We all have different reasons for investing in real estate, but it ultimately comes down to one main goal and one goal: to make money.
For those who are organized, disciplined and have a clear strategy, achieving a goal of $ 1 million in equity in a decade is not just a dream. Rather, it is quite an achievable goal – and you don't need to dive into high-risk projects and get rich quick to get there.
Solid residential investments, as well as equity-making strategies, including subdivision, renovation and development, are the keys to success here. And as banks have increasingly favored commercial loans in recent times, commercial investment could also be a major piece of the puzzle.
As with residential investments, selecting the right commercial property is crucial to your success, which is why it is essential to exercise due diligence.
"To start in commercial properties, you generally need 30% deposit. However, in recent times commercial financing has become easier for the Australian daily – many banks now offer LVRs of 75-80%, "said Scott O’Neill, director of Rethink Investing.
"You will always have financial hiccups. There's always going to be something wrong that you don't expect, and it's different for every deal "
"This trend is expected to continue, as banks appear to have a greater appetite for the market share of commercial loans."
O’Neill adds that, for many Australians, "commercial property would do more for them than owning half a dozen quality residential properties!"
Whether your strategy involves commercial or residential properties, old or new assets, or a mix of all of the above, there are clear steps you can take to develop the wealth of your property. In the following pages, we describe the five key steps that will help you move your real estate journey forward, with your eyes firmly on the price of seven-digit profits in just 10 years.
STEP 1: DEFINE YOUR FOUNDATIONS
Before embarking on the purchase of an investment property, you must establish a solid foundation for investing. This means having a clear vision of what you want to achieve as a real estate investor, as well as the financial basis to start with.
Defining goals not only helps you determine the right strategy to implement, but keeps you on the right track as your journey progresses so you can be sure you reach your goals. goals in the best possible way. And if you are not, you can rotate and adjust your strategy accordingly.
"You need a solid plan – it must understand what you hope to achieve through the property investment, how many properties you plan to buy, how you plan to structure the mortgages and how you plan to buy – such as in your name, common names, in a trust or even in an SMSF, "says Catherine Smith, CEO of Wholistic Financial Solutions.
"I believe that the essential element of real estate investment is to properly establish the financial foundations. You wouldn't buy a property without verifying that it was structurally sound, right? "
Whether your plan involves focusing on cash flow, long-term capital growth, or a combination of both, and whatever type of property you choose – apartments, houses, or business premises – this sheet clear road will help you get a realistic view of your financial situation.
Then you can determine exactly how much you need to save to get started.
"In terms of savings, an investor would need at least 15% of the purchase price to cover the deposit, stamp duty and fees to get started, as banks do not currently lend only 90% of the property value. Thus, for a property of $ 500,000, an investor would need $ 75,000, ”says Smith.
“At the moment, it is more difficult for investors because of the restrictions on loans since the royal commission.”
A practical way to prepare as an investor is to consider your standard of living and how it affects your ability to invest.
"Many young investors make rent – that is, they rent where they want to live and invest in more affordable areas. Some stay at home with their parents while investing. We had a 19 year old single earner earning only $ 65,000 who could buy an investment property, ”said Smith. "Yet a couple earning $ 250,000 together could not borrow due to their high cost of living, which included regular dinners, private school fees, vacations, and expenses for clothing, hairdressers and cosmetics. "
A common objective of real estate investors is to prepare for a comfortable retirement, early or not. But while you are still in the workforce, it is important to understand and maximize the resources you have and to be aware of your risk profile.
"We had a 19 year old bachelor earning only $ 65,000 able to buy an investment property … Yet a couple earning $ 250,000 was not. , due to their high cost of living ”
"Given that real estate investment is the essential element of setting up a self-funded retirement, it is essential to minimize your costs of purchasing and holding and Get as many taxes as possible to help you pay for your investment property. The more property you can have for the less spending, the better, "says John Hehir, CEO of Financial Advisers Australia.
He points out that professional advice is important when you settle in properly in order to understand these factors. Real estate investing is not a solo job, so you should always be prepared to hire people who know better and who can give you objective opinions, especially regarding your risk profile.
