19 Oct Make money by saying no – Miriam Sandkuhler
You will make more money from the things you say ‘no’ to. An unusual statement but it applies to how buyers agents look at buying property. We can lean much from asking about the properties they reject and why. Buyers agent Miriam Sandkuhler answers that for us.
Kevin: Someone once said to me that you’ll make more money out of investing from the things that you say no to. That leads me to ask this question now of buyer’s agent Miriam Sandkuhler from Property Mavens: the properties that a buyer’s agent will reject, and why?
Good day, Miriam. How are you doing?
Miriam: I’m good, Kevin. Thanks for having me on.
Kevin: It’s a great question, and I’m sure you’re going to be able to give us a wealth of information there. What sort of properties do you reject, and why?
Miriam: I use the term “compromise,” so any properties that are compromised in any way that can have a detrimental effect to the property’s capacity to resell down the track or to earn decent capital growth down the track.
For example, there was a great property I was looking at for a client in Sunshine West recently. It ticked all the boxes except it was very close to high voltage power lines, and I know for a fact in dealing with a lot of sworn valuers, that they always suggest if you can stay 100 to 300 meters away from those power lines, it’s better from a resale perspective and a capital growth perspective. In this instance, the property we rejected was within 65 meters of both power lines, so we walked away.
Kevin: Yes, that would be a no-brainer, wouldn’t it?
Miriam: Well, no, not really. In that situation, a competing buyer bought it for their client.
Kevin: Well, there you go.
What are some of the other things that would knock properties out, Miriam?
Miriam: When I assess a property, you look at the whole property, not just the individual parts of it. I factor in things like the suburb, what the demand is like in that suburb of buyers, what the capital growth rates are like, vacancy rates, and so forth. They have to show specific returns to make it viable to invest, and if they’re not what I need, then I don’t bother.
Proximity, so things like proximity to transport or employment or schools. Local amenities, that’s really important, so depending on how far or how close they are to it.
Some suburbs can be really big. I know there’s a suburb here in Melbourne called Reservoir. It’s a substantially large suburb and there are some really great properties, but when you figure out why they cost so little comparatively to the ones that are closer to the shops and the train… If you want to go to a shop in that region, you have to hop in the car and drive to it. So, that’s something to take into consideration.
Then you look at the street itself, what the streetscape is like, what the traffic is like, what the zoning on the street is like, what capacity there is for that street to be subdivided and developed and become denser down the track. That might be a reason to reject a property if there is a lot of risk around that, or it might actually be the reason to buy it if someone is looking for a development site.
These are some examples of the things that you need to take into consideration to decide whether or not it ticks the boxes or if it doesn’t and it’s not good enough.
Kevin: As a buyer’s agent, when someone comes to you and says they want to buy an investment property, what are some of the questions you ask them, just so anyone who is interested can be a little bit more prepared?
Miriam: It’s firstly about what’s your strategy? Are you investing for capital growth or for cash flow? I always like to get an idea of what’s already in their portfolio, to see how balanced their portfolio. And, of course, it comes down to their income, their buying capacity, and if they’re already financed and pre-approved.
I think one of the mistakes that most people make is they start searching the Internet and race down that path. One of the first things they really have to do is talk to a mortgage broker and find out exactly what they can borrow, because the way banks are changing their policies every five minutes at the moment, people who qualified one week suddenly don’t qualify the next.
That’s a really important thing. If you’re going to talk to a buyer’s advocate, have that buying capacity in place and know what you can do.
Kevin: Generally, what do you find in terms of a negotiation level? If you were looking to buy something around, say, $600,000, what price range, typically, would you be looking in, knowing that you could negotiate?
Miriam: In the market that I’m in and the investment-grade property that I buy, often there is not a lot of room to negotiate because I’m dealing with some high-demand, low-supply properties. Having said that, there are still skills that come into play and I manage, more often than not.
What’s more important is to secure the investment-grade property at fair market value rather than trying to muck around to save a couple of dollars and lose out. That’s something really important to consider.
It really depends on the state that you’re in and what the regulations are around price quoting. Certainly, in Victoria, we’ve had legislation come in that now provides a framework under which quoting has to take place. But unfortunately, the sneaky agents who are out there, a number of them [4:36 inaudible]. That effectively is still a way of under-quoting.
But you know, it really depends. It’s really case by case. The other thing, too, particularly here in Victoria, Consumer Affairs haven’t particularly advertised it very well, so there are a lot of buyers out there still automatically just adding 10% or 20% to the top of a quote range, not realizing that legislation has come in, and then they’re doing themselves out of locking in the property in the first place. So, there’s still consistency in the marketing in Victoria around price quoting.
Kevin: I guess at the end of the day, you have to listen to what the price range is, but you then have to make your own mind up as to what you think that property is really worth, Miriam, haven’t you?
Miriam: That’s exactly right. You always have to do your own research. In Victoria, we now have a statement of information, and where it gets tricky is that sometimes the comparables either aren’t genuinely comparable or the date of the information is so out of date that properties have increased substantially in price in that time.
Whatever it is that the agents are providing, you still have to do your own due diligence, you still have to do your own research, you still have to understand how to assess the value of property and how to know what a genuinely comparable property is.
If you just can’t do all of that and you’re missing out, understand that it’s costing you anyway because being out of the market when it’s escalating so rapidly will probably cost more than engaging a professional buyer’s advocate.
I say to investors, if you want to give it a go yourself, great, do that, but draw a line in the sand and make a commitment that you give it a go for a certain amount of time. Then if after that time, you’ve had no joy, get a professional to help you because you’d be surprised how quickly we can get you an outcome.
Kevin: Miriam Sandkuhler there from Property Mavens, PropertyMavens.com.au. Miriam, thanks again for your time.
Miriam: You’re welcome. Thanks, Kevin.