Where to find cheap properties?

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You may have an interest in purchasing a cheap property. There are several ways of locating one. Perhaps we should discuss the term “cheap” property. Cheap properties are normally some “problem” properties. However, they are not necessarily bad investments. They may be poorly maintained, poorly managed or have continual vacancies. Perhaps financial problems or owner problems are creating the situation.

Here are a few common reasons a cheap investment property may be for sale:

1. Death of the owner or the settling of an estate. These properties are generally priced at fair market value or below so the estate can be settled quickly. There is no easy way to locate these properties.

2. Partnership disputes. Some of the most reasonably priced investments on the market are a result of two or more partners who are disagreeing and want to dissolve their partnership.

3. Financing problem with the property. Perhaps the present owner is facing a mortgage and does not have the money to pay it off. If he cannot find ways to repay the loan, he may lose the property through foreclosure.

4. Run-down properties. This usually indicates either financial or management problem and may be your clue to a well priced investment. What causes a property to be neglected?

a) Vacancies. An apartment or condominium building with continual vacancies is probably creating a financial burden on the owner. He, therefore, is letting the property deteriorate, which in turn, will create more vacancies. He may be willing to sell.

When you did not see a property or unsure of vacancy problem in any building, watch the “for rent” ads in the newspaper. When a building is continually running “for rent” ads, it may have vacancy problems. “For rent” signs always on the property may be another indication. But, don’t be fooled. Some owners keep a sign up or run continual ads, especially on larger properties to be certain they have a tenant lined up when the next vacant apartment becomes available.

When you find a building that always has vacancies, try to analyse the reason. Are rents too high, the building run down, poor management, etc. Perhaps a change in the type of tenants will keep the building occupied, like catering to elderly, or families with small children, or converting to all “swinging singles,” and so on.

b) Management may be the second reason a building is run down. This usually occurs in one of two ways. The owner is “milking” his investment. in other words, getting all he can out of it without putting anything back. He is failing to realise that eventually, it will catch up with him, and he will have a difficult time turning his property, and profit picture, around again.

The other possible problem caused by management is when the owner lives in another city or state far away from the properties. He may have hired someone to manage his properties for him. The manager is getting by doing as little as possible and the physical appearance of the property is beginning to suffer.

photo credit: nateOne

5. Length of ownership. How long has the present owner had the property? When he has owned it for quite a few years, he may have an interest in selling. You can find our how long the present owner has owned his property by checking the recorded deed at the land office.

6. Sale of foreclosure properties by local lending institutions are additional sources of cheap investment properties, but it is a foregone conclusion that you are buying a problem. Even if the price is a bargain, this type of investment is not recommended for a beginning investor, contrary to the advice you’ll find in some of the “Get Rich Quick” books you have read. You want your first few investment to be as trouble free as possible.

Direct approach to locating a property
Suppose all these approaches fail to turn up an investment that looks interesting to you. Try a direct approach. Find a property that you would like to own, and appears to be in the size range you want. Find the owner and ask him if he’d consider selling it to you. Many properties are bought this way. If he says no, ask him if he know of any other similar properties that may be for sale.

How do you find out who owns a specific property? Your nearest land office has complete records of all deed transfers. This information is available to public. To locate a specific property you will probably need the legal description. You may engage a conveyancing lawyer to perform a land search for a property if you know its address (at a cost around RM150). Land search result will tell you who owns the property and details of the property including Bumiputra-reserved status.

Another simple approach to find the owner of a property is by asking around the neighborhood.

Give yourself a choice
As difficult as locating a good investment may be, do not limit yourself to just one choice.
You should have a least two that, on the surface, seem to meet your investment requirements. You can then compare the two in complete detail to determine which is the best one for you.

You may also find that you are unable to purchase your first choice in a way that is acceptable to you. It is nice to have a second possibility to fall back on. Along these lines, once you have determined in your own mind, and on paper, the maximum you are willing to pay and the most restrictive terms you can accepts, do not compromise your position.

If you cannot purchase the property on terms that you can live with, drop it and find another property. This is on the assumption, however, that your purchase requirements are reasonable ones and in conformance with the current market situation.

Everyone would like to buy investment real estate at 25 percent less than current market values, but if you hold out for that non-existent bargain, you may never buy anything.