Working out how to be a good buyer can be tricky. There are some difficult situations to navigate and often, it can feel like you aren’t completely in control. So how do you set yourself up for success and ensure that you are a ‘good buyer’. Read some of the factors that you should take into consideration when you’re getting ready for purchase.
Try not to enter into deals which mean that you feel rushed or pushed for time. More often than not, the more time you have the better prepared you’ll feel. Whilst not every situation affords the luxury of being able to negotiate a longer than standard 4 – 6 weeks completion, having a bit more time, allows the developer to get organised.
It would be a useful window to sort out finance, carry out further investigation work or even to start discharging pre-commencement conditions. Make sure that you use this time effectively and be wary of the fact that too much time can also be an issue. Ultimately, you want to be able to start working on the land as soon as you complete, you definitely don’t want to lose time with the land being untouched.
When you are thinking about closing the deal, it’s always wise to consider the best financial structure for you. Naturally, a vendor would prefer an outright purchase so that they receive their money but that might not be the best option for you. Think about exploring other alternatives which afford a little bit more flexibility.
Joint Ventures are one way of reducing your costs and as this method becomes more popular, more and more sellers are becoming open to this financing option. The only thing you have to be wary of here, is ensuring that your JV is with a person or company which is on EXACTLY the same page as you. There is no point going for a more cost-effective option and then finding that you can’t agree on how the land will be used.
Another route to go down is buying land on option. This is by far the best way to take some control over a land deal. In essence, it means that you have first refusal on buying a piece of land. This can be expensive depending on what the option agreement is and whether your planning application actually goes through but if you identify an opportunity before it goes to market the deal will ultimately work in your favour. Whilst in theory this is a great approach there are a number of potential pitfalls and you have to do a lot of due diligence to feel confident when you offer on option.
Look Long Term
Think about what else you can get from a site. Is there further development potential? Whilst you might already have in mind what you want to do with the land think about what else can be done. I have seen many instances whereby land deals are consented for one use but could suit an alternative. It’s great if you select a site that can be dynamic, property is so unpredictable that’s it’s always good to have a second or even third back up option to prepare for all eventualities.
In addition, there may be a number of specialised cases where you could encourage the vendor to enter into an overage agreement. Whilst there are instances where these might be few and far between, it’s always good to consider sites with future potential.
Be Prepared for Pitfalls
It may seem obvious but to be a good buyer, you need to be open minded and ensure that you have considered all eventualities. First of all, know your area and make sure you are familiar with the market, there is no point going for an opportunity in an area that you don’t know very well, it can lead to hidden problems further down the line.
On a similar note, no matter how well you know the area, make sure you know EVERYTHING about the land. It may sound silly but check your rights of way, make sure that you can access the land you are buying and more importantly that it can be built upon.
Finally, one of the biggest pitfalls is making sure that you can actually sell. Your exit strategy is so important but sometimes, people can rely on pure faith to ensure a sale. Whilst risk can be positive, it’s not something that you want to depend on, particularly when you are left with units which you cannot sell on.