Do your homework,and then do it again. Don’t wait to feel 100% comfortable with your decisions,that will never happen.Consider the worst scenario and if you then feel confident to go ahead,do it.
A few years ago, when I started investing, I did so on a short term basis, for a period of 12 months only, on each property ,which worked well for me in the recent Tassie climate. Whilst reinvesting a minimal amount back into the properties,I averaged a profit of $120,000 for each in the 12 month period. I became well aqainted with some good people in the business who were looking out for me and I didn’t hesitate going with my gut instincts.
the best advice for those who have not entered the market yet is to make buying a property their number one priority. And to do it now. That is start from scratch researching the area you’d like to buy in and look at as many properties as you can intensively. Never give up even in a down market because that can be the best time to buy.
There is always someone with the money if you have the knowledge and reliability. Borrowing is usally the easy part.
For a long time now (I don’t always catch on straight away… I never seem to have enough time to dedicate to property investing. I know there are a lot of people out there who seem busy but really waste a lot of time and I wanted to make sure I wasn’t one of those, so I did a little excercise that I thought others might find useful.
I kept a diary for 2 weeks of everything I did and how much time it took me. This included driving, work, watching tv, cooking, going out etc etc. Include everything. I then totalled up the different activities to see if there was any time I could free up by giving up or reducing one of these activities. Some of the results for me were:
– I worked out I watched approx 9 hours of tv a week, some of which I could justify for relaxation etc but there was spare time there.
– Driving was another big one. I am now moving closer to work to reduce travel time and also leaving earlier in the morning and in the evening to reduce the time driving in peak hour traffic. (will save approx 4-5 hours per week)
– I have horses and was doing all the care of them myself which is very time consuming. I now pay someone else to do some of the care (save approx 6 hours per week. I am also selling one of the horses which will save another 5 hours a week in riding and care time
Just working the simple excercise and making some simple changes did make a big difference for me. I still won’t have an enormous amount of free time but soon I will have a more time to do things properly, (as the quality of what I was doing was suffering trying to do too much) time to dedicate to property investing and you never know, maybe some time to socialise as well!
So my advice is to stop giving the ‘I have no time’ excuse, find out where your time is going and do something about it.
I believe the most important consequence of getting that first (good) property out of the way is MOMENTUM. With sound financial intelligence that good property will provide you with opportunity to then buy your second property in the not to distant future. Then you have 2 properties which can buy you 4 more properties and so on. It’s just MOMENTUM.
But the it has to start somewhere so make it start NOW!!
My first property paid for the entire acquisition of my second property. Whilst this is not always encouraged as my loan was 103% of my purchase price. The property is strong enough in rental yield to carry this difference. Now in less than 1 year. The value of that 2nd property is 50% more than I paid for it. (And after the end of the so called boom) Remember i didn’t contribute more than 10cents to the purchase of this property. It was all from the equity gained in the couple of years after buying my first property. For you math mathmeticians, what is the ROI??
My best tip would be don’t be afraid to manage your properties yourself. There is really not that much too it and when you consider that half the time the real estate agencies put naive young girls in charge of the rent roll it is not hard to figure out why you are getting problems with vacancies and rent collections. I have managed my own properties for the past two years and I have not had a bad debt or a clear out or any other problem yet. I think it just comes down to keeping in contact with your tennant and keeping tabs on the bank accounts to make sure there is no drifting. In the end you will probably do a much better job and save yourself quite a lot in management fees to boot.
I agree with you Steve, I have found that investing is best looked at as a journey. My husband and I started investing by reading lots of books and then jumped in and bought a negatively geared home. We then read more books and went to seminars and found out that we had invested but not in a very effective way. We decided to be smart and researched different areas and came up with a few that fit our criteria. We bought more property and this time we were more confident in our choices (our friends however thought we were mad).
Now fifteen months on we are selling our negatively geared home and concentrating on turing problems into solutions.
Our property in the areas we researched are doing extremely well. One we bought for 52k is now undergoing a renovation which has only cost 7k and the property is now worth 105k and we rent this out for 130/week.
The other property we want to develop, but we need to learn alot more about that before we go ahead.
Now we see opportunities when before we could only see problems.
Hi Steve, Thanks for the news letter. You have asked that I share some hints with others less experienced Well lets try, I’ve just started my investing since reading one of your books and have just purchased my first positive cash flow property so less experienced others may be hard to find. Steve the best advice I can give is to research & research I believed I understood the property market-having been in real estate/building trade and finance for the past 20 yrs but I could never get my head around negative gearing- just didn’t suit me then I read your book and anything else I could get my hands on. It was like a light had been turned on.
