Do You Know What Makes a Good Investment Property?

Investing in property is much different from home buying. It is all about the numbers and has nothing to do with emotions. Choosing a good property means you have to think logically and long-term, with perspectives of future developments in the area or location of choice.

Here are some hints to help you determine if you are choosing a property that makes for a good investment:

1. The property caters to an existing market. When there is no need to create demand for a property, because there is one place, this is a good sign. An academic community with a nearby university or colleges is good for acquiring investments such as units or apartments suitable for students or faculty staff. There is already a demographic profile of people that you can take advantage of when deciding on which properties to buy.

Is buying a home and buying an investment property the same?

No, buying a house for you and buying an investment property are two different purchases.

You may be buying property in both cases, but the motivation for doing so are quite different. One, you a buying with your heart and the other you are buying with the calculator.

When you are buying your own home, you have a personal wish list that you want to achieve - or as close as you can. Maybe you want to live in a certain area, with a minimum number of bedrooms and space with all of this coming within budget.

What could you buy for $300k?

So you have $300,000 and you want to invest in property. What solid properties are available in some popular places across Australia?

Here are some options:

Lakelands (Perth/Mandurah) WA

For Sale $298,734

This is a 3 Bed, 2 bath property, garaging for 2 cars. It is 'on the doorstep' for activities such as fishing, cafes and restaurants.

4 Things Great Tenants Hate

So you have a great tenant - that's fantastic, they are what all landlords hope for. They pay their rent on time, they look after your property and they are undemanding.

However, they can still get frustrated and want to move. Do you want to know what drives them over the edge? Here are a few areas that you control, that could drive them out. So take heed.

1 - Great tenants don't like being bugged.

They don't like it when neighbors (especially in an apartment complex) throw wild parties, they don't like drug dealers in the neighborhood and dealers' clients knocking on their door, and they don't like you showing up early Saturday morning wanting to get stuck into the garden.

Good tenants want to live undisturbed in a safe neighborhood. So if there is activity that is going on in the area that is annoying or unsavory, then work with the owners of the properties to sort it out.

As for you showing up 8am on a Saturday morning. Don't! Call your tenants first (at least 48 hours in advance) and work out a time that's good for both of you.

The Bad Tenant - How to get rid of them.

It's the nightmare of all Landlords, the Bad Tenant.

No one wants them, and you're probably kicking yourself that you may have been able avoid them, 'if only' you had done X,Y, Z. Well you can't go back in time, so the next step is to deal with them here and now.

But what do you do?

First of all it depends on what is happening? Not paying rent, being rude to the neighbors, destroying your property (pulling out water heaters, tearing up the floor, setting fires etc)

The Art of Negotiating

One of the keys to getting a property that is good value, is the art of negotiating. I bet you have come across a really good negotiator, one where they can get thousands and thousands off the price - of anything! From cars, houses, furniture, they see the price as a starting point rather than the end point. Here are a few trick they probably use.

When it comes to negotiating in property, there are a few key areas that can create a more favorable environment - for you.

When to buy property - for the first time.

Which do you think is harder? Knowing HOW to begin a property portfolio? Or knowing WHEN to begin your portfolio?

I would say the latter, and it's becoming more and more difficult to start. Entering the investment market means you need money and you either get that by saving for a deposit and buying a house as you normally would. Or if you already have a home, leveraging the equity in the property as a deposit. To leverage your own property, then you need to have paid some or all of the original loan, or the property has to have increased in value. 

Both of these options take time, especially if you are waiting for your owner-occupied property to be completely paid off before you begin investing. At which point you may jeopardize your portfolio's full potential.

Do you know how to make money from property?

Everyone starts in the same place when it comes to property. They start from the beginning. They don't wake up one morning with a portfolio of properties that are raking in a very nice passive income. They had to start from square one*. They made mistakes, they worried about each move, they fretted about tenants and maintenance and nest eggs.

They had to learn how to make money in property and once they understood that they then built a strategy, and once they had a strategy they built up their portfolios. So the starting point is HOW to make money in property, and there really are only two ways:

Timeless Tips for Property Investors

After many years in the business, there are some things that don't change when it comes to choosing the right investment property. I'm hoping that you've seen these all before, and this is just a reminder list for you.

