Investment tip: ‘Plan with the end in mind’ 

Investment tip: ‘Plan with the end in mind’ 

One of the main questions that is common among budding property investors—the all too familiar clashing of investment goals and personal considerations. While both are important, there are completely different mindsets required to deal with them.  Do not confuse knowing your city neighbourhood, where you live and where you’ve grown up, with knowing a market because they are two completely different things. Living in a suburb means you know the social amenities and the busy roads … but that’s largely irrelevant if the outlook of that broader city is not particularly good—there are two different mindsets required there. You need to have an investor mindset and also see property as a financial instrument.   Investing in properties is obviously a big decision to make as it entails risks that are quite costly for most people. Someone who’s only beginning to dip their toe in the business of creating wealth through property, must already start thinking about his ideal ending.  All big decisions, plan with an end in mind. So, what is the end in mind? The end would surely be “you’re contemplating investing in property because years down the track, you don’t want to be strapped to a government-funded pension which isn’t going to provide much of a lifestyle.”  “Is buying a property in your local suburb going to help you do that?”  That will be based wholly and solely on your personal requirements and emotion. On the other hand, when you take a critical look at this massive country called Australia where there’s a lot more opportunities, will one of those opportunities be better for you?  While your local...
Habits of investors who have grown massive portfolios 

Habits of investors who have grown massive portfolios 

The habits that differentiate these investors with massive portfolios from those who have only succeeded in purchasing and maintaining a couple of investment properties are:  Understand the fundamentals Successful investors, first and foremost, familiarise themselves with the most basic fundamentals of investing in properties. It comes down to your ability to hold the property, which comes down to cash flow.  Asset selection should be an important part of the process for property investors looking to succeed in the business of wealth-creation. You can have one property that takes all your negative cash flow or you can have 10 properties that takes that same amount of negative cash flow—it is one of the fundamentals. That is a leveraging get off smart cash flow management.    Balance cash flow and yield Some of the factors involved in maintaining the portfolio’s cash flow of successful investors are rents and rental yields. Striking a good balance between the two is one of the most important secrets to success in the business of creating wealth through real estate assets.  The bigger investors understand how much negative cash flow they can afford on a month-to-month basis, and they balance that.    They use a ‘strategic point of view’ Since getting finance has become harder, smart investors always make it a point to ‘strategise’ in order to maintain good serviceability and borrowing capacity.  They’ll take on strategies like ‘Where in my portfolio can I add a granny flat that’s going to increase my cash flow and increase my serviceability?’ They’ll look at it from a strategic point of view. They think  differently around things so you can look...
Why understanding your cash-flow is important 

Why understanding your cash-flow is important 

Cash-flow is not just about the rent that you’re earning from your portfolio.   Successful property investment requires an understanding of your individual cash-flow position needs as well as your ability to manage your cash-flow over the decades.  Sometimes people tend to start looking for properties that will represent what their understanding of cash-flow is – which is often wrong to start off with.  If you take someone who is on a really good income, a 5 per cent yielding property might be good enough for them once they include all of their tax deductions.  However, if you consider a young couple who are just starting out and don’t earn a lot, and therefore do not have a lot of disposable income, a 5 per cent yield may not be enough to maintain their lifestyle.    It’s an individual equation  Your own unique situation or financial footprint is going to dictate where you should begin and where you’re going with your cash-flow requirements.  As life unfolds there are going to be times when your cash-flow is going to be more important to you, which is why pre-planning is vital.  Managing your cash-flow throughout your life – including when children arrive, as an example – is the name of the game, especially when you’re building up an asset base.  Take our interest rate at the moment, which is historically low but won’t stay that way.  Too many property owners and investors aren’t thinking about that overly much, which will ultimately impact their cash-flow, because they’re too busy enjoying the strong capital growth. This is a critical mistake.    Cash–flow management  When it...
How to increase your rental yield

How to increase your rental yield

Market places change. These tactics can help investors increase their rental yield, regardless of price and market conditions.    Cosmetic renovations  Humans can be superficial. So even a basic cosmetic facelift to your investment property may be enough to command extra dollars in rent each week.  This could be a fresh coat of paint, more modern light fixtures, or updated blinds and curtains to maximise light. The rule is to keep it simple, not blow the budget, and ensure all changes you make are mostly timeless.    More substantial renovations  No amount of fresh paint will help if the kitchen and bathrooms look like something out of the dark ages.   Substantial renovations, like a new kitchen and bathroom, or new flooring, require capital and time, and of course a loss of rent, but can dramatically increase your yield. Apart from the immediate increase in rent, it will also reduce how much you will spend on repairs and maintenance in the long term, as you will have new appliances and fixtures.  Assess similar local properties to understand what the local standards are to avoid overcapitalising and to assist with budgeting.    Add furnishings  Furnishing a property can instantly lift its rent, so long as this is appropriate for your location.  As an example, furnished properties may be ideal near universities where there is high demand for “turnkey solutions” by students. In this case, styling should reflect a younger demographic, and cater for potential wear and tear from socialising.  Travelling business people may also require furnished properties near airports or city centres, and may prefer not to spend through the nose on more expensive...
Tips for starting your property portfolio 

Tips for starting your property portfolio 

Starting your own property portfolio may seem daunting, although with a few sage tips you can avoid unnecessary pitfalls and ensure success!  Be clear on your goals  Be clear on what you are trying to achieve from property investing. Be specific about the financial outcomes you looking to achieve from property investing, and in what time frame you want to achieve this in. Property is just a vehicle to get you to the financial position to give you the lifestyle you desire – ask yourself, “is it passive income, or a net equity position, or is it a combination, and when do you want to achieve this by?”  Be educated  We’re playing with large sums of money, and most often buying a property will be the biggest financial decision you will make in your lifetime. It still baffles me that some people spend more time researching a weekend getaway than they do buying a property. There are some great online platforms including Smart Property Investment, Australian-specific property investing books, podcasts, online forums, networking events, and free seminars.  It’s in the strategy  It’s important to understand what financial outcomes you are trying to achieve from investing in property because this will dictate the strategy you adopt, and how passive or active you need to be. It’s also important to assess your risk appetite dependent upon your situation. Some well-known strategies are buy and hold, renovation, flipping, development, and joint-venture to name a few. It might be a combination of these, however always be clear on what outcomes you are trying to achieve.  Build your team  Once you’ve created what you believe is...
Renovation projects that add instant value 

Renovation projects that add instant value 

Looking to add value to your investment before selling but not sure where to get the most bang for your buck? Before putting your property on the market or undertaking any renovation projects here are some suggestions that add instant value.   Paint  Never underestimate the difference a fresh coat of paint can make! This is one of the most cost-effective ways to not only add value to your property, but to make it look new and modern. Go for neutral, cool toned colours to make spaces appear larger. Choosing colours that are not likely to date quickly means you’ll get more life out of your investment.   Kitchen upgrade  The value a brand new kitchen will add to your property is incomparable. The kitchen is the make or break point for many potential buyers, so if you’re looking to sell for a high price point, ensure the kitchen is up to scratch. Don’t spend more than you have to on unnecessary features. You can’t go wrong with adding extra storage, quality finishes and appliances, as well as a fresh, modern style.   Bathroom upgrade  The other major make or break point for many buyers is the bathroom. If your bathroom is old and outdated, it’s definitely time to consider an upgrade. Again, go for clean, modern tiles that aren’t likely to date any time soon. If your space is small, larger tiles can help it look bigger and more expensive than it really is.   Front façade  The first thing potential buyers are going to see is the front of your property. Making a strong first impression is essential....