Category Archives: Buy and Hold

The Best Place To Buy Investment Property – A Trip To The Coffee Shop Confirms It!

coffee_artI’d love for you to join me for my cup of coffee and I’ll share how to locate the best place to buy investment property.

I’m not going to give you a long formal list of ‘must haves’. I’ll give that to you in another post. Instead, these are my recent thoughts I had over a cup of coffee the other morning icon_smile

We spent the weekend in the city visiting our 7 week old grandson. We don’t like too much time passing by without a visit, so trips to the city these days are frequent. Apart from spending time with the family, the change of scenery, coffee shops and restaurants are always nice. (I’m a big fan of coffee shops and eating out!)

Our son and his family rent one of our properties from us. It’s a 3×2 very spacious apartment we bought in 2004 for $265,000 and is now valued in the high $500,000’s. This is where we often stay for our city visits.townhouse in the best place to buy investment property

It’s just across the road from a gorgeous parkland area called Herdsman Lake. The Lake has great walking tracks all around it. You may not know, but I love to get out most mornings for a run or cycle and when we’re away from home for the weekend it’s no different. These tracks around the lake are so close and just perfect for a run or walk.

I’d had a tip recently about a great little coffee shop called The Ingredient Tree that was only a few minutes off the walk tracks. So on Sunday Murray and I took off for our run with the intention of taking a little detour at the end of our run to stop in there for a morning coffee.

We weren’t disappointed and I couldn’t believe I had not come across this little gem before. The coffee and atmosphere was great. While we were sipping our hot coffee and hot chocolate, what struck me was how busy this little place was, even though it was not on any major traffic strip.

Then it dawned on me – this little café might have been tucked away from the main stream of traffic, but it was in fact, located right smack bang in the middle of several blocks of high rise apartments that would be home to thousands of potential customers all in one spot.

This is an example of a few of the ideal facilities that are attractive to renters when you are considering the location of an investment property. The types of nearby facilities renters want when they are considering a property to rent are parks, shops, café’s, transport stations, bus services, schools and hospitals.

Too often buyers will purchase a property they like, fall in love with, can afford, but is not in a high density population area, nor very close to any or many of these types of facilities.

The Ingredient TreeThe Ingredient Tree made a smart move in setting up right in the middle of thousands of potential customers. You need to be just as smart and make your investment property purchase right in the middle of where your potential tenants or buyers are too!

This is why I prefer to purchase within a reasonable distance of a major CBD. Good deals can be found in regional areas, although generally capital growth will be slower and rental demand less.

The “West Australian” reported on June 22, that properties available for rent in the Perth area rose from just over 4,000 this time last year, to over 5,700 this year. This means the more attractive the area and the more facilities that surround an area you have your eye on, are all great indicators to start with when you’re looking for the best place to buy investment property!

The way I turn my ‘coffee shop’ thoughts into proven research is to open up my Investar program so I know I’m getting location selections right for the best place to buy investment property. Try it out for yourself and see if it helps (I’m sure it will!). Enjoy!

5 Top Suburbs Reports - FREE

Here’s to your success (and the next cup of coffee!)

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P.S. :  If you’d like to follow along my property investing journey and accelerate your own at the same time, be sure to join our mailing community by clicking the box below to get notification of new free tutorials and detailed case studies. icon_smile

Why Invest in Property? My Top 3 Reasons

Why invest in property?

There are a lot of ways for you to spend your hard earned money, so the question is often asked “Why invest in property?”

Just like we have, most people looking to invest their money will generally consider shares and/or property. Where you decide to invest your money will often be a result of the level or risk you are comfortable with, the amount of money you want to invest, and the short and long term goals you expect from your investment.

I’m not going to discuss here the comparison of shares versus property. I might do another post on that topic alone another day.

Today I want to highlight the 3 key reasons property is such a great investment.

To Invest In Property Is Low Risk

Despite what many people think, property is still a relatively low risk investment. Investing in bricks and mortar always has been solid.

One of the reasons the risk factor is low with property is that Australia has an ever increasing population growth. This graph taken from http://www.abs.gov.au shows continued growth for Australia as at 30th September, 2013 from both natural increase and migration.  Populationgrowth

Everyone needs somewhere to live. Property is not something everyone can suddenly decide to do without. And Australia simply does not have enough houses to meet its population demands. There is a lively discussion on the topic of housing demands here, with ABC’s Alan Kohler.