1. Buying in the same area you live in is often preferable, especially for a new investor, as it is easier to keep an eye on the property. Driving past the property regularly will help you stay on top of any potential problems, and relieve any new-investor anxiety.
2. Three or four bedroom homes are usually easier to rent and normally have a quicker chance of re-sale should you need to sell any time in the future.
3. Low maintenance cladding materials on the exterior of the home will help to reduce ongoing maintenance costs. Maintenance is not something you should take lightly.
4. Double income properties, for example homes with a granny flat, often offer excellent rental yields. If you lease these at different times, then you won't be down double income if both are vacant.

The Steps to Renting Out your Property - Part 2

In Part 1 of: The Steps to Renting Out Your Property, we covered 

• Finding the right property manager
• Landlord Insurance
• Taxes

In this half of the article, we get you out the door and into the landlord game.

4 - Decide on the rent

You need to work with your property manager to decide on the best rent. Yes you want to make a profit, but is it wise to charge more than a comparable property? You might find that if you invested just a little bit more to spruce up your place, that you could enjoy much better returns. Your property manager will be able to advise you on this.

Do you Want to Become a Property Tycoon?

So do you want to be a property tycoon, with millions of dollars worth of property under your belt? Silly question really, of course you do, we all do. But what are the fundamentals that these property magnates use, to expand their portfolios and wallets?

Now, I'm not expert in investing, my forte is in looking after your properties! I know however, that it takes a lot of commitment to learn real estate.You need to study the ins and outs like you would learn any other trade. So to evaluate the best potential  investment properties, you need to know your trade!

Knowing your trade, you need to know the fundamentals, and those are a lot of questions you need to ask of your potential investment property. To find the 'best of the best' start by asking the following questions: 

(Re)Financing: Tips for Property Investors

When you are buying property you need money to finance the investment. Here are some things to consider if you are either refinancing your property or trying to find funds to purchase an investment property.

1 - Shop around.  Don't just go with what you know. If you already have a lender, don't assume that they will give you the best deal. Things change all the time, smaller banks and lenders often have more flexibility compared to the big-box banks.

2 - Lower rates aren't always going to give you the most savings. Make sure you look at the fine print and find out if there are any hidden fees.

3 - Don't wait out the RBA. Rates may or may not drop, if you see an investment property on the horizon, get the financing sorted out pronto. In fact, you should really have that sorted before you start looking.

4 - Get it in writing. Has your broker given you a rate? Get it locked in, in writing.

5 - How good are you at maths? Getting a cut in you interest rate by about 1% can save you about $100 per month.

6 - Going against what I said in number 2 - if you have a lender and are refinancing, be careful when you switch. There will be fees up the wazoo - establishment fees, legal, ongoing, stamp duty…. make sure switching to a new lender adds up the right way.

7 - How's your credit? Just because you think you have good credit doesn't mean it's all good. Make sure you get someone to check your rating to ensure you can get the best deal. The stronger your rating, the better - obviously.

8 - Don't fall for the honeymoon. You can get a low rate at the start, but what happens when it changes? How will that position your loan in the long run - and monthly payments?

9 - If you refinance, don't use the money to pay off debt, unless you are changing your spending habits. You could create the never-ending nightmare.  

10 - Your down payment. The bigger the better.  If you are financing from scratch make sure you have a good 20% chunk in most cases (not all). If you can swing a 25% down payment, then you may qualify for an even better interest rate.

Bonus tips:

Here are some other places you may look for cash. You may or may not be successful with these options and of course, get input from people who know their dollars and cents!

• Home equity lines of credit, 
• Credit cards
• Life insurance policies
• Owner financing
• Peer-to-peer loans
• Maybe you could start a Crowd source campaign - who knows if it's possible?

So what is the most creative way that you've manage to cobble together funds to buy an investment property?

NOTE: I am not an expert in financing, these are thought starters. Make sure you get input from someone more knowledgeable than myself.

Don't Pay Too Much

One of the keys of being a successful property investor is getting to the property before the competition and getting the property under market value. But how do you do that - how do you avoid being fleeced?

Well it comes down to planning.

Numbers

You need to do lots and lots of research! The numbers don't lie and you need to have accurate historical data to make informed decisions. Some (but not all) of the areas you need to cover in your research are:

• Median price in the suburb that you are investigating - past 12 months, 5 years and 10 years
• Track property sales in the targeted suburb. Which ones are going to auction, which are being passed in. Ask for price guides from agents. (Keep a closer eye on comparable properties)
• When you are looking at a particular property, find out what it last sold for, when and how long it stayed on the market.

Great Tenants for your Rental Property are Determined by YOUR attitude! PART 2

Last Time, we discussed how your personal attitude impacts on the quality of tenants that you attract. Now lets discuss the attitude of your property.

How well dressed is your property?

