” but the impending buyers in the market may think differently. They are looking to get the property as cheaply as possible in order to minimise borrowings. The second is improving a property over and above what the surrounding neighbourhood aspires to. A two storey palace with a circular driveway and stables home does not have its place in a school district standard suburb or outlying country area where the majority of properties are modest single level dwellings.   Mistake No 2 – Not Adjusting Expectations. A common issue between valuers, banks and owners is that valuations are coming in below the expected market value placed on a re-finance request when it is sent through. That is, the owner’s estimate is much higher than the resultant valuation because the original estimate has not taken into account the current environment.   Everyone still thinks they can get the same price for their property as if it was pre 2008. The fact is the recent sales history is showing a decline in price, or extended periods on the market and each of these factors is affecting the valuation figures returned. If you think your house is worth $500,000, but all around you, similar houses are selling at $480,000 and are taking 6-9 months to do so, then the likelihood is that your property will value up at around $480,000. Hence today market is still a buyer market.  You shall seek free pre-approval to maximise your bargaining power. Mistake No 3 – Timing. In this case, timing relates to the sales period. Not everyone has the benefit of being able to plan the sale process of their home. The current environment has meant that many people have had to undergo a forced sale or at worst, a mortgagee repossession. That being said, owners and investors are still not adding a selling scenario into their exit strategies and are subsequently being caught short if all of a sudden they do have to sell. The end result is a frantic campaign at a lower price with a mass of bargain hunters attempting to force down the price. Seek experienced broker to help you to re-structure your loan so you have the buffer to tide over unexpected events that you can avoid this unpleasant situations that is working against you.  Mistake No 4 – The Asking Price. Where an owner is looking to re-finance and has an over-inflated expectation (as in mistake number 2) the same thing is occurring when a seller enters the market with an asking price that just doesn’t reflect the market, or is based on “what the property owes me”. What invariably happens is that there are no buyers, the property sits on the market for longer than required and then the asking price starts to fall in the classic “stepped” approach whereby the owner is always one step behind what buyers are willing to pay and the price keeps falling.   Mistake No 5 – Poor Renovation Planning. This mistake is becoming more prevalent today than at any time in recent history. The usual scenario is that the owner/investor starts renovating and then runs out of money and attempts to pull out more equity to continue the renovation. The valuer is called in to assess the situation and unfortunately, because half the walls are incomplete and the bathroom is a mess and the back patio is just frame work, the valuer has to put a lower figure on the property because if it had to sell in the current market it would not achieve a market rate due to it’s state of incompleteness. This is a tragedy all-round because in most cases the finished renovations would have some added value yet the property needs to be valued “as-is” in order for the valuation to be a true and accurate reflection. What happens is that the bank decline the re-finance, the owner/investor has no money to continue work on the property, so it sits in the market as incomplete product. Throw in a worst case scenario where the property now has to be sold and the financial pain is enormous.   Such mistakes however can be avoided by simply speaking to a number of people including a real estate agent, your finance broker or a valuer either independently or collectively to determine a course of action before starting any process.   Capital Wealth Finance is your wealth creation partner that tailors financial solutions based on your needs analysis to ensure your decision making is of quality and can stand the test of time. We would much rather see people avoid the mistakes than experience them.