Tag Archives: investing

What are the golden rules when investing in property?

True Property -What are the golden rules when investing in property?

Investing in property is probably the most popular way to invest in Australia, but there are some ‘golden rules’ to follow when buying an investment property.

Before we jump into those rules, you need to look at the investment and decide if you have a short-term focus for the property or a long-term one. A short-term focus would likely mean that you would purchase it, renovate it and sell it as fast as possible – making the biggest profit possible in the shortest amount of time. A long-term perspective means that you would purchase the property to hold it, possibly add some upgrades, then rent it out for the highest rent possible.

Set your rules and know the market

That means know what sort of properties you are after and how this fits into your overall strategy – apartments, 3-bed dwellings, or commercial properties. Once you know what you are looking for, understand the market you are buying in. Are you buying in the heart of Melbourne? Or are you buying in rural Victoria? These are very different markets and you will need to understand the market before committing to purchasing an investment property.

Location, location, location

I’m sure everyone knows this rule – you should purchase the worst house in the best street. If you nail the right location then renting out the property (or selling it) will be relatively easy. Alternatively, buy the best house on the worst street and no now will want to live there nor buy it.

How much do you expect to make?

What is your minimum acceptable yield? Most investors are aiming for an annual yield of 10%. It can be tricky to find a property with a 10% yield, but shrewd money handling and a good eye, should get pretty close. Calculate yield by multiplying the weekly rental income by 52 and dividing the sum with the property price (include renovation costs in this figure). If you can’t reach that 10% figure would a mix of a lower yield and high capital gains be a good compromise?

Find the bargains

You make money when you buy not when you sell. Which means, find a great bargain and then add value to it. Finding an unloved property that has huge potential is the key. All you need is one of these properties and you will start a property chain, earning you a nice income along the way.

What rules do you follow when it comes to property investing?

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How to negotiate a better investment deal

True Property -How to negotiate a better investment deal

One of the keys to getting a property that is good value is knowing how to negotiate. I’m sure you know a talented negotiator, one that can get discounts off anything – cars, houses, and especially at their local farmers market. They see the price as a starting point rather than the end point. When it comes to negotiating in property, there are a few key areas that can create a more favorable environment – for you.

Do your research

If you have done all your market research, you will be in a strong position to offer a realistic price which gets a good deal for you at the same time. Make sure you are knowledgeable about the market and what you are buying. If you hesitate for a second, the seller will sense it and will be able to predict your next move.

You’re not the only one

You need to convince the vendor that their property isn’t the only one you’re interested in. They need to know that you are prepared to walk away – no vendor wants you to walk away, which may mean they will be more willing to make a deal. Make it clear you have other properties you are looking at. The person who has more than one option will be the person who has the most negotiation power.

Be strategic

Your first offer will benchmark all other offers so go in high. The seller will undoubtedly come back with a lower counter-offer – you can always go lower, but you can’t go higher once the first offer is made.

Time is on your side

A vendor who needs to sell will be more open to doing a deal. Of course, you won’t always know their timeframe upfront, and the agents may or may not want to share this information, but you can get a general idea on how motivated they are by asking what other offers that may have received.

What negotiating techniques have worked best for you? Let us know your successes.

 

Will you be buying an investment property this summer?

True Property -Will you buy an investment property this summer

Many people will be taking it easy and hitting the beach this summer and real estate investors are no exception. The real estate market slows down over Christmas until about February so it could be the best time to negotiate a great deal. 2016 is right around the corner and a lot of us are thinking about what we can to do to make it the ‘best year yet’. If you haven’t jumped on the property investment bandwagon yet, you may be a little overwhelmed with the amount of information that is out there and you are looking at making the leap this summer, but you don’t know where to start.

Here are a few points to consider:

Can you afford it? 

What have you saved for a deposit? What about other sources of money? Make sure that you have at least 10%, and some banks will want more. They also want to know where you work and will love to see that you have a secure job.

If you are relying on a First Home Owner Grant (FHOG) remember that more often than not they are designed for properties that you intend to live in rather than investment properties.

Educate yourself

How much do you know about investing? What is your strategy and do you know how to evaluate a property to see if it’s a good investment? If not, then start researching and learning – the more educated you are the better off you will be.

Who’s on your team?

This is important. You need a lot of people around you to make a successful investor – Lawyers, building inspectors, buyers agent, financial planner, a property investment adviser, finance team etc. Build your team and start putting offers in on properties.

Take Action

It can seem overwhelming to have to know all this information. Combine that with probably your biggest purchase to date, and you a likely to get caught up in ‘analysis paralysis’ – you research and research and research, but don’t have the confidence to actually do it. This is when your team will help push you over the edge.

You know what to do, how are you going to go ahead and buy an investment property this summer?

Rental income vs capital growth: Which is more profitable?

Rental income vs capital growth

Everyone starts in the same place when it comes to investing in property. Most people don’t wake up one morning with a portfolio of properties that are raking in a tidy sum in rents each week.

Everyone has to learn the ins and out of how to make money in property and once they have a plan, they can start building their portfolios. There really are only two ways investing in property can be profitable.

Rental Income vs Capital Growth

Rental Income:
This puts money in your pocket if you have a positively geared property. In general, a cash-flow positive property has a gross rental yield of 9% or above.

Capital Growth:
This is the value of the property. Historically property increases its value over time, this is easy to see when you come to sell a property for more than you bought it for. The key here is to either add value to the property and/or hold on to the property long enough to achieve those gains. Again, if you property’s value increases at 9% or more annually then you’ve got a good one.

So which is better?

