Becoming a savvy investor does not happen overnight. Although some people possess more abilities than others, any winning investor will benefit from years of experience, mentoring, and access to other people's knowledge.
But that does not mean that there is no way to make effective use of this knowledge and to disseminate it in accessible form. Simon Buckingham, Managing Director of Results Mentoring, has developed a range of tools to help new and existing investors invest in real estate investments based on several strategies ranging from capital growth to positive cash flow, to real estate development on a small and large scale. Investors.
"We are training people to become savvy and sophisticated real estate investors who use real estate assets wisely in their investment portfolio," says Buckingham.
He explains that any investor looking to expand his portfolio must follow five essential steps: strategy development, release of funds, search for real estate, negotiation of amazing real estate agreements and implementation of effective management.
"Whether you are new to investing or have already built a portfolio, they are a valuable way to examine your current situation and re-evaluate your strategy, if necessary," says Buckingham.
1.Create your strategy
When it comes to investing, the first – and most important – question to ask is simply, "Why do I want to do this?"
This is a question that many investors do not seem to be asking until they are at the end of the buying process, says Buckingham.
"When you ask people why they invest, many respond with a vague answer such as" make money "or" have a real estate portfolio for retirement, "he says.
The problem with the answers of this type is that "having money" and "owning properties" are not really goals in themselves.
It is a means to an end, but not an end in itself.
"Investors who do not have clear goals tend to take an investment approach without a plan," says Buckingham. "As a result, they often end up with portfolios that do not meet their expectations and their actual financial needs."
If your primary goal is to create recurring passive income, income-generating contracts, such as positive cash flow assets, could replace a portion of your salary.
Performing several similar transactions could ultimately replace the entire income of your work over time. In this case, it may be counterproductive to adopt negative long-term growth properties.
If not, if your main objective is simply to have a lump sum to buy the material goods you want in life, it may be better to take a certain number of high-growth capital buildings or projects. value assessment. cash investment.
To help you narrow down your strategic choices, Buckingham suggests adopting a "path of least resistance" approach. Keeping in mind your overall goals and understanding your current financial resources (available investment capital and borrowing capacity), determine the financial hurdles you are most likely to encounter first. Are you more likely to deplete your investment capital before reaching a borrowing limit, or vice versa?
If borrowing capacity becomes the biggest problem in the short term, a strategy of investing in positive and high-yield cash-flow real estate operations can increase your borrowing capacity and you help build your portfolio.
On the other hand, if the limited investment capital is the most important constraint, then a strategy to actively add value in order to quickly increase your equity or your capital Financial can be more logical than integrating all your existing capital into a positive cash flow. investments in property or in long-term growth at the outset.
You can even change your strategy over time to make your investment more sustainable.
2. Unlocking Finance
In the context of your strategy, the next step is to secure the financing of your future property. However, as Buckingham notes, it is essential to be well prepared to obtain a loan. In recent years, APRA (the leading financial regulator for banks) has lobbied lenders to improve their "responsible lending" standards. Along with the recent Royal Banking and Financial Services Survey Commission, banks have been questioning the much heavier borrowing capacity, many of them taking a conservative approach to spending. discretionary.
"Take a tight budget for at least three months before your next loan application," says Buckingham. "Obviously, you will have fixed expenses, but it is crucial to find ways to reduce discretionary spending."
Fixed costs include rent or homeownership costs (mortgage payments, rates, home and property insurance, utilities), tuition fees, child care expenses, current medical expenses , health and life insurance and a reasonable allowance for essential items like groceries, transportation, phone and clothing.
Discretionary spending would include things such as online subscriptions, gym subscriptions, wellness therapies (such as naturopath or chiropractor appointments), cool meals, donations charity or anything else perceived as being "easy" to reduce.
Buckingham also suggests reducing consumer debt to a minimum. Credit cards are an area in which caution must be exercised.
"It's not the outstanding balance, but the limit that affects your borrowing capacity," says Buckingham. "You should consider re-evaluating your limits, or even eliminating some cards."
3. Finding the Right Property
Finding the right property in the right domain is intrinsically linked to your strategy. Being able to articulate a clear description of the type of property you are looking for real estate agents will immediately distinguish you from other investors.
"Asking smart questions to the agent will encourage them to take you seriously," says Buckingham. "If you enter and ask for a property that earns money, they will simply tell you to queue."
Investors should never buy either based on their emotional attachment or intuition, he says. Purchase decisions must be supported by data and how effectively a new property will align with your overall financial goals and your related investment strategy.
Buckingham explains that it may be more important to realize that when choosing where and what to invest in, there is no single, unified "real estate market" in Australia. Each suburb is a market with its own dynamic, behaving differently from each other. There are still suburbs where values ​​are rising (or about to rise), while other suburbs are falling or falling. Rental yields also vary accordingly. Yet these facts are often overshadowed by the emphasis on the movement of median prices. The focus on infrastructure or development is also often wrong, he warns.