"Nine out of 10 people never buy a second investment property because they were not properly informed or prepared," warns Hehir.
"It is essential that someone impartial to the investor reviews and notes all aspects of the" real risk "of owning a long-term investment property so that when the first bump occurs out of the way, panic and sell when they should keep their investment. "
A healthy financial profile suggests that you are ready to manage debt, so don't worry too much about short-term losses.
Rocket Property Group CEO Ian Hosking Richards also advocates that new investors seek expert advice to avoid making major mistakes from the start.
“Real estate investment can be a very complex subject for the uninitiated. It is often counter-intuitive and does not lend itself easily to a theoretical approach, ”he says.
“When I started, I found a few experts who had been investing for many years and had achieved the kind of success I was looking for. As a beginner, I think it is wise to be open to the advice of more experienced investors. Otherwise, you could be on a very steep learning curve. "
STEP 2: CREATE A STRATEGY
As an investor, you need to think realistically and develop an investment strategy based on your personal circumstances rather than trying to follow in the footsteps of someone 39; another. Your Lifestyle Can Affect The Way You Invest, So The Next Step To Becoming A Real Estate Millionaire Is To Create A Personalized Strategy
Once you've defined your investment goals, it's time to think about how you can achieve those goals. When creating a portfolio, it is essential to have an action plan so as not to waste time and money in activities that do not really help you get there. where you want to be.
According to Director of Results Mentoring, Brendan Kelly, the factors investors need to consider when deciding on a strategy are the desired outcome, the money they have, their ability of borrowing, their level of skill and related expertise (such as in accounting and project management), and how much time they have to devote to the process.
Financial limitations in particular can be a common obstacle for many new investors, so it is important to carefully and realistically assess your ability in this area.
"In your attempt to build a real estate portfolio, you may have discovered a financial limitation. It may be the liquidity pool to which you have access, or perhaps your borrowing capacity is low. In either case, you'll need to adjust your original investment approach and start your journey with more affordable properties, "advises Kelly.
“An alternative can also consist in integrating your lifestyle into your investment. If you have enough money to buy a home but not enough to invest too, it might be worth having a temporary life experience for a better investment result. "
Your borrowing ability plays a major role in the strategies that you are able to employ, as it often takes more money to execute a more complicated but cash-intensive strategy. which can put you on the fast track to substantial equity.
"In today's financial environment, lenders are more willing to offer financing to those who can demonstrate great financial control personally," says Kelly.
"It means a good savings history, minimal frivolous spending, clear accounting of where your money is going, and a regular and reliable paycheck."
Improving your financial situation is not something you can necessarily handle on your own – sometimes a little help may be just what you need. For example, a joint venture can be a great way to start as a real estate investor, especially if you can create a configuration that will benefit you and the other party.
"If you end up with a small bank balance but have a great job, it might be beneficial to team up with a retiree who you may know who has access to money and would like to improve his financial situation, but who is unable to borrow money because they are not employable, "suggests Kelly.
Definition of key criteria for your strategy
If an investor's goal is to reach $ 1 million in equity in a decade, their mindset must be to invest for the long term and reap the rewards of capital growth, and not just to seek passive income.
Therefore, you must be prepared to devote time to your investment journey, especially when defining your acquisition plan.
"As an investor moves towards more complex strategies, a greater commitment of time is required," says Kelly.
"As with everything, however, the more developed expertise you have with a strategy, the more systems you will have developed to build efficiency and confidence and reduce the time load."
You also need to spend time researching and determining where and what you can buy. Are you going to lean on the capitals, which generally offer larger capital gains, or take a greater risk with a trendy but affordable and high-flow regional market that could explode?
"In today's financial environment, lenders are more willing to offer financing to those who can demonstrate great financial control personally"
"This may mean investing in more regional cities, smaller properties on smaller blocks or perhaps units or apartments rather than houses or townhouses. Thinking that way can allow you to access the real estate market and start building your wealth while continuing to save and reach those promotions, "said Kelly.
Whichever direction you choose to go, you want to define clear criteria to inform your purchasing decisions. By learning a lot about the market, you will have a better idea of ??the specific goals, such as the level of growth you want to see in a few years and the return rates that will support your portfolio throughout the trip. Once you know what you are looking for, you can then buy your first property.
