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How to avoid overpaying in a heavy "guide price" market


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Hi,

Where I am investing the market is bonkers, talking all viewings gone within 12 hours of a property going out to market and some mad price increases being banded around. Im in the east midlands, just missed out (luckily you may say) on a property thats gone for £160k , 2 bed, had 5 offers on the table, which means its gone up 60% i the last 2.5 years from 105 and went for nearly 10k over the guide price of £150k . Its happening all over the place and everythings getting listed with a guide.

The city I am in is an area where strong rental demand exists however historically properties have been responsible meaning you can easily get 10%+ net ROI, guess thats catching on now post covid. 

I have resided to the fact I'm going to have to offer on 15-20 houses before getting a deal I want and am working the agents hard to get viewings booked in before the properties hit rightmove for example and they get hammered with interest.

Is anyone else experiencing this and how are you making peace with yourself that what you are paying makes sense? I am investing at purchase price between £115-£160k which i guess is prime for people listing to take advantage of the SD holiday to move up the ladder, but alot of these places sold say 3 years ago for much less and not all being full refurbs / previous off market sales. These places however are selling within days at times.

I am happy with my ROI numbers when I run the numbers based on the rental amounts that i sense check with a local agent , and was happy to get out bid on the last one. I have a long term view on property and I am buying and holding, however I also have concerns about under valuation if the local market has taken such a huge leap in the last 12-18 months that transactions havent quite caught up?

how is everyone else finding it??  i'm feeling bullish about taking action, however I dont know if thats a case of knowing I need to and in 10 years time I wont regret it or blind stupidity following the crowd 😂

 

 

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Patience is definitely the key for investors in this market. It’s different for residential homeowners and they’ll happily pay all the money for a property as it’s most likely going to be their long term home and not something they’re looking to buy for a profit (in the short term anyway). I personally feel things will be a lot different in 6 months when furlough ends, the stamp duty holiday is over and sadly a possible rise in unemployment / tenant evictions. 

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Have found the same thing! It's crazy out there...especially Nottingham.

However I think the market will remain pretty resilient and am not going to hang around waiting for the market to dip.....

So long as you buy a good house in a good, rentable area, your figures stack up and you're looking to hold, any temporary dip will level out eventually.... My hunch is that prices will keep rising and to wait will mean having to pay even more down the line. I could be wrong but that's my view. 

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I can completely echo your frustrations!!!

 I have just ended up buying what is pretty much a ‘turn key’ property after viewing 20+properties and  multiple offers being rejected. 
I was initially attempting to buy a BRR property but all the rundown properties seem to be selling for near enough the final product value - crazy. 
The ROI still adds up on this B2L, and whilst I am disappointed that I will not be able to stretch my money further using BRR model, I do not want to wait for a market dip that may not happen, and find myself paying another 5k-10k in a years time an d lose out on potential income.

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As a cash buyer - I will wait it out for a while unless a real good deal comes along.. Hopefully there will be some distressed sales towards the autumn/winter... Its a tough call as many people have been waiting since last march for a dip and its anyones guess if it will actually come this year

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I’m getting this same issue, I’ve just called an agent about 7 properties on RM, 5 added yesterday. Of the 7 that I wanted to view, 4 are now under offer the other 3 have fully booked viewing days and I’m on the reserve list.

Absolutely crazy!

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10 hours ago, giles s said:

I’m getting this same issue, I’ve just called an agent about 7 properties on RM, 5 added yesterday. Of the 7 that I wanted to view, 4 are now under offer the other 3 have fully booked viewing days and I’m on the reserve list.

Absolutely crazy!

Yeah I think a lot of people have cottoned on to the amount of money that’s been pumped in as stimulus and effort and funds the government will go through to keep the housing market moving upwards. They know how integral the property market is to the economy in general, brits put huge emphasis on property prices and if their houses / investments are going up in value they know people are likely to increasing spending in other areas. 

 

ive had an offered accepted today, was going to buy two places in the 3 months , but have decided to get one now (that I paid asking price due to its great positioning and strong roi  from the get go) and then hold of a few months to see what plays out into spring summer with COVID and easing of lockdown etc.  Split my risk! 

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On 3/14/2021 at 8:04 AM, djaneyc said:

Have found the same thing! It's crazy out there...especially Nottingham.

However I think the market will remain pretty resilient and am not going to hang around waiting for the market to dip.....

So long as you buy a good house in a good, rentable area, your figures stack up and you're looking to hold, any temporary dip will level out eventually.... My hunch is that prices will keep rising and to wait will mean having to pay even more down the line. I could be wrong but that's my view. 

Ha Nottingham is crazy in some areas, some of the growth is insane over the last 2-3 years in some places and places are selling like hot cakes. Played into my hands working the agents every week and getting them to message me when the contract was signed on something, when it hits right move your already hours behind 

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Hi ayns

I think something to consider as well maybe when looking at this whole situation of when the prices of houses is going to stop rising etc is to consider the ratio of house prices to wage earnings, i am going to continue to try and buy here in Northern Ireland and increase my portfolio even though there is not a lot of value around at the minute if any, as at present the average house purchase is ONLY 4.5 times the average salary, so considering here in Northern Ireland when the last crash was in 2007/2008 the average house purchase was 9.0 times the average salary, you can double check this yourself but i believe at the minute in England average house prices are SIX times the average salary, so i still feel there is some way to go yet and its still safe enough to buy at the minute based on that here in Northern Ireland

There is of course still a big demand and supply issue here in Northern Ireland but from my own point of view i will keep an eye on average salaries compared to house prices as my guide as to when to stop buying as there could be a possible crash around the corner.

Thanks

Barry

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