"The bottom line is buyers and sellers. Supply and demand are like everything else, "says Buckingham. "Choosing the right areas at the right time is closely related to the observation of a particular suburb, then you have to compare the number of sales compared to the number of properties listed, the speed with which properties are sold, vacancy rates, rental yields and history of all these factors in the previous 12 months. "
PASSIVE VS ACTIVE INVESTING
There are many ways to make money with the property. Some of them are more "passive" in that they require little continuous effort – such as positive cash flows from rent or market-led capital growth. Others are more "active", for example, they proactively add value to a property through renovation, subdivision or development.
No approach is necessarily better than the other; they are not mutually exclusive and you can use a combination of these approaches. For example, if your goal is income-oriented, you can focus first on building a capital base through growing real estate and / or value-added projects. , before reinvesting the equity created in high-income buildings. You can also combine the properties of growth, value creation and cash flow as you go.
4. Negotiating Amazing Real Estate Transactions
A smart investment strategy is to take advantage of current market conditions to close deals, says Buckingham. This requires a thorough knowledge of trading techniques and the ability to recognize the nature of the surrounding market.
"Right now, we have a market for buyers in many parts of the country, which opens up trading opportunities that would not normally be available," says Buckingham. "Many buyers are hesitant and sellers are more motivated. This is the perfect time to select interesting offers in the right sectors. We have recently seen some great examples, with some of our students getting 10% or more discounts on sales prices, and even 25% in some cases, thanks to a bold and smart trading tactic. "
He advises to keep in mind certain essential points during the negotiation.
"You must know how much you want to pay and why. You must understand your plans for the property and the number of people involved. Never start with your best position either, because it leaves you nowhere to go. "
He adds that negotiation is not simply about asking for price reductions.
"Depending on the property, you can consider other flexible terms: a long settlement, early access to the property, the current owner paying some renovations before the settlement. It's about getting a compromise that makes you happy, as well as the seller. "
It is also crucial to have objective data and independent standards to support your position. Finding recent comparable sales, building reports and pest control assessments may require an investment of time or money, but may end up saving you money in the long run. "Finally, train in advance with more experienced negotiators," Buckingham said. "Entering unprepared is one of the worst mistakes to make."
5. Establishment of Effective Management
The process is not completed after the purchase of the property. Too many investors think their investments start and end simply with the purchase of a property, Buckingham says.
"Once transferred to a real estate manager, too many investors cared very little about the actual performance of the building."
However, it is essential to actively examine and manage the property, otherwise you increase the risk of the property experiencing stagnant or declining values, an increasing number of vacant dwellings, increased costs or problems cash.
"Even though the property has performed well in the past, the actual yield may now have fallen to the point where the property offers only a very" lazy "return on investment, capital asset or borrowing that could be better used elsewhere, says Buckingham.
If you are unable to regularly analyze the performance of your real estate portfolio and take steps to optimize it over time, it may take much longer to reach your financial goals. Worse, there may be problems in your portfolio that, if not resolved, will actually hurt your goals.
It is also important to regularly and proactively review the prevailing market conditions in areas where you own or want to invest, to ensure that these market conditions will actually help achieve your goals. financial objectives.
"No matter how many properties you own, it's essential to understand the performance of each property if you want to maximize your profits and reach your financial goals as quickly as possible," says Buckingham.
Ensuring Future Investments
There is no need to panic if you have already identified problems in your own portfolio after reviewing these five steps, says Buckingham. They are deliberately intended to be used as focus and course corrections. Asking honest questions about yourself now will allow you to achieve better results in the future.
"If you already have existing investment properties, take a moment to think about your current portfolio and determine if you have a focus on capital growth or cash flow," he said. -he declares.
"Have you been active or passive in your quest for profit and do you need to change your approach to the current market to achieve your financial goals?"
ABOUT MENTORING RESULTS
Results Mentoring is home to Australia's first independent mentoring program for real estate investors looking for financial freedom to own property: the Mentorship Program RESULTS – a multifaceted training and support program designed to adapt to different learning styles and levels of investment experience.
Whether you are a beginner or experienced investor looking to take it to the next level, results mentoring can provide you with personal support, concrete strategies, smart investing techniques and the detailed information you need. to take advantage of the daily property deals in all market conditions. For more information, visit resultsmentoring.com or call 03 8843 7700.
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Results Mentoring gives your readers of investment properties a FREE review of the personal property investment strategy with a real estate mentor.
To organize your personal strategy session, register now at the following address: resultsmentoring.com/strategy-call
