Making the most of property procrastination: Letter from the editor
How long do you spend on real estate websites each week? Browsing listings in the name of research is many peoples’ favourite pastime, and understandably so.
However, if you’re using this time to do research online then you need to be wise. It’s fair enough to browse in the name of ‘foyerism’, as @KrisSimmons on Twitter referred to it to me. But if you’re researching your first purchase or, really, any purchase, there must be method to the madness.
There really is a fine line between due diligence and analysis paralysis.
Womankind magazine calls it ‘mentalistic hedonism’ and the concept of browsing aimlessly through real estate listings comes up twice within the issue.
They ask: “You’ve spent the last hour viewing houses on an online property website, but you’re not looking to buy or rent a house. So what exactly are you doing?”
Source: Womankind
Their mentalistic hedonism idea suggests that we browse property because we experience pleasure from the idea of buying.
However, while that is most certainly the case for some browsing (such as multi-million dollar penthouses and mansions, or any property outside of your budget), browsing listings websites can present you with a unique opportunity to really get inside the market.
Searching listings without a formal plan to buy is good for numerous reasons. One of these is familiarising yourself with the language of real estate agents when they list property. The other is getting a general understanding what is on the market in which areas.
A reader recently sent me a direct message on Twitter. I was aware that he’d recently missed out on a property at private treaty. We briefly discussed the merits of using buyer’s agents. It seemed that he had a fairly good grasp of the market just from making tentative bids and just being when the selling process was underway.
The first timer who has read all the information and browsed several properties, maybe even heading to a few auctions too, is in a far better position than a person who goes in cold.
What this type of laid back research doesn’t do is provide you solid data you can use to inform your future purchases and knowledge of the movements in the market. Certainly it provides a good base, but some solid comparables are crucial.
If you’re not sure about where you’re ready to buy, consider collecting the data as you go to really maximise all that time spent online.
To take things further, you need a system.
Someone else told me that they’d been collecting auction figures in a spreadsheet every week, with plans to use it to assist them buy in the future. Property Observer publishes links to APM's list of Sydney, Melbourne, Brisbane and Adelaide auction results every Monday morning.
I am of the opinion that it is possible to buy well and pay the right amount without hiring a professional. I also believe that it’s possible to do very badly indeed without an expert on your side, if you scrimp on valuable research.
It can be a time consuming process that, when considering your own personal cost per hour, may actually be a false economy to take into your own hands. If you’re also not that confident in your own abilities, or perhaps you’re just not really wired that way, it may be time to seek out an expert.
If you are not interested in making a really significant effort to research, let’s face it a lot of us are very time poor, then it might be worth engaging a professional or laying down some money for reports and details that would take you too long to compile yourself.
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Later in the same edition of the magazine mentioned on the previous page, Womankind presents another interesting discussion around the same topic.
They explain the ‘nesting’ aspect of interior design and renovation, but does not mention the financial aspect. It is many home owners’ dream to “do up” their property, but it’s also often the dream to add some value to it in the process. Rare is the home owner who doesn’t think about the added financial possibilities of a home extension or renovation.
Many property owners and first home buyers think their property, or the one they are looking at, is worth more than it probably is. We’re all guilty of it.
The internal dialogue goes a little like this:
“Well, I bought it in 2010 for $420,000 and that was a good price for the time. Since then I’ve spent $40,000 in renovations and improvements, and the market has moved now so it’s probably worth at minimum $600,000.”
The reality can be far different. And sometimes those $40,000 of renovations do not factor in at all. This is where objectivity, and your collected statistics, can come in handy. Become an evidence-based property investor or first home purchaser that buys based on solid, proven data.
One strategy that has stuck with me is to do the following:
- Open a document in Excel and label it with the suburb you are looking at.
- Each row down the left hand side can be the address of a property.
- In the first column next to the address, include the ‘asking price’. In the next column, write ‘sold price’ and ‘sold date’. You can leave the sold price and date blank until you find out.
- In the column headings after, write points of comparison such as “number of rooms”, “square metres”, “pool” and other features. I’ve heard of some people saving corresponding files with the pictures from the listing as well. The more details, the more easily you can compare later.
After you’ve collected these details, when you see a property come onto the market you can quickly look for where it sits in your spreadsheet. Is it a four bedroom house on 900 square metres with a pool? You might just have the recent sale price of a nearby home that matches (or can be a starting guide).
Here's a quick intro to understanding comparable properties that will help you fill in your spreadsheet.
This is just one of many ways that people collect the necessary information. Some people plot recent sales and prices on Google Maps so they could get an idea of which areas are pricier. Some people just write down the details, or give the property their own ranking as well, and keep them in a folder.
For first home buyers, having a collected pile of comparable sales can quickly alert you to when a home owner wants more than is viable for you to pay. It may also protect you from real estate agents presenting inappropriate comparables. Obtaining this information is of paramount importance.
If collecting this evidence comes with a bit of gazing at glorious Sydney harbourfronts with infinity edged pools and Tasmanian converted churches, well, so be it!