You turn up to your property viewings, smartly dressed, with organized paperwork and an air of confidence about you. Does your property present the same attitude?

What type of tenant would be attracted to this property?

Without fail, all good tenants want to rent a place that looks good. They want to show their friends and family a place they are proud of. They want to live in nice surroundings.  Bad tenants don't care. Bad tenants just want a place to crash. They will bypass the fantastically presented property, because they know more will be expected from them.

How much does it really cost a Landlord when a Tenant moves out?

Reducing tenant turnover is paramount to being a profitable landlord. Not only does it chew into your time when you have to get the rental property ready, market it and then show up for viewings,you are losing income! So what are the actual costs  when a tenant moves out?

This is what you want to avoid!

So what does it actually cost? 

These are by no means exact numbers for your rental property.  Only you know how much:

• You are renting out your properties for 
• What your mortgage payments are
• How much work that need to be be done on the property before turning it over

But if you are new in the landlord game (or you have been there a while but you really haven't thought about actual costs) this will give you a general idea of what the outlay is.

You Can Take a Holiday!

It's starting to warm up down and we are all dreaming of our Christmas holidays, but one of the hardest things about being self-employed is taking a holiday. Who is going to handle any crises that may come up? How will you get paid? But it is important to everyone to take downtime. So how do you work it so that you can take a holiday and come back recharged and refreshed? Yes it is possible to take a break from the calls and requests.

My first suggestion would be to hire a property manager and you will never have to worry about taking a holiday, but if you like going it alone, here are some tips on making a holiday a reality.

Find a "Bob"

While you are away things will happen that need to be addressed so find a trusted friend or a relative ("Bob" )who can take over managing the property(ies) in your absence. Make sure that they are:

• Trusted - you can not worry while you are away, so you must be sure that Bob can handle the job and not make mistakes that could damage your reputation.
• Bob must be reliable in all aspects of the job
• That Bob isn't going to be put out too much (make sure they live within a short drive of  the property(ies)
• Bob must be relativity handy.
• Bob must be willing to do it! 

I would also set up some kind of remuneration for them so that they take the role seriously. Consider even writing up a contract. 'He' may be your best mate or your cousin, but don't take him (or her) for granted.

It sure is a tall order, but once you find the right person, the rest is simple.

How to get the Smoke out.

No one likes walking into a place with the lingering smell of smoke. It's very off putting for potential tenants, especially if they are non- smokers. So what happens if you buy a property and it smells like smoke, or you have found out your previous tenants didn't follow the rules and now the house smells like smoke? How do you get rid of the smell?

Vinegar

Vinegar is an acidic agent containing mainly acetic acid and water. Historically it's been the most available mild acid. And while you don't want to put it on your carpets or any fabric (can bleach and stain those!) you can put it on walls (diluted with water) to absorb the smell. Vinegar in a bowl can be used to absorb onion odors while cooking so you can bet it's going to get the smoke smell out of walls and linoleum floors. Distilled white vinegar with water on a clean cloth is all you need to get your hard surfaces smoke free. 

Child Safety In Rental Properties

Renting to families is a smart move.  Parents tend to be stable, they don't want to move around a lot and are reliable and responsible. To ensure that they remain in your property for a long period of time, it's important that your property is safe for children. (It goes without saying that it should be safe in general, but there are a few other considerations when it comes to children.)

Parents are ultimately responsible for their children's safety, but here are some things to keep in mind when you are renting to families:

Pools/Spa: If you have a pool or a spa on your property does it comply with Australian Law ? All states and territories have laws, make sure that your pool  complies.

How to Be a Successful Long Distance Landlord

There is a very real chance that any property that you purchase as a rental, is not in the same town that you live in. So how can you make sure that you can be the best landlord that you can be, considering that you can't keep a physical eye on things.

This is a great article that popped up recently from Rentjuice.com 

I would definitely highlight tip number 1!

Not all landlords invest in properties that are steps away or a quick drive from their own residence. Some landlords choose to purchase rental properties that are hours away or even out of state.

July Article Round Up

I can't belive we are now in August! The Olympics are on, we are making it through winter and before we know it spring will be on us.  

So what articles did I enjoy during July?

WA Carves Home For High Earners 

Australia’s highest earners no longer reside in Sydney’s Eastern Suburbs or within Inner Melbourne, but in Western Australia, according to the results of the latest census.

Moving Day Horror Stories

When Greg and Sally Slack moved from Colorado to Missouri in 2004, they took along two very excited golden retrievers and towed a boat.