The Urban Development Institute of Australia have also stated that Australia does not build enough new housing to support its growing population. You can read their article here:  http://abode2.com.au/enough-new-housing-support-growing-population/

While housing prices do fluctuate over time, the market is still much less volatile than other forms of investment such as the share market. Yet, I’ve never quite understood why, for some reason, some people see it as being far more acceptable to lose money in the share market than they do if prices in the area of their investment property fall slightly. I’ll keep working on figuring that one out icon_smile

Even when housing prices fall slightly, you still have possession of your asset! It still has the ability to produce an income for you and to increase in value.

High Capital Growth

Many new investors become concerned with the outcome if the value of their investment property falls. Well, it has to be said….

the prices of property does fall, but it also rises again.

This is why property investing is best considered over the long term.

To remind you of this, I’m sure you’ve been in a situation where your jaw has dropped when you’ve heard what seems like a ridiculously low price an older generation family member purchased a now highly valued property for, many years earlier.

In Australia, through boom and bust times, property has historically continued to rise in value.

When your investment property is selected in the right location you have the ability to gain significant capital growth over time. In general terms historical statistics show that well selected properties can double in value every 7-10 years.

An example of one of the properties in our portfolio:

Purchased 1999, 3×1 Unit

Purchase price: $108,000

Current value: $420,000

So, after 15 years, this property has come close to doubling every 7.5 years.

Our equity growth has been $312,000 in that time.

With the initial investment of our own money of only around $20,000 that’s a great return on our investment icon_smile

When you do this on a couple of properties, you can soon have a nice accumulation of capital growth within your portfolio.

Ongoing Income

Why invest in property? Passive income of course!Each property you purchase can return you a significant income from your tenants, whether it’s commercial or residential.

You’ll be in a great position when your investment properties replace your J.O.B. income and allows you real freedom and lifestyle choices. icon_smile

There are loads of properties and deals out there that will return you a positive cash flow from day one and these are the ones you should have your eye on.

Many of our initial properties were purchased using a negative gearing strategy, but as our knowledge of investment strategies has increased, we’ve made changes to our portfolio (and continue to), to reach a point where every property returns positive cash flow.

Still asking the question Why invest in property?

Building Wealth Through Investment PropertyJan Somers has written a fabulous book Building Wealth Through Investment Property which was one of the best selling business books of the year when it was released and is still a great read, especially for newer investors. In fact, copies can be hard to get hold of, so if you can get your hands on one I highly recommend you grab a copy to read on these cooler winter evenings.

Here’s to your success!

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P.S. :  I would love to hear how YOU feel about property investing. Leave a comment below and share your “what” and “why” with us.

Watching House Rules Episodes: The BEST Way To Spend Your Time….

house rules episodes teamI really don’t watch much television at all, but every now and then I get sucked into watching one of these reality Australian renovation shows. (Damn it!) At the moment I’ve been watching the House Rules episodes. I justify my actions by claiming it’s research for my businesses (my blog here and our property investing). And that’s why I just had to write this post.

In fact, that’s exactly what I want to encourage you to do – use the show as research.

It’s no secret that these Australian renovation shows are scripted and edited to maximize a captive viewing audience. While there are a lot of tears and tantrums to wade through during the House Rules episodes, if you look deeper, you can find some golden nuggets that will keep you on track with renovations for your own home or investment property.

The House Rules Episodes – Lessons You Can Learn

These are the things I see as the major points to learn from this show:

Budget: I’d like to say there is something to be learned about how to budget your renovation. But unfortunately as we are never told what the teams have to use as a budget, I’ll have to pass on that.

Styling: The teams usually do a total demolition on each House Rules episode. Not every renovation you do will need that. What is nice, is seeing the completed rooms and the ideas teams have for styling. (Not all of them are great though!).

If you listen to the judges comments you can pick up small tips and tricks that work well in different areas.

Functionality: Look for things that make an area functional (or not). Small things can make a huge difference, such as oven or patio doors being able to open properly; the level of lights or shower heads.

I know it sounds like it’s too simple, so here’s a real life example. Last week I went to visit a girlfriend who had just moved into the dream home she and her husband had just finished building. My heart sank as she explained her disappointment in one particular area…. it was not until she went to put her new furniture into the lounge area, she realized it was not even big enough to fit a set of sofas, let alone the TV cabinet or coffee table. So now, it’s a small sitting area for two – not at all what they had planned.

Colours: Take notice of how different colours create different moods. People get told this all the time but seeing it in action always has more impact. Not all the colour choices on the House Rules episodes have been great.