STEP 3: ACT
You can only plan so much before the paralysis of analysis takes hold. Time in the market is essential for capital growth, so in step 3, it's time to move on and start building the portfolio you dreamed of, whether it is asset-based residential or commercial properties
With your strategy in hand, it's time to go shopping. The good thing about investing today is that you don't need to hammer down the sidewalks for the perfect property – you can browse property listings across Australia from the comfort of your own home. .
Websites like RealEstate.com.au and Domain offer complete lists of homes on the market all over the country. You can sort them based on how you set your criteria, be it price or location. You can also hire a buying agent who specializes in working with investors to help you find the right properties at the right price, in the right place.
Many people think that owning an investment property is only the domain of the wealthy, and that a large part of your time and personal effort should be devoted to the prosecution, but that doesn't have to be the case, especially when there are experts who can help.
"I like to choose the most practical strategy: buy new from a reputable manufacturer and be guided by a much more experienced investor. Then choose the service providers carefully and let them continue their work. Don't try to manage your investment property yourself, especially when you already pay someone else to do it, "said Ian Hosking Richards, CEO of Rocket Property.
When buying a property for the purpose of renting it, it is also important to consider what the desired tenant would like.
"I spend a lot of time establishing the profile of my target tenant: where they want to live, what type of property, what level of specification they will pay the most for," adds Hosking Richards.
"Once you know what they want, you go out and buy a property that will attract them; this helps minimize vacancies. "
When it comes to building a real estate portfolio, many investors stick to residential real estate. It is considered the safe, comfortable and less intimidating choice, and the risks are easier to grasp than those of commercial investment, despite its cash potential.
But there are more and more reasons to embark on commercial investment. There is a misconception that business investments are not good for long term gains; however, Rethink Investing director Scott O’Neill – who has had tremendous success with this type of investment – says this is not at all the case.
"Many investors fail to understand the overall wealth benefits of this asset class – namely, growth in equity over a long period. High-yield commercial buildings have the capacity to pay for themselves in 10 to 12 years, while also benefiting from capital growth, ”he says.
Many investors do not understand the overall benefits of wealth from commercial real estate – namely, growth in equity over a long period of time "
"In general, the value of a commercial property is generated from three main areas: rental income, the environment of interest rates and the strength of the lease. Once you understand these basic areas, you will see capital growth as a major wealth creator for business investors. "
Commercial properties generally attract tenants who are looking for extended leases, because they prefer not to uproot their businesses. Additionally, as with residential properties, location is essential to maintaining long-term commercial property. Investors should therefore seek not only the yield, but also the source of the tenants. A solid location means you will worry less about one tenant leaving because you can easily find the next.
Cities are often ideal locations for business investment because their larger population and the convenience they offer keep vacancies low, while homeowners can earn returns. About 7 to 8%. Nevertheless, regional investments can work to your advantage, as long as you are in the right area.
"You just have to be in the most convenient place you know. If you're going to go into a retail business, you might want for example a corner block with a tenant always real estate office, "advises O'Neill.
"Commercial interest rates generally start from 3.6%, depending on the lender and whether they are fixed or variable. In our property example [see table, p31] we have assumed interest rates of 5% only for the figures, since we are using the income from the assets to pay it back as soon as possible ", explains O & # 39; Neill.
"In year 10, this property would have more than $ 89,438 in debt and a value of about $ 1.1 million. Incredibly, by the end of year 11, the property will be completely debt free, producing income of $ 80,869 and increasing every year thereafter. "
This unique property would do more for many investors than owning half a dozen quality residential properties.
"As with residential property, finding the right commercial property is key," adds O’Neill. “There's a lot more due diligence compared to residential properties, but when you get there, the returns can be much higher.”
STEP 4: MANUFACTURING GROWTH
Savvy investors don't just buy property, sit down and collect rent. They are looking for ways to get the most out of their investments through diversification and value-added strategies like renovation
Property is one of the most diverse means of investment, as it is not just about what you know. There are investors who have managed to invest in a place where they have not gone personally, either abroad or interstate. This is where you can find not only growth but also positive cash flow.
