Investors

Our easy-step Melbourne residential investment goes like this:

Step 1 - Work out what you want – Your Needs
Step 2 - Understand cash flow
Step 3 - Get finance arranged (we can help)
Step 4 - Search for properties
Step 5 - Prepare a Property Report
Step 6 - Buy it
Step 7 - Tenant and maintain it

Passive residential investing is about two things: growth and cash flow. Everything relates back to these issues at some stage after we have established Your Needs.

Growth Calculator - The good news

Your Investment: $ Rate of Growth (%):         Result: (Years) 1 2 3 5 10 20

Capital growth is the cornerstone of good property investment

The price you pay to the agent might well determine how much money you have for school fees, how much you have for your next purchase, and how much you have when you retire.

Capital growth does not start at the agent's asking price or the price you pay – it  starts at the good buying zone or the underlying value. For example, not all CBD units are bad per se - it's just that many people have paid well above the good buying zone.

There is a similar situation with some coastal or commercial properties. Capital growth is not a government formula that must happen.

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Rewards will come to those who choose the right property

If you buy the right property for the right price and hold it for the long term, you should be comfortably better off in the future than a person who takes no risk.

If you choose well for growth, hold onto it and possibly buy a few more, then property can be a brilliant investment.

Take the place below.

We bought it at auction in mid-2000 for $480,000 – a good $50,000 under what our clients were prepared to offer pre-auction. The same place sold for $721,000 in mid-2002 after only a minimal cosmetic update, worth less than $10,000. That’s good property investing.

 

 

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A good risk reduction strategy is critical in real estate investing

We are leaders when it comes to investing in property. But it’s not always good news. Property has its upsides and its downsides.

It is possible to lose money on property through poor decision-making, having to sell at the wrong time, or because of unforeseen market circumstances.

To successfully invest in property, we strongly recommend a strategy based on:

1. Establishing a long-term property plan, as property operates in cycles.
2. Understanding that while property investment can financially be very rewarding, not all properties are good and, in some circumstances, purchasing the wrong property can lose you money.
3. Liaising with your independent legal counsel with regards to title, contracts and GST issues. We should also liaise with your accountant or financial adviser at the start to obtain the correct so the correct level of finance can be obtained; and confirm during the process whether any financial suggestions (some creative) are suitable for you. That’s on top of  helping you budget cash flows for land tax, stamp duty, depreciation, interest rate increases and GST if applicable.
4. Putting in place a financial buffer (meaning don't stretch to ridiculous lengths) or getting an independent bank valuation prior to purchase (we can help if required). Why? The bank may value the property differently and not lend you the full sale price. Our estimates are appraisals, not sworn bank valuations.
5. Paying for qualified and independent building inspections and pest inspections and, if appropriate, qualified surveyors or qualified town planners. These professionals can fully assess the soundness or suitability of the building with regard to structural integrity, vermin or general condition, fencing positions, future developments and town planning issues.
6. Adopting a clear process for assessing whether the desired property meets your goals and objectives. We follow a system for selection and due diligence; and provide a detailed Property Report to assist you when making those decisions.

While a lot of our work is for investors and we take great care in our recommendations, our job is to help you identify and buy the right property. We cannot guarantee future performance with regards to capital growth, or rental yields.

 

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Case Study: What you want is not always what you need.

Our client wanted to buy a particular property in the CBD. We completed a fact find in terms of their needs and recommended they consider leasing instead of purchasing at this juncture. Why?

1. Their business was growing considerably so future plans were unclear
2. They would be stretching themselves so ownership and debt may have shifted their focus from the business
3. This purchase would have dominated their investment portfolio which is unavoidable and probably acceptable in owner occupier residential but a very different story in commercial
4. We are in an interesting time in terms of the commercial property cycle especially with the number of CBD leases up for renewal. In the late 1980s, there were some disasters and in the early 1990s there were some bargains
5. We live in a commercial world - the landlords/vendors agreed to accept a deal which was far below interest costs and included outgoings and GST. Total minimum savings were $90,000 if the market remains flat over the next three years. And our client can still buy an investment during this time if they wish
6. And finally we packaged the lease in such a way that the property was secured for almost two decades on a rental increase that was the lesser of CPI or 3%. The option set up gave our clients a great deal of flexibility, no matter whether they expanded or not.

Juggling psyche and needs with growth, cashflow, risk and protection

When looking at specific properties, we assess the following criteria:

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