Actually, if you find the right property you can have both! Finding a positively geared property that you can rent out, add value and sit on for a few years would allow you to reap the benefits of both. But these are very difficult to find and all investors are looking for these properties so competition is fierce. Usually, these get snapped up by the experienced investors because they have developed an extensive network of people who can give them a heads up before other people are aware.

Rental Income:
If you like the idea of income then finding positively geared property is the key. But, it’s easier said than done. It is not easy to find a positively geared property, you will have to put in a lot of time and energy to hunt down those properties. Often times the property will only become positively geared once the debt owing on the property has been paid off.

The other downside to a positively geared property, is that if you are making money on the property then you need to pay taxes on that income which makes it harder to build wealth.

Capital Growth:
The upside to capital growth is that you can make a lot of money and this is often where investors make the bulk of their money. On the downside, you usually need to hold on to the property long-term to make a profit.

So which works better for you? Which system do you gravitate towards?

Tips for investing in property

True Property - tips for investing in property

Some things never change when it comes to investing in property. I’m sure you’ve seen these tips before, this is just a reminder list for you.

  • Buying where you live, is usually preferable, especially for a new investor as it is easy to keep an eye on the property. Drive past the property on a regular basis to be aware of any potential problems, and relieve any new landlord anxiety.
  • Three or four bedroom homes are usually easier to rent and normally have a better chance of selling should you need to sell any time in the future.
  • Low maintenance cladding materials on the exterior of the home will help to reduce ongoing maintenance costs. Maintenance is not something you should take lightly.
  • Double income properties, for example, homes with a granny flat, often offer excellent rental yields. If you lease these at different times, then you won’t be down double income if both are vacant.
  • The location of the property tends to be more important than whether the property is a house or a flat.
  • Properties down a right of way are difficult to inspect from the road.
  • Look for properties that have an X factor. Can it be extended? Is it sub-divisible? Is its location superior? Look to the future as to what you could do with the property.
  • Organise your finances before signing an agreement to minimise the conditions applicable. So many people forget to do this.
  • Set yield criteria for your property purchase. Try to achieve a rental yield higher than the rate of interest.
  • Develop a relationship with your Mortgage Broker and Buyers Agent. They will save you time and money. Speak to them regularly about your future investment plans.
  • Fixed interest rates reduce risk. Floating interest rates create flexibility. You need to know what works for you.
  • Keep accurate, complete and tidy tax records. Highly important!
  • Spread your investments. Target some properties with high yields and low potential for growth, and also target properties with lower yields and a higher potential for growth. A balanced portfolio is always a good idea. Make sure you follow a plan so you know what sort of property you will be buying next and why it will work for you.
  • Make your investment property loan interest only if you still have a mortgage on your home. Make all the principal repayments on your home loan, as this is not deducible. Make sure you work with your accountant and financial planner when doing this, to make sure it is the right thing to do.
  • Use an accountant for your tax work!
  • Always maximise your depreciation claims by having your chattels valued regularly.
  • Be nice to your tenants. They will be nice to you in return.
  • Always respond quickly to a tenant request.
  • Review your rental rates, both up and down, according to the market. Work with your Property Manager to help you with this.Talk to your Property Management Company. They have the market information and experience to help you to make the right decision for your investment.

How to find a bargain investment property

How to find a bargain investment property

One of the keys of being a successful property investor is getting to the property before the competition and getting the property under market value. But how do you do that? It comes down to planning.

Research and Planning

You need to do lots and lots of research! The numbers don’t lie and you need to have accurate historical data to make informed decisions. Some (but not all) of the areas you need to cover in your research are:

  • Median price in the suburb that you are investigating – past 12 months, 5 years and 10 years
  • Track property sales in the targeted suburb. Which ones are going to auction, which are being passed in. Ask for price guides from agents. (Keep a closer eye on comparable properties)
  • When you are looking at a particular property, find out what it last sold for, when and how long it stayed on the market.

Consider a buyer’s agent

They are on your side, they are trying to get the best deal and they take the emotion out of it all. Send the agent to auctions to ensure you don’t get caught up in the excitement and go above your budget. They will also be an expert in the areas that you are looking at, and from their experience they will be able to give you a general idea of what a property is worth.

Make an offer

Sometimes you might want to put in an offer before a property goes to auction (if that is where it is headed). Some vendors may want to skip the auction stress altogether and jump on your offer. Also, have a good negotiation strategy – not offering your top dollar first off is a good move.

Know when to walk away

There is always going to be another property around the corner. So if you miss out on one because it has gone over your budget, don’t worry another one is on its way. Plus, you never know, the vendor may not be able to sell their place for their asking price and may get back in touch.

What other things can you do to snap up a bargain?

How to get started with property investment

how to get started with property investment

We all have to start somewhere, getting started is the hard part. Where do you start?

The very first step to property investing is researching. You need to know your market so that you can effectively compare properties and know when you have a deal or not. So take the time to do reading, researching and talking with people in the know.

Tips for getting started in property investment:

Know the Market 

If you don’t understand the market, you won’t be able to make educated decisions.

Set Goals

You need to be very clear about your short and long-term goals. If you don’t know where you are going, any road will get you there.

Have a plan

Know what your strategy is going to be. Don’t change your mind once you have decided. If you change your mind half way, your results will be less than you hoped for. 

Know the Risk 

There are always going to be a risk when you invest in property. Investing in property has been a wise investment for a very long time, so know that in the long run it’s very likely you will come out ahead. But not always! 

Stick to the facts

You are not living in the property, so don’t look for properties you love, look for properties that will give you the best yield.

Location, Location, Location

Buying close to schools and shops is a pretty safe bet when looking at investment properties. Especially a first one.

So get the right advice, do the research and follow your strategy and one day you may wake up and be a property tycoon!

What do you think, what would your best advice be for a new property investor?