The key to property investing success lies in leveraging OPM: ‘other people’s money’. This is just one of several insights shared by property expert and investing veteran Michael Beresford, director of OpenCorp, who also reveals how to shave tens of thousands off your building costs – and points out a “fundamental shift” that savvy investors can take advantage of.
When the team at OpenCorp prepared to put on a series of educational sessions in Brisbane, Sydney and Melbourne recently, their goal was simple: to distil the myths, share the insights, and make investing in property as simple and accessible as possible for everyday Australians.
We sat in on several of these events to see what secrets the team would reveal.
For Beresford, 20 years of investing experience have been whittled down to just one hour, resulting in “a pretty rapid-fire educational experience”.
“The thing about property investing is that people want a return immediately – by 4pm this afternoon if possible, or sooner. But that’s not how compound growth works, and that’s not how you have success as a property investor. It takes time,” Beresford says.
His own journey as an investor began back in 2003, when he bought a house in Perth for $267,000 with a small cash deposit.
“I paired that small deposit with OPM: other people’s money. And how did I identify Perth? Using what we now call the MAP process: market, area, property.”
The MAP process is a simple strategy the OpenCorp team uses to evaluate a potential property’s value proposition:
Market: Supply and demand drives market cycles. Capital cities have the highest number of people and the lowest amount of land, so that’s where the company focuses, while steering clear of regional areas and mining towns. It’s also essential to look at the micro and macro economic factors impacting the market.
Area: What types of dwellings typify the area? “Apartments are riskier: they have a low land content and can quickly become oversupplied, which increases vacancy risk, giving investors negligible leverage to put rent up,” Beresford says. Suburbs typified by freestanding homes are therefore more sought after.
Property: “We want optimum size and quality, and this is why many people’s portfolios fail to perform well – because they haven’t optimised,” he explains. “This doesn’t mean small and boxy and building the property right to the maximum; it means maximising the land use and leveraging the best areas without overcapitalising.”
It’s this last point that Beresford says is a major strength of the team at OpenCorp. Having honed their strategy after years of buying and building hundreds of millions of dollars’ worth of property on behalf of clients, they’ve come up with a winning formula that delivers instant profits.
“Let’s say you spend $300,000 on a block of land and you decide to build a 240-square-metre three-bedroom house, which costs $300,000. Your total outlay is $600,000,” he says.
“At OpenCorp, we might create a 215-square-metre floor plan and four bedrooms – and we can do this without reducing the liveability of the property. We will strategically shift walls and spaces to get the build cost down to $260,000 instead of $300,000.”
“There’s a fundamental shift happening in Australia … as investors, if we can leverage and understand it, we can take advantage of it for the best possible outcome for everyone”
The end result is a brandnew home that has almost the identical amount of living area and is the same type of property, with zero change to tenant appeal but a saving of $40,000. The property also has an additional bedroom compared to similar homes in the area, making it much more effective from a cash flow point of view.
This is just one of the proven strategies that Beresford and the OpenCorp team leverage when assisting their clients in building their property portfolios. Another key pillar of their service revolves around recommending strong, growth-ready locations to invest in.
Well before Sydney and Melbourne boomed in recent years, OpenCorp was shuttling its clients towards low-risk, high-growth opportunities in key locations in these cities, and now the team have earmarked their next hotspot.
“Where are we buying next? Brisbane,” Beresford confirms.
After a decade of stagnation, he believes there are pockets of the city that are poised for growth, a sentiment shared by researchers at BIS Oxford Economics, which recently tipped Brisbane houses for 20% growth over the next three years.
While OpenCorp favours a strategy that focuses on new builds, Beresford adds that no matter where you buy or what type of investment you pour your cash into, the important thing is to have a plan – and then act on it.
“There’s a fundamental shift happening in Australia: it’s not new, but the government isn’t talking about it. It is something that, as investors, if we can leverage and understand it, we can take advantage of for the best possible outcome for everyone.”
This shift, he says, relates to older Australians – and the fact that we’re now living for longer, with many more years in retirement than ever before:-
“I’ve got a fundamental problem living in a country where people work hard their entire lives and the best advice for them when they reach pension age is to separate, because you get more on the aged pension as a single person,” Beresford says.
“This is the big pension problem. The number of Australians aged 65 and over is expected to increase signifi cantly to over four million people in 2021. Life has changed, and we need to do something differently to secure our financial situation in retirement, because there is no passive income created by owning your own home outright. You need to be using the equity in your home to create an income in retirement.”
Property investing is a safe, proven vehicle for creating wealth, he adds, and with the right strategies it’s possible to make massive financial strides forward, such as paying off your home loan in 10 years, rather than 30 years. Beresford also hammers home the point that investing is all about mindset.
“The reality is, the pathway towards financial security is really boring and dull – but it’s also super effective”
“Adopting the right mindset is the first key step towards becoming a successful investor. It’s crucial to get in the right headspace before you create your strategy and start moving forward. Only a small percentage of Australians invest, because we don’t all grow up with parents telling us, ‘The pension isn’t going to be enough; have a positive attitude to debt and start planning for and thinking about your financial future now’,” he says.
“The reality is, the pathway towards financial security is really boring and dull – but it’s also super effective. It’s just like getting up, going to work in the morning and doing the same thing every day on repeat. Growing your wealth as a property investor is exactly the same; you just need to follow a proven process and be consistent, and you’ll get the results.”
All information presented in this article is general and may not apply to your personal circumstances.
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