In a recent post titled What is BMV in Real Estate? I explained that Below the market value (BMV) is a collective term used by investors and property investment experts to mean any purchase or investment made below the market price.
Often, BMV properties are good deals that have the potential to be profitable because of the ability of the investor to get these properties at a cost that is lower than the supposed going rate.
Although, “there are two types of BMV properties: those that make you money, and those ignored because they are money-draining duds.
The truth is, it is not all properties that are buyable at below the market value price that are significant investments.
“Some of them are cheap as chips for a reason!”
In this article, I’d like to share four things to consider when sourcing BMV properties:
1. Make sure that it is a cash-flowing property
“An excellent property investment needs to pay its way, so make sure that any property you consider purchasing is going to be cash-flowing.
For example, it is possible to pick up cheap, high-quality properties in remote parts of the UK. These could have the most enchanting views and most beautiful designs, but the likelihood of you selling them on or renting them out quick is unlikely.
Even properties in apparently desirable areas can cause unexpected selling problems, such as a lack of hungry tenants or low rental prices in the city failing to cover the mortgage.”
Remember – “No rental demand, no tenants. No tenants, no rent. No rent, no money.”
2. Seek out hungry sellers
“Properties that have been on the market a long time is likely to have a willing seller.
On apps, such as Zoopla, check the “most recent” listing backward.
If you combine evidence that similar properties are available for rent in the local area with the fact that the property has been on the list for a long time, you are likely to find a motivated seller.
Any property not viewed on a property website or app for a month or more suggests that the seller is going to be more open to lower offers because the longer their property is on sale for, the more it will cost the seller.
A seller’s keenness – or even desperation – to sell their property offers you plenty of leverage.”
3. Don’t buy homes that need too much work done
“Some property investors are so excited by a BMV price that they neglect to consider how much extra work the property is going to need before it can be rented or re-sold.
If you have great builder contacts, then a property that requires some work might be significant. However, there are risks involved when buying a run-down building, so make sure to hire a property investment consultant or a reliable surveyor to inspect the deal and detail any significant repairs or alterations needed.”
4. Don’t buy in the wrong location
“Buying in the wrong area is one of the most common mistakes that first-time property investors are likely to make. Many areas may have a reputation for being “up and coming,” with plans for better transport, a new shopping center, more significant funding, and many other exciting possibilities.
However, unless plans such as these become concrete, they can easily fall through.
Every investment carries risks, of course, but it is your role to minimize the likelihood of loss and increase the possibility of profits.
For that reason, avoid buying property in the reputed “bad” areas of town simply because of their low price tag, unless you have some serious evidence that it is going to make a worthy investment.”
“Buying below market value is finding a property for a lower price than other property owners are selling similar properties. If you can find a distressed seller, or any property that has been overlooked by other buyers due to lack of advertising or some other neglect on the seller’s part, do your due diligence, and get ready to make some serious money.”
If you would like to learn more or ask questions about how to find BMV property deals, you can book a free 30 minutes strategic property investment session with me here.
Thanks for the insight.