Rule 1: Successful property investors make their money when they buy.
This is the first of five blogs on how to make at least $50,000 through property investing in the next 12 months.
It’s a fact that buying well is the easiest way to make money in the property market.
Buying well does not necessarily mean picking up the cheapest property on the market, but more about finding and buying under market value.
An example of a typical property purchase:
Let’s say you start looking for a property and you decide to go and speak to three real estate agents. You also start searching online and in the local newspapers. You decide what your after and you begin to get a sense of the market and ‘the true value’ of properties in your area. You spend months walking through open homes and discussing new listings with anyone who will listen. As time passes and you miss a few properties you start to become more anxious. You begin to feel like youre never going to find the right property and start to up the price of your offers.
After a few months you find a house that you love. It almost meets your criteria and the agent tells you that houses like this move quickly so you should put an offer in asap. You ask agent what the vendor is willing to accept, its slightly above what you wanted to pay but you decide to put in an offer anyway. You’re so exhausted by the process of looking for a property you justify the extra 5 – 10%.
So you paid a little more than you were planning to spend, its ok, your now a property owner.
If you’ve been through the property buying cycle you’ve probably had this experience and if you haven’t this is the way 90% of us buy property. Unfortunately Ive also done this on at least two occasions.
What could possibly lead to this behaviour?
There are 3 fundamental reasons we continue to repeat this behaviour:
- We live in communities where the people closest to us are happy to give us advice. This advice always comes from the heart and is designed to protect us. Unfortunately this advice is often based on misinformation and personal experience rather than true market insight.
- We dislike pain. Finding the right property can involve pain and rejection.
- We fail to stick to our plan, leading us to take the property that’s in front of us, as opposed to the property thats taking us towards our goals.
The 3 most important things to know about buying well:
“The same wind blows on us all. It’s not the blowing of the wind that determines destination, it’s the set of the Sail”. Jim Rohn
Before buying or investing in any property you need to identify what you are really looking to achieve.
Most of us are looking to either:
- Make large chunks of money now.
- Make passive income.
- Make money in the future.
Your strategy will be dependent on your goals, your age and your tolerance for risk.
You must realise that each property you buy is intimately connected and will either get you closer to your goal or take you further off your path.
An example of my personal property investment strategy:
- Buy and sell 1 principle place of residence every 18 months for the next 10 years.
- Build and hold 1 dual occupancy property every 24 months for the next 10 years.
- Build and sell at least 2 properties every 12 months for the next 5 years.
This strategy will allow me to make:
- Tax free dollars through my principle place of residence.
- Passive income through the dual occupancy properties.
- Large chunks of short term money through the new builds.
At the end of the day your strategy should be used as guide and will provide you with much needed focus during your property search.
Understanding your market is key.
You can get access to 95% of the data you need to make a great investment decision by:
- Identifying 2 – 3 suburbs that you would like to buy in. The Residex Best Rent Report can help you identify these 2 -3 suburbs.
- Identifying the most popular areas within these 2 – 3 suburbs based on; recent sales values, average days on market, home owner to rental ratios, infrastructure, access to schools, shopping centres and services and feedback from real-estate agents, property managers and locals.
- Googling ABS and local council information on; income, demographics, occupation, home ownership and projected population growth rates.
- Searching on Realestate.com, and looking for the more free suburb data feature, for; recent sale values, demand and supply ratios, monthly and annual property prices.
- Physically driving around the suburbs and talking to locals.
- Meeting with 3 – 5 real-estate agents and getting their thoughts on the suburb.
Relationships are everything in real estate.
Often the best properties are sold well before they ever get to market as real estate agents pass them to other real estate agents, family and friends.
You should aim to find a couple of real estate agents that you like and can trust in each of your 2 – 3 suburbs.
You will be surprised at how much they will tell you once you begin to spend some time together.
These relationships should be based on a desire to help each other achieve your goals. In the case of the real estate agents they want to sell as much property as easily as possible, while you want to find undervalued properties before they hit the market.
Its no secret that successful property investors and property developers make their money when they buy.
Unfortunately too many of us fail to take the time to plan, research and build the relationships which will ultimately lead us to our goals.
The second of this five blog series on how to make at least $50,000 through property investing in the next 12 months will be titled Renovating For Profit.
If you have any property success stories please let me know in the comments below…