Few questions get property gurus hotter under collars than ‘should I buy real estate sight unseen?’
Some experts warn it is a financial disaster waiting to happen. Others will dismiss that view as irrational, stressing sound property investments should be purely numbers-based decisions.
Here are a few of my thoughts on the pros and pitfalls of buying real estate without laying eyes on it. In my view, the best way to make any decision is to first educate yourself – read widely and consult professionals – then make an informed decision based on your own individual circumstances and goals.
Good reasons to buy sight unseen
- Emotion is less likely to influence the purchase decision – ‘falling in love’ with bricks and mortar and getting emotionally attached can be fraught if buying an investment property because buyers are more likely to dismiss or miss the property’s shortcomings (ie limited rental pool, structural faults, weak capital value growth figures etc).
- Figures, figures and nothing but the figures – as a remote buyer you can only judge prospective properties based on their raw data – previous capital value growth, expected rental return per week, yield, land size and virtual location on a map. If the numbers stack up, they cannot lie to you.
- Save money by doing your initial inspections online – thanks to a raft of digital tools a buyer on the opposite side of Australia can walk through a prospective property without having to physically walk through it! This means huge savings of money, time and energy and can help buyers compile a short list, or even find ‘the one’, without ever having to leave their sofa.
Good reasons not to buy sight unseen
- It is high risk if you do not know the area – spending hundreds of thousands of dollars can make (or break) new investors. Get it wrong and you may never recover. In my experience, the only way to buy smart without actually seeing the property is if the purchaser has past history in the area of the purchase and can visualise the suburb, the ‘good streets’, even the good sides of the good streets.
- You cannot see what’s next door – those clever online marketing videos and glossy still photos make the property look amazing, don’t they? Bet they don’t reveal the sewerage plant on the boundary, or power lines cutting your ‘water view’? Buying sight unseen should not be viewed as ‘the easy option’. To sleep at night, make sure you do additional due diligence to double check who lives/trades next to you and how it impacts on your property.
What can you do if buying remotely?
- Ask a local agent to tell you more about the street/suburb you are considering buying in;
- Scrutinise the figures and your personal buying criteria;
- Contact local council in the area to find out what developments are approved nearby in case they will impact your prospective investment;
- Do you have a family member or friend who can inspect on your behalf?
- Get a building inspection and/or pest inspection report as part of your pre-purchase due diligence.