15 February 2016

How to buy an investment property sight unseen?

How to buy an investment property sight unseen?

While this might be a daunting thought to some people, buying an investment property sight unseen is actually quite a common and simple process. Investing should be a much less emotional purchase than buying your own home, and one based on facts and figures.

The trick to separating the facts from the feelings is really quite simple…research! Extensive research on the market and the property are what makes confident investors comfortable to proceed, even if they haven’t laid eyes on the structure themselves.

Is buying sight unseen risky?

Many people feel that buying sight unseen might be a risky move; however, if you employ a “top down” research approach focusing on Macro and Micro drivers of a particular market, remove the emotion and let the numbers speak for themselves, you will find that they will point you in the right direction.

Often in this circumstance you’re researching unfamiliar markets that could be interstate or overseas. To better understand a particular market, it is important to apply the good research methodology that will ultimately determine whether you should be investing in that market or not. But don’t stop there – pick up the phone! Speaking to local real estate agents and property managers can provide valuable insight as well.

There are many ways to minimize risk when purchasing an investment property and investors who focus on the 15 Key Investment Drivers are settling themselves up for success.

15 Key Investment Drivers:


How to best research an investment property?

– Macro Level Research
On a macro level you must first decide which market to buy in. In Australia each property market experiences peaks and troughs at different times, so it is important to profile these markets and understand the best time to buy.
Your biggest influencers here should be things such as employment rates, supply and demand, and economic strength.

– Micro Level Research
The next step is to zero in on the micro drivers of a market – taking you to a particular suburb or area. When looking at micro drivers, you are looking at things such as infrastructure, vacancy rates, affordability and demographic.

– Property Level Research
Once you have worked through the macro and micro drivers you then get down to the property level. For property selection, there are a couple of things you need to ensure you’re across such as condition, rental demand and comparable sales.

Obtaining a building and pest report on the property can also assist when purchasing sight unseen. These reports identify any issues or defects the property might have which can make or break a purchase. In some instances, and depending on whether you are buying a brand new property, the builder is responsible for rectifying any of the defects outlined in the report.

Speaking to some local agents to get a feel for the current market and having a good building inspector on your team makes buying sight unseen achievable.

In summary, buying sight unseen is possible and very achievable if you apply a strict research approach, remove the emotion and let the numbers do the talking.

This article is provided for general information only and does not constitute personal advice, as it does not take into consideration your personal circumstances. Please consult a licensed tax or financial advisor before making any decision to invest.