I did love the colour Antique White that was used on this weeks’ episode, and have used a very similar colour myself called Hogs Bristle Quarter Strength in a cosmetic renovation. These are great colours for creating a crisp, clean and bright atmosphere.

Theme: It’s interesting to see how a theme, or in the case of this renovation show, the ‘5 House Rules’ can affect the whole outcome of the renovation. The ‘themes’ for the home renovations have varied from ‘farmhouse’ to ‘junky chic’, to ‘Bahamas’.

The completed rooms in each house have not always flowed as well as they could because of the nature of the competition. You however, have the chance to choose the theme or style for your property. Run it through the entire home to increase the impact of your whole renovation.

Renovate For The Owner: Every renovation on the House Rules show has been purposefully done with the owners in mind. This is a really important thing to remember.

It’s so easy to renovate for what YOU want. But if you are renovating for profit (and you should be), lots of thought needs to go into WHO will be living in or renting the finished property.

Are you renovating in an area where families are living? Is it likely to be young professional couples who tenant your property? The demographics of the suburb you buy in will have a huge impact on how and what you do during a renovation.

Be sure to do your homework first!!

House Rules – Final Thoughts

Sitting back at night with my cup of tea and feet up has been a fun way to reinforce some of these fundamental rules of renovating. It’s been great to see how much value has been added to each teams’ home and I’m sure you would agree, that despite faults, bad colour or design choices here and there – all teams have ended up with a home that is more functional and nicer to live in than what they started out with.

Although I’ve only done minor cosmetic renovations, I know several people that have had great success with renovating for profit. And I know some people prefer having a structured process that takes them from property selection through to working with their tradies etc.

I’d actually love to do a larger renovation at some stage in the future if it fits into investing strategies. I’m currently working on our buy and hold strategy and starting a property development joint venture, but at some point I may include a structural renovation. The way we’ve been investing up to this point as been super easy, so I’m interested to see if a renovation can be just as easy – or more complicated.

Here’s to your success!

Fay McLean

 

 

P.S. I would love to hear your thoughts on the House Rules episodes, and on your renovation project in general. Do you find them complicated? Do they work for you?

Home Renovations – Renovating for Profit On A Budget

home renovations - renovate for a profitIf you are considering doing some home renovations, renovating for profit doesn’t have to mean you spend a fortune. In fact, some of the most simple and cosmetic renovations can achieve the biggest impressions and improvements to the look and feel of your property.
Renovating a home is an investment strategy that appeals to lots of people. Spending some money, time and energy on doing a place up and selling it off for a profit is a great way to boost your profits from property when done correctly.

Renovating For Long Term Equity Gain

You can also improve your profits by doing cosmetic renovations and upkeep on a property that you keep long term. Smart renovating can lead to capital growth and strategic improvements can be a good precautionary measure against maintenance issues on a property you intend to keep for a while and rent out.

If you have a buy and hold type property, unless there are major issues, it can be easy to ignore some ongoing maintenance tasks. Regular contact with your property manager should keep you informed of larger maintenance issues as they arise. But let me tell you that your property manager and you don’t always have the same standards when it comes to what is acceptable. We’ve certainly experienced this ourselves!

We were receiving our property inspection reports which seemed to be getting progressively worse. We decided to personally visit the property and found the dirt and state of the walls and paint work was disgusting. After studying Jane Slack-Smith’s Ultimate Guide To Renovations, we decided the next time the property was in-between tenants, we would go in and give the place a quick cosmetic reno.

You can watch the video to see our fabulous results.

Home Renovations - Renovating for Profit in Mandurah

Beware!! Renovating for Profit On A Budget Does Not Work……

Unless….. you follow these three guidelines:

1.  Stay to Budget By HAVING a Budget!

Remember that renovating strategically isn’t about painting a wall and calling it a day. It’s about a careful consideration of adding real value to a property in the market, and that takes some homework as well as sweat equity.

Take a checklist around the entire project and mark where you intend to spend money.  You can start today by downloading this Sample Renovation Checklist and Renovation Summary Guide  immediately. You can see how detailed your costings need to be. Divide your list into ‘wants’ and ‘needs’. Every likely cost should to be added to a spreadsheet plus an amount for ‘variance’.

You should then consider how much you think your improvements will add to the market value of your property to determine if the whole exercise will actually result in a profit. Additional fees and expenses such as agents fees, marketing and stamp duty all need to be taken into account.