Results Director of mentorship, Brendan Kelly, notes that to maintain a real estate portfolio, an investor must be able to repay their debt, particularly for investments with a negative orientation.
When buying in sought-after suburbs around major capitals, rental yields may vary from 2% to 5%, depending on market conditions at the time of purchase, "says- he.
"Depending on interest rates and other holding expenses, the property that has just been purchased is likely to be negatively oriented, which means that the expenses necessary to continue holding the property exceeds the income from the rent. ”
Given the need to have constant incoming funds, an investor should make room in his or her portfolio for balance. With interest rates currently low, they can capitalize on properties that offer yields of around 5 to 6% and remain in the dark.
“A balanced portfolio is essential for long-term capital growth. Having a balance means that it may be easier for an investor to manage repayments and long-term costs without experiencing financial stress, "said Helen Collier-Kogtevs, CEO of Real Wealth Australia.
But what about the investments you already have? Do they lack aesthetics or do they not stand out in the local market? With a little work and expense, you can increase the value of your existing properties.
"When done right, renovation, development and subdivision can be a fantastic way to generate growth as long as the strategy is what the market wants," says Collier-Kogtevs.
"You have to start with a good solid foundation of quality properties to which you can add value in order to produce growth. The means to achieve this include the selection of properties which can be either subdivided, titled or renovated later. "
Adding value is one of the best ways to maintain a property for long-term growth, especially when combined with other strategies.
Renowned renovation expert Naomi Findlay says, "No matter how you use the renovation, at all stages, you're looking to generate value in the property. This value can then manifest as a profit if you sell it after renovation, an increase in value which can be used to increase borrowing or improve your lending position and use it for others investments.
"Renovation does not need to be used as a stand-alone strategy. In fact, many of my students use it in combination with other strategies such as subdivision, development, and short-term hosting. "
It is essential, during a renovation for the rental market, to understand what the tenants want, explains Collier-Kogtevs.
"Sometimes investors design or decorate to their taste or according to their personal preferences, which is not always ideal. Investors therefore need to do their research, ”she said.
"When I am ready to undertake a renovation, I often spend time opening houses or displaying houses to get an idea of ??what is fashionable and what people want at home. This makes it easy to select paint colors, the latest accessories, flooring, and outdoor entertainment spaces. "
Although you want to maximize the potential of your property during the renovation, it is essential that you remain realistic. You have to understand the market trends and the level of growth that you can generate, otherwise you risk spending too much for limited returns.
“A common pitfall for investors is to underestimate the renovation budget or overestimate the value of the completed project. This can lead to incomplete renovations or under / over capitalization of a property, "warns Findlay.
For this reason, Collier-Kogtevs recommends that investors do a feasibility study before embarking on value-added projects – whatever their size – so that they know exactly what they are ; undertake.
"Renovation does not need to be used as a stand-alone strategy. In fact, combine it with other strategies such as subdivision, development and short-term hosting "
"If development is the strategy used to stimulate growth, investors must understand the market – in the suburbs or in the city – in which they find themselves in order to build what is demanded and not what they think to be the best, "she said.
"For example, if there is a suburb where houses with three to four bedrooms are in demand, it may not be a good thing to build one-bedroom properties . This could limit your ability to produce growth. "
Local agents and property managers are generally a good source of information because they are very familiar with the market and preferential prices for tenants.
STEP 5: RINSING AND REPETITION
Building a million dollar portfolio takes time, persistence and a willingness to get out of your comfort zone, whether you are a new investor or already have a few properties under your belt
Real estate investing is about playing the long game, so you have to be ready to stay in the "buy and grow" cycle for years to come. The more properties you acquire over time, the more experience you gain and your decision-making as an investor improves. The important thing is to stay realistic.
"Ten years is certainly an achievable time to create $ 1 million in equity, but you will need some capital or some initial borrowing." The national average real estate growth is 6.8%, so you have to invest prudently from $ 1.3 to 1.4 million to generate $ 1 million in capital growth, "said Sally Dale, director of Interlinked Property Solutions.
"Start small and grow slowly during this period. Spread your risks across multiple sites, plan your strategy and leverage your investments. "
In the end, there is no perfect formula for getting that first million goods, as it is a process that will vary with different types of investors and markets.