What I do have to offer those that are just beginning is that at first the prospect of positive cash flow property seems almoat impossible but look! and look again- they are there, use the ideas that Steve suggests with regard to value adding
Be patient-when you find a good deal it makes up for all the hours of wild goose chasing that you have probally done.Until next time. regards Laurel.
Forum virgin here, this is my first post! Im just a young guy who hasnt really started investing as yet but am getting my finances in order, which is the first and most vital step, so I can start my journey to financial independance.
As I havnt had as much practicle experience in investing the best advise I can give from my own personal experience is that there are two types of debt:
1) Good debt : income producing debt : investment debt
2) Bad debt : income consuming debt : consumer debt
I have learnt the hard way that it is very easy to get credit cards, personal loans, Hire Purchase leases etc to purchase things that generate no extra income or real value to your life. This debt then takes so long to pay back and if you dont take control of it and your spending/saving habits then it becomes a perpetual downward spiril. Worst of all, it keeps you married to a “job”.
Money is a very addicitve thing and when you start earning a decent wage it is all to easy to go and borrow money to purchase “life style” items that just drain your cash flow.
My tip is to take control of your spending/saving, pay off all “bad debt” and then use that money to invest into income producing assets.
overcoming fear of debt was our biggest hurdle to purchasing investment property. we managed to repay a 25 year principle home mortgage in 14 years and celebrated being debt free as we did not have a big income and my husband had a progressive disease which meant he would not be able to work until normal retirement age.after about 5 years of being debt free, our kids leaving home and the big drop in bank interest rates on our savings we realised that our principle home was more than just security but also a valuable asset that was just lying idle. after reading a lot of investment books we learnt the difference between good debt and bad debt. we bought a investment property in an area close to small industries 7 years ago and have been lucky to have the same tennants for 6 years. as this property will be freehold in 4 years and has gained a 150% increase we once again face our old fears regarding debt[daisy][daisy] as we are both mid fifties and my husband has not worked for 6 years and my income is moderate. we now live in arnehamland as i work on a community and our principle resident has also become a part time rental property. as we approach retirement age security has once again become an issue. we do wish we had been better informed about property investment not being just for the wealthy at an earlier date but our jouney has been a success for us as moderate risk takers
I am not an experienced investor. I am 34 years old, a family day care mother with 15 years previous experience working in a law firm (prior to babies) in the property/securities sector. Now I spend my days covered in vomit and other bodily fluids, but this day to day exchitements gives me the cash flow I need to invest. That’s all, apart from a life long interest in property. I love it.
We have our current residential home plus 2 units on the Gold Coast, most mortgaged interest only. My husband pays heaps of tax, and hopefully, next year we won’t have this problem.
My biggest advice to ANYONE is DON’T BE AFRAID TO TAKE A RISK, after all, what is the alternative and secondly and more importantly, DON’T DISCUSS WHAT YOU ARE DOING WITH ANYONE THAT IS NOT ALREADY A PROPERTY INVESTOR. Otherwise, you will get 99.9% of people telling you that you are crazy, how are you going to sleep at night, ohh, you will have 3 lots of rates, my god, plus body corporate, how will you manage. blah blah, the best one is, no, no, it’s not the right time to buy (given these people are 50/60 and still working trying to pay off their home loans, these are not the people to listen to.
While I am on the subject, I would be interested in hearing from people – other investors or want to be investors to compare notes. Generally, none of my friends know what we do, just a couple that are doing the same heads. I leant from experience when we told a couple of friends, they looked at us like we had two heads. The other problem we experience is people automatically think you are RICH! which is far from the truth at this stage, merely GOING TO BE RICH YEAH YEAH!!!.
I recently had another experience when a bad rental manager nearly lost me my tenant. In Queensland, each time an agency gets you a new tenant, they keep the first week’s rent. This is fine I think but when they are losing you perfectly good tenants, is this viable? I think not. This is another story if anyone is interested.
Well, I’m another ‘Forum Virgin’… However, what I’ve discovered about myself is quite enlightening for me and may apply to more ‘prospective investors’ out there…
When buying my own homes, I’m quite proud of the fact that I can ‘get a good deal’ and have done so several times, but when it’s your own home to live in you don’t need to know about yields and don’t worry about vacancy rates, etc. It’s different when you know that ‘money’s on the line’ and mistakes can be expensive. Yep – a classic case of ‘Analysis Paralysis’.
So here’s my insight. Know when you’ve done enough research to be able to get started. Recognise when it’s time to just ‘get on with it’.