Plenty of people have an appetite for doing a place up and selling for a profit. But not doing enough prior planning or keeping track of the numbers is one of the reasons why renovation costs can blow out and a disappointing profit margin can be the result.
Any time you are spending money on a property you want to be sure you’ve done a good feasibility on the entire project!

2.  DIY Home Renovations

There is a saying ‘money makes the world go around’. I will be the first one to suggest you save money on your home renovation wherever you can. But unless you are a skilled tradesperson, it’s likely there will be at least some tasks required that don’t fall within your expertise. The best thing you could do is to employ a tradesperson to do the work for you.

DIY renovating can certainly save you dollars. It can also cost you big time if things don’t go to plan. You might take weeks to complete a task that a tradesperson can get done in a matter of hours or days. A task completed quickly and done to expert standards will mean you can move forward quickly. This can become extremely important if your objective is to get the property tenanted or sold.

Every week the project goes uncompleted, you could be paying additional interest if you are borrowing money to do the renovation in the first place. As you create your feasibility, you may be surprised to find DIY renovation costs are higher than you expect.

3.  Renovate for Profit – Where To Start

The key lies in understanding which improvements will return you the highest possible profits. As you can see in our recent renovation, paint is inexpensive and can instantly create a fresh, new look. Despite my earlier suggestion to avoid DIY, painting is relatively easy to do yourself and you can save lots of money. Even if you do need to pay someone to do more difficult areas or outside work you will most likely get back more than you spend.

The other big money spinners are kitchen renovations and bathroom renovations. These rooms will definitely start to chew up your budget though. So again, lots of planning and cost analysis is important before you even begin. Carefully consider the demographics of potential buyers or renters to be sure you meet their needs. Get several quotes before you commit to the task. https://www.hgquickquote.com.au/ is a great place for finding qualified service professionals to quote on your home renovations.

If you buy a property and plan to renovate for a profit, it might be in a cash chunk from a sale or from a rise in equity in your buy and hold property. Either way, check your tax obligations and entitlements here.

Any More Home Renovations?

We have a townhouse in a suburb just 6kms from Perth City that our children currently rent from us (that’s another story!). When they re-locate in six months time, we plan to use the process within The Ultimate Guide to Renovations (TUGR) again to create a more extensive cosmetic renovation. This renovating course has been incredibly comprehensive and so motivating. Following TUGR guidelines will mean we can significantly raise the rent and increase our equity. That’s what I call renovating for a profit! I can’t wait to get started!…

Jane Slack-Smith has a FREE chapter of her new book available at the moment. It’s all about renovating for the investor and home owner. Grab it today. I’m confident you’ll LOVE it as much as I do!

Renovate For Profit: DIY Renovation Case Study

Let’s go behind the scenes of a recent DIY renovation Murray and I did on one of our properties.

This is a 3 x 2 townhouse that is currently part of our property portfolio. It is in Mandurah, Western Australia.

Property to renovate for profit return via increased equity

After receiving property management reports that were becoming less than favourable, we   decided to do a personal inspection of the property and could see immediately that there was a need for a light cosmetic renovation.  With a small break in between tenants, we jumped in to give the place a quick DIY renovation makeover.

These three videos take you through our process from when we first arrive at the property right through to when we leave.

At the end of Day 1.    You can see I’m tired and exhausted but got loads done 🙂

The finished project. Great results and happy!

Buying or owning a property is no different from the car you drive each day. It needs attention and maintenance to keep it in top condition. The occasional DIY renovation will help to keep your property in tip top condition.

Here’s to your success!
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P.S. If you decide a renovation is right for you, be sure to grab the FREE Chapter of Jane Slack-Smith’s new book “Your Property Success With Renovations“. I think you’ll love it!

Investing In Property: Is It A Good Time To Invest In Property Today?

If you’re considering investing in property, “Is it a good time to invest in property today?” is a great question to ask.

Investing In Property: Is It A Good Time To Invest In Property Today?

Potential investors will often be thrown off track with reports they hear in the media about interest rates that might skyrocket, or that in 2 years time housing  prices will hit rock bottom, or  there will be a better opportunity to invest in property around the corner.   Let’s face it, the media loves (and needs) a good story!

Now don’t get me wrong – it’s a wise thing to keep your eyes and ears open as to what is going on in the economy.  But it’s more important is to use strong statistical data and research tools to find out for yourself what is going on, or is likely to happen.