At the end of the day, there is no perfect formula for getting that first million goods, because it is a process that will vary with different types of investors and markets. "Chaque investisseur est unique, donc des considérations personnelles telles que la situation financière, les plans de stratégie immobilière, l'appétit pour le risque et le nombre d'années avant la retraite influencent tous la bonne combinaison de propriétés pour que quelqu'un puisse construire un portefeuille durable », explique Rhonda Olsson, chef de l'exploitation d'Interlinked Property Solutions.
«La recherche de ce mélange est là où réside le vrai travail lors de l'élaboration d'une stratégie immobilière réalisable et efficace.»
Garder à l’esprit votre calendrier peut influer sur votre stratégie, tout comme vos objectifs finaux personnels, car la définition d’une «retraite confortable» sera différente pour chacun.
«Chaque investisseur est unique et doit définir son mode de vie à la retraite souhaité et ce que cela signifie en dollars. Plus le délai est long, moins l'investisseur doit être agressif. Des délais plus courts nécessitent souvent des investissements à plus haut rendement pour faire partie du mélange », explique Olsson.
«Souvenez-vous, les gens ne se vendent pas toujours à la retraite. Les propriétés sont une source de revenus continus, pas seulement une croissance du capital. Les propriétés acquises peuvent générer un revenu bimensuel sain. La clé est de réduire la dette le plus rapidement possible, de réemprunter puis de recommencer, mais de continuer à se concentrer sur le remboursement rapide de la dette. "
«Soyez confiant, agissez et restez sur la bonne voie avec votre stratégie immobilière, car la plupart des gens se retrouvent coincés, tergiverser, ne commencent pas, ou commencent et ne progressent plus»
Faire votre premier million de biens dans les 10 ans est un objectif réalisable tant que vous gardez les yeux sur le prix.
«Dans l'ensemble, au cours des dernières décennies, l'Australie a connu une croissance exponentielle du marché immobilier, et ces cycles devraient se poursuivre. Il y a des marchés à l'intérieur des marchés, et vous devez savoir quoi acheter et où, en fonction de votre stratégie individuelle », dit-elle.
"Soyez confiant, agissez et restez sur la bonne voie avec votre stratégie immobilière, car la plupart des gens se retrouvent coincés, tergiverser, ne commencent pas, ou commencent et ne progressent plus."
Le plus grand «sacrifice» qu'un investisseur fera pour atteindre son premier million est le temps qu'il faut pour effectuer des recherches approfondies et faire des choix sur cette base. Tant que vous savez dans quoi et où vous achetez, un investisseur ne devrait pas avoir à faire de sacrifices inutiles.
«L'investissement agressif est une question de perception – comme tout, vous récupérerez ce que vous investissez dans votre investissement immobilier. Le soutien d'experts qui peuvent mettre en place votre stratégie est essentiel pour un investissement agressif », dit-elle.
Pour Brendan Kelly du mentorat des résultats, la réalisation de 1 million de dollars en 10 ans dépendra de l'effort que vous déployez.
«L'investissement agressif est une question de perception – comme tout, vous récupérerez ce que vous y mettez»
«Habileté à comprendre comment se comporte le marché immobilier et à lire les mouvements du marché. Connaître une sélection de différentes stratégies. Entrez en contact avec les principaux fournisseurs de services liés à l'immobilier et d'autres investisseurs. Rafraîchissez vos connaissances sur la structuration fiscale et juridique, ainsi que les tactiques de négociation », conseille-t-il.
«Avec le bon soutien et la bonne activité, 1 million de dollars en fonds propres est possible à réaliser bien plus tôt que 10 ans. Un tel objectif est agressif et nécessite une approche plus active de la part de l'investisseur. "
Au final, l'investissement n'est pas une course, et peu importe le temps qu'il vous faudra réellement pour atteindre un million. S'engager fermement à apprendre et à grandir en tant qu'investisseur est la clé. Même si cela vous prend 20 ans, vous atteindrez votre objectif en suivant un plan clair et en étant persistant, même pendant les premières étapes difficiles!