I was once told to bite off more than I can chew! Then chew like crazy!!
Our first property was a unit on Paradise Island on the Gold Coast at $190k and $210 rent in Oct 2000. It was “new” when we bought it, and it still looks like new today. However, we wanted to chew like crazy so we signed up for a block of land to build a new home on and rent out before we could move into it.
When the valuations were done this unit came in at $150k, so we got another one and it was $165k and the 3rd was $155k. The banks wouldn’t let us see the valuations until the 3rd one. It was then we found out the unit was built in 1965 and refurbished in 2000!!!! I was amazed that the first bank didn’t do a valuation because we had 80% equity in our own home!
I did a Residex report on the unit and it didn’t show any previous sales. How can someone check for this doing their due diligence?
One more thing is this: My ex wife and I have invested about $40k in seminars, books, CD’s & tapes, and more. I still haven’t got through all the info in all of them. However, if we sold up everything now, after 5 years of mistakes and learning from them, we would still have far more than what we would have had after 4 decades of so called superannuation! We are liquuidating some of our 12 now due to the property settlement and then I will be at it again.
And I will be biting off more than I can chew! Will you?
Just a quick money saving renovating concept that has saved us a considerable amount,and that we have to constantly have to remind ourselves of….You Don’t Have to Live There….
For example, we have just finished painting the inside of our IP in a lovely neutral green/cream, not our first choice in colours,but we used 20 l of it, price of 2 x 10 litre top quality paint $4.00 per litre….Miss tinted…..normally around $150 each….and we managed to find an attractive grey contrast as well
So just remember that You Don’t Have To Live There when out shopping for anything just as long as it is still appealing and of quality
If I had to give myself just one tip it would be to remember to see mistakes as opportunities. Easier said than done as not only do I beat myself over the head with my mistakes, I tend to let others do it as well!
Last year my husband and I signed up for a Reno Kings workshop. All fired up and convinced we’d come home as reno kings ourselves we exchangged contracts to buy a rather badly neglected little duplex just a week or so before we left for Qld. We told our families (and the property manager at the agency we bought it from – how embarassing) how we were going to fix it up over a couple of weeks and increase the yield and create instant equity blah, blah, blah…
Well needless to say that reno kings we are not.
At first we got a bit down about it, then we had a few fights over it and then we just let it sit there unfinished for a while while we streessed out about the lost rent. Finally we realised that the best solution would have been to pay someone to do most of the work and give up on being “reno kings” ourselves. Perhaps we need a bit more practice when time is not costing us money or perhaps we will just call the reno idea quits altogether.
My step-father-in-law and his brother are builders and they were going to help but… well that is another lesson/tip in its own right.
As if the whole experience wasn’t disheartening enough my father who has always had faith in me now says that the whole experience should have taught me not to keep on with this “frightening” idea of property investing.
So what was the opportunity here? We learned that it is best to cut your losses early and hire a proffesional or two if necessary. Although it may seem expensive at first, at the end of the financial year you will realise that it was the best choice if you are out of your depth. We also learned that we are not reno kings and that there is a better strategy out there for us than the DIY specials. Oh, well… looking forward to the next opportunity
Something that I found to be so successful taht I have tenants waiting for us to buy other rentals ans we are developing one of our investment properties at the moment is when I get our tax return I offer our tenants a choice to make their home more comfortable eg, remote rollar door for garage, tinting windows, sail shade cloth last year our tenant asked for us to upgrade the lighting for mood and replace bulbs with fluos for his office I also connectted to broadbrand for him. Of course he agreed to a slight rent increase but willing renewed hie lease for another 2 years! I see it as the properties taking care of their carers so that they are well looked after. I have also done claimable maintence just before tax return and claimed it back the next week. Nothing new I know but it’s good to be reminded of your options.
Just stopped by to say ‘Thanks Heaps’ for the contributions and to recommend that we keep ’em coming.
I will then turn them into a summary and place them in a welcome document for new members (and existing members too!)
While I’m here, I found some words that I had written previously that might add to this discussion:
This may sound a little strange coming from someone who is considered a cashflow stalwart, but the truth is that there isnâ€™t a right or wrong way to invest in real estate provided what you do is legal, ethical and helps makes progress towards your investment goals.
Just be careful though, lots of people will sell you schemes that they think may work, however itâ€™s up to you to sort of the good from the bad.
Nevertheless, experience shows that those who have a goal for their investing tend to make the best progress, so before you begin, work out what you are trying to do as that will provide a context for what makes a deal either worth doing or else left on the table.
Thanks again for everyone’s contribution!
Remember that success comes from doing things differently.