Some of the key factors to look at, analyse and understand when investing in property are:

1.   What industry is going on in the area? Be sure to even delve into the management strength of large companies. You need to be sure there is employment prospects long term in any area you might want to place your investment dollars.

2.   Calculate your borrowings using a strong buffer for interest rates. Do your affordability figures based on todays interest rate, and also on a higher rate in case there is a rise.  Be sure you can afford to hold the property under both situations.

Below is an example calculation of the weekly holding cost of a property.  In other words – exactly how much you, as an investor, would have to find each week to keep this property.  It has taken into account fees such as stamp duty and settlement, ongoing property management fees, interest due, rent received etc.

Investing In Property: Costs to keep an investment propertyYou MUST know your numbers!

3.   Investing in property that you buy under market value will be a huge advantage. There is a saying that goes something like this “It’s not what you sell a property for but rather what you bought it for that determines your profit.”  Using a buyers agent or the power of group buying can pay off here.

4.   Understand the demographics of the area and what type of dwelling is ideal for prospective tenants or development.  Where are the main roads, any new council approvals in the system, new schools or shopping centres being developed?

So now, back to the question: Is it a good time to invest in property today?

Once you’ve considered these important indicators above as a starting point, you should have a much clearer pathway to being able to come up with your own answer.

Investing in Property With Your Head and Not Your Heart

Subscriptions to high quality magazines and data research such as RP Data are great places to begin doing your own research and obtaining this kind of information when you start looking for an area that will meet your investment needs. I suggest starting a spreadsheet to record all the information for different areas you  are considering.  After a while, you’ll start to see patterns emerging as to where high growth rates are, fast selling suburbs etc and before long, the information you have gathered will start to ‘speak back to you’.

Yes, this does seem like a lot of work.  But after all, your money is valuable (or should be!) and you want to invest it wisely.  Using statistics and numbers to make your decisions also takes the emotion out of your investing – making decisions with your head and not your heart.

If all of this seems too overwhelming for you to do on your own, another good idea is to associate with other people who have already had years experience investing in property.  Being part of a support community (like this blog) or mentoring group can  help put aside the nerves and fears that can be associated with making that investment decision.

Investing in property is about two things – education and action.

Do you remember when GST was first introduced?  People still invested in property and have made good money.  Do you remember the first stock market crash?  People still invested then in property and have made good money.  It was not the timing  their investment was made, but rather the decision around what, where and how much the investment was for. I started my investment journey when interest rates were up to 18% and was still investing in property through the stock market crash – yet I have never looked back!
There are always  going to be moving market indicators no matter when you decide to commence your investment journey.  You can use these moving indicators as an excuse to stay in your comfort zone and do nothing.  But I can assure you – sitting, wishing and waiting will not make you any money.  Action and implementation will!

Considering investing in property? Is it a good time to invest in property today?”    In my opinion…… if the numbers and statistics add up (as far as affordability,  holding costs, location, demographics etc), then the sooner you get on the gravy train, the sooner you’ll reap the rewards.

Here’s to your success!

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Property Investing or Herd Mentality?

herdmentalityProperty Investors Have A Herd Mentality

Property investing is so much like handling livestock, that it is not funny. Property investors have a herd mentality – I will explain more.

Having been a farmer for a good part of my life, I was responsible for the welfare of my livestock. I would have to open the gate and let the cattle into the new paddock, some would move through the gate at quite speed, and others would meander through at a more sedate pace, and finally some would not move at all.

You would easily tell who the cattle were that took that little chance, grabbed the huge opportunity to better themselves and there family. That cow that moved first had more to give to her family and thus that little calf grew very well .Yes the others finally came out, but they did not grab that vital opportunity when it was created. Don’t forget it was my job to provide and educate my cattle that it was safe to move forward through that gate, and that they could do so safely. That is called the herd mentality.

It is exactly the same in real life when you consider property investing.  You have those that will take and grab an opportunity and run with it. As someone who mentors people in investing in property, I take great pride with those people and make sure, just like I did with my cattle, that they are guided through the process safely.

It is going to be the person that does decide to invest, that will have that little bit extra now and later in life to provide for their family, and have some left over.

Property investing is not hard. It is about being educated in the right way; just like I educated my cattle to reach their full potential.  I can help you to reach your potential with property investing as well.

ARE YOU WITH ME?  LEAVE YOUR COMMENTS BELOW AND LET ME KNOW HOW I CAN HELP YOU.