What type of property should you be buying in the current market?

I was recently speaking to a real estate agent, who made the comment to me, “you should only be buying properties that are selling” in the current market.

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This was a statement that really resonated with me because I’m only ever looking to buy A-grade properties. In the current market, we’re really starting to see just how differently, A, B and C grade type properties are performing.

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While it’s been well documented that property prices are declining across the country, that’s still not stopping people from buying homes. However, it is very important not to get too caught up in trying to grab a bargain.

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At the moment, you might very well be able to go out and buy a “cheap” property. It's likely that it is going to be significantly cheaper than what it was this time last year and there are it’s also likely that you’re not going to be facing all that much competition.?

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The question really needs to be, is that the type of property that you should be buying?

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Over the last few years, I think a lot of people got caught up in the overall strength of the market. During a good market, everything sells.

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If you’ve got a mediocre property, then the perfect time to try and offload it is during a strong market. That’s really the only time you’re going to have people fighting over what is a less than solid asset.

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On the other hand, if you’ve got a really A-grade property, that ticks all the boxes - think things like owner-occupier appeal, blue chip location, plenty of parking, large bedrooms, north facing with good light, close to schools and shops - then you’re always going to have very strong demand.

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Going back to the comments of the real estate agent I was speaking with, they continued to reiterate the fact that it’s these A-grade properties that are continuing to sell incredibly well. They are still attracting plenty of interest and multiple bidders. These types of properties aren’t selling at a huge discount and it’s likely that they never will.

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On the flip side, there are plenty of cheap properties and great bargains to be had. But if you’re buying a C-grade property with no competition, then there’s likely a reason for that.

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Where is your growth going to come from in the next 5 years, without strong demand and fundamentals to back it up? Who are you going to sell the property to in the future? Are you going to be able to attract multiple bidders when you launch your marketing campaign?

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These are the real questions you should be asking, not how much you can knock off the asking price. If you’re getting a huge discount, you might just be paying what the property is actually worth. Is a cheap property really a bargain at all?

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After what’s been a record run of property prices, it’s easy to think that all properties always rise, when in reality that’s not the case.

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As Warren Buffett says, "A rising tide floats all boats….. only when the tide goes out do you discover who's been swimming naked."