I was having a conversation with a good friend the other night whilst around at their place for dinner – pre lock-down of course – and we got chatting about a bit of a moral dilemma. The dilemma being that if you’re buying off a distressed vendor below market value are you taking advantage of someone else’s misfortune? My answer is no – but not because I don’t have feelings or morals.
The reality is that there are going to be forced sales in this market. Maybe not mortgagee sales but certainly sales where the vendor has been left in a position where selling is the only option. This is one of the real negatives of a market downturn and it’s painful to see. However, it’s happened before and it will happen again so as property owners and business owners we need to be prepared for when it does happen.
If someone is selling at the moment, then it’s more than likely because they have to rather than because they want to. Therefore, isn’t someone buying it actually a good thing for all parties? If buyers sit on their hands because they don’t want to “take advantage” then that will leave the vendor in a worse position as well.
This leads me on to the point of my message today which is what would I be doing as an investor right now?
First of all, I’d be making sure I know what my options are. Do I know what the banks will and won’t do in this market and which strings I can pull when I need to? I wrote about this earlier in the week it’s vital you understand because knowledge is power. If you have tenants that find themselves struggling to pay rent, then you have options so you need to know what those are.
Is your portfolio well set up and have you maximized your equity position? what I mean by that is do you have access to capital for when you need it. What’s your LVR position at the moment? If you spot a good deal, have you got access to a deposit easily? Right now, is the time to be getting this sorted but it may not be as simple as you think. Bank credit appetite and turnaround times are way out of kilter so get advice around how to approach this.
Have you got more than one banking relationship? This is important for a number of reasons but one that will catch people out in this market is if you need to sell in order to access cash. Will the bank you’re with allow that or will they look to keep full settlement proceeds. This has been a problem for a while now but now more so than ever. Make sure you can achieve what you’re trying to do before you go about doing it.
In all honesty, as an investor right now I wouldn’t be buying. I would however be getting myself ready for when the opportunities present – and they will. So have a look at your portfolio and put together a strategy for your next move. If you’re not sure, then get advice. Luck is simply when preparation meets opportunity, so get preparing.