A simple formula for property investing success

By Nina Cuturic | 07 Apr 2020

An encyclopedia of information is on hand to investors at every stage of their journey.

There is no one “right way” of working towards a gold mine in property, nor is there a fixed approach to each strategy.

With each person’s circumstances being different, customisation becomes an investor’s creative tool in their endeavour to smartly pocket a cash return – and this involves knowing how your capital, no matter how big or small, can take you further.

As director of investment services at OpenCorp, Michael Beresford shares, “there are different ways to make money in property”.

“What is essential is that you pick the strategy that will deliver the results that you’ve got –that’s the first step,” he says. “Step number two is your [next] fundamental step, [which] is to understand your borrowing capacity”.

Know how far your cash can take you

Being able to flex a mighty borrowing capacity shouldn’t make you lose sight of the investing options that are on offer. In fact, choosing to disperse your capital is known to be an effective strategy in mitigating some of the common risks.

Beresford explains that having a complete understanding on how much you would be eligible to take out on a loan, “doesn’t mean that if you have a million-dollar capacity, you need to use every bit of that borrowing capacity on one property”.

He advises investors to keep open minded about how they can utilise their invested capital so that it best meets their goals.

For instance, investing it across more affordable properties in different locations can work to cushion you against being in a world of hurt if a single asset is thrown into the havoc of a dip; as a volatile and still largely unpredictable market is often known to deal.

Beresford says: “You know what you have borrowing capacity for so that you are acquiring investments that obviously work within those constraints of your personal situation.”

“Understand what you want your investments to provide for you. What are those financial goals? How much do you want and in what time frame because that helps you set and choose a strategy that will deliver that result,” he says.

Place your trust in long-term results

Property is almost always most profitable when it is a long-term play – something that has become even clear in recent times, amidst the COVID-19 pandemic.

When seeking out an opportune location that will nurture a well-performing asset, the employment opportunities that it offers is a key factor to consider for how it speaks of a thriving economy that will draw-in demand.

“We would be recommending [to] stick to the major capital cities. That’s where the jobs are. Look at the capital cities that have relative affordability because everything cycles,” Beresford says.

While he explains that market downturns can still happen, he advises investors to not get emotionally swayed by the media headlines as shifts in market behaviour “don’t last forever”.

“The proven markets cycle is just the same great period of four to five years. A minor correction [happens], things work their way back and they stabilise, and that’s the 10-year cycle. So, it’s really encouraged people to take stock of where they are currently,” Beresford says.

Make decisions that best suits your goals

Before taking up a specific investing strategy, there’s a process in the lead up that calls for due diligence and research.

This includes meeting with qualified professionals who can uncover your intentions for investing in the market, your financial capacity to get started, and the key steps to plot throughout your investing timeline.

But while there’s also value in learning about how other investors are effectively navigating their property endeavours, Beresford shares that it’s important to know when to turn observation into action.

“The number of times that I get asked questions by journalists or questions by clients saying, ‘I’ve heard about the renovation and flipping strategy, I think that I can see those results’… When you ask them what [they] want their investment portfolio to provide for them, that strategy is actually not going to help them achieve the goals that they’ve got,” Beresford explains.

However, as long as the strategy suits your goals and financial capacity, taking the stride into manufacturing a return, instead of solely relying on the market to do all the work, can potentially have you pocketing an instant return.

Encourage a profit through value-adding

Drew Evans, director of Caifu Property, says, “investors who know how to create their own equity always build bigger portfolios than those who don’t”.

“This is true in the good times as well as the bad,” Evans says. “Most investors make the mistake of being 100% reliant on market growth to give them the equity they need to step up into their next property.”

He adds that successful investors are the ones who “take control of this process so that they can keep growing their portfolio”.

While Evans shares that creating equity within your portfolio is a “big leverage point” and also “the key to understanding portfolio growth”, he explains that executing a renovation or development requires a significant amount of time – and that’s “even if you use tradies to do all the work”, he adds.

Along with countless decisions to be made and quotes to be gathered, pin-pointing the right property for the project – and one that will strategically lead you to your desired exit-strategy – is essential. 

“You need a property where you can see around $5 in valuation increase for every $1 spent. Finding just the right one takes up a lot of time,” Evans says.

Check in on your investments

It’s not a set and forget approach when it comes to property. The assets that you accumulate throughout your investing journey may be high-performing, but it’s what your overall incomings and outgoings are on a whole ­­­­– including the costs that are being funnelled into holding your asset base – which also count.

Beresford from OpenCorp shares how “reviewing on a consistent basis how you can tweak your portfolio” can make a real difference to your finances.

In fact, the director assisted a client in restructuring their loan, and as a result, he was able to save them over $9,000 per year in interest payments.

This outcome was “purely due to being on top of what the lending parameters are doing right now and what the opportunities are”, Beresford says.

“Take advantage of the marketplace and keep your finger on the pulse with regards to what those opportunities are to tweak your existing portfolio,” he advises. “Free up some cash flow, improve the overall position, add [to] your portfolio, and be better prepared to be able to add to your portfolio when you can.”

Investing in property: an expert’s top tips

Knowledge is powerful as much as it can be wealthy, but with the every-flowing amount of information and advice that’s on offer to investors on how to start the property climb and make progress, it can be enough to have even the most prepared clouded with indecision.

Michael Beresford, Director of investment services with OpenCorp, shares some of the grounding fundamentals to re-focus on.

When choosing a property, the major capital cities should be at the top of your list because that’s where most of the job opportunities are concentrated. Hone into the more affordable locations that will reap growth in time.

Be aware of how rises and dips in the market cycle fluctuate, and don’t give in to the immediate urgency to exit a property if a location is experiencing a decline. It could be a momentary shift before the market stabilises again.

Be clear about your goals from the start and what you are setting out to achieve as an investor, as your chosen strategy will be the vehicle to help you get there.

Know how much you have to work with financially and how you can use it as leverage to take you further along your investing timeline.

Make it a priority to check in on how your portfolio is performing and whether your strategy is still giving you the best return. This includes reviewing your home loan product and seeing where there’s new opportunity to save.

Top Suburbs : kariong , willoughby east , scarborough , woolloongabba , lockridge

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