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The Importance of Investing Well and Avoiding a Dud Purchase

Wed, 22 Dec 2021 23:50:32 GMT

Property investment is often viewed as something you simply hold onto as an equity-building asset. But what if that asset is not really growing in value? Does it really make sense to retain it without ever really seeing any true rewards? Here we look at the importance of investing well and avoiding those dud purchases that reap little growth.

The Difference Between Intelligent Investing and Wasted Investment

When you choose to invest in property, regardless of your timeline, you want to grow equity. This is not so much a goal, as it is a given with real estate investors. But is this really how property investment works? Is it really a matter of just buying a property that seems like a great deal and waiting for it to rise in value? The simple answer is no. There is far more to investing than that. Intelligent investing considers all of the things that will either offer organic price growth, engineered price growth through development, or in the best-case scenario, both.

Your goal is to find properties that have a higher return on investment that are growing exponentially due to their location. This is what we call organic growth. Whether you hold the property for years or want to see growth sooner, organic growth is key, which means location is your most important consideration. A wasted investment is a dud purchase that sees little performance while holding up cash you could invest in a higher-performing property.

How Do You Make Smart Investments?

Smart investments look at ideal locations based on three key elements for success:

Demand: Is the area in demand or on its way up?
Supply: Is the area more likely to be overdeveloped with tons of housing options due to available land, or is it limited for development opportunities?
Demographics: Who lives in the area, what is their income, and what is the opportunities their wealth or lack of it present in the area?

Intelligent investors build quality property assets, with substantial equity holding, in a desirable location to enjoy long-term compounding capital and rental growth .

How Do You Know You Have a Dud?

Because you won’t see growth, or you won’t be generating income. As mentioned above, you need to know your investment is a quality asset that is seeing substantial, notable growth. We are talking about numbers here, so your equity is measurable. If you look at what you paid for your property and what its current value is now, and you aren’t jumping for joy, chances are something is not working for you.

If you are holding a property in the hopes of compounding capital, and it isn’t delivering growth, you should reconsider. This is an important consideration when it comes time to decide if now is the time to offload that property. The sooner you sell it, the more time you have to start building equity in an intelligent investment. However, you still want to see above-average growth. For example, if your goal was to develop the property and you are waiting for the right time, if your property hasn’t been compounding capital year over year, then your investment in developing that land won’t be enough to allow you to fund your development costs. Simply put, if a property is not delivering strong growth or income, then it should go! It’s time to assess your property, determine its value and work with EQ Property to get it sold.

How Many Investment Properties Do You Really Need to Achieve Your Goals?

trent@trentbutler.com.au (Trent Butler) — Mon, 20 Dec 2021 23:51:24 GMT

This seems to be a pressing question for property investors, yet the answer might surprise you. It is not so much how many investment properties is enough, but more what types of properties provide the best value. Quality always trumps quantity, but how do you know how to find high-quality properties? It is all about building equity through your assets. Here we explain why it’s not about how many investment properties you need, but instead how to find high-performing properties with the best equity potential.

What is Equity?

One of the reasons you can make a lot of money with an intelligent property investment strategy is because you can put very little down and already have equity. So what is equity? Simply put equity is the amount of money you own in the property outright. This begins with how much you put down on the property, as well as how much of your mortgage you’ve paid down. Over time as the value of the property increases so does your equity.

Over time, almost every property builds equity. The challenge with property investment is finding the properties that will outperform the averages so that equity builds quickly. When you find a property that will grow in demand, you will see the value increase quicker, so you see more equity. The formula to understanding your equity is your property’s current value minus how much is owing on your mortgage. The current value is based on the average price your type of property is selling for in your area.

The Danger of Dud Properties

Unfortunately, a big mistake new property investors make is thinking the longer they hold on to a property, the more equity they automatically see. But this is not always the case. It is dependent upon supply and demand. If you buy a property in an area with high demand, but supply that keeps up with demand, then your property will not see as strong an “organic” growth as a property with high demand with supply limitations.

When buying property to build your assets, your goal is to not just look for several properties available at the lowest price, but instead for properties in areas where demand will grow, but supply can’t keep pace.

Spotting Quality Property Investments

Quality property investments require careful research and are data-driven. However, in general, ideal investments begin with ideal locations. This is often an area with less expansion of land where suburbs can’t spread and grow. The more confined an area is in land availability, the higher those limited square meters become in value. Combine this with a wealthy economy in the area, and you have the three things you need to avoid a dud property:

Increasing demand
Limited supply
Favourable Demographics

If you fail to meet these three criteria in your property search, you won’t see as much growth in your assets .

How to Decide If Using a Buyer's Agent Is Right for You

trent@trentbutler.com.au (Trent Butler) — Sun, 19 Dec 2021 23:51:42 GMT

Buying property is exciting but is also both time-consuming and expensive. It’s always a significant investment, and you want to ensure you are narrowing down your search to save time while understanding the market to save money. When you decide to go it alone, you are more likely to make common mistakes that cost you time and money. Here we look at five of the most compelling reasons to use a property buyer’s agent to ensure you don’t waste time and get the most for your budget.

1. You are Short on Time

This is a significant consideration when embarking on a property search. Most people don’t realise it takes an average of 200 hours to find the right property. This is because there are so many locations and properties on the market. You want to narrow down your search in the best neighbourhoods for your budget and see as a few houses as possible to make your search easier.

A buyers’ agent’s job is to find properties for their clients. They do this day in and day out and already have an excellent understanding of what properties are on the market. They can conduct research using the best tools available, tools you can’t access. They also hear about new listings sooner. As a result, your search is streamlined and the only time you invest is in seeing the homes that meet your criteria.

2. You Don’t Want to Miss Out on Opportunity

When you go it alone, you look at property after property and can miss out on properties that are right for you. If you are looking at the wrong properties in your search, those with a buyers’ agent have the edge over you. They are looking at the right properties. When you share your criteria with your agent, they zero in on the suitable properties, so you never miss an opportunity. While you might think what you won’t know can’t hurt you, when you move in right beside a far more appealing home that just recently sold for the same or less than what you just spent on a less desirable home, you’ll recognise just how much it hurts to miss an opportunity.

3. You Want to Pay Less and Get More

The money you invest in sound advice could save you from making a much more expensive mistake. When you are out inspecting homes, the agents you encounter are the sellers’ agents. And guess what? They do not have your best interests at heart. They are there to represent their client who is looking for top dollar for their home. Without a buyers’ agent, you are vulnerable to buying a home that is either not suitable or far more expensive than the market average – or worse, both. A buyers’ agent represents you during the negotiation process, so you always pay the lowest possible price for the home you want.

4. You Want to Avoid Frustration

If you search for a property without a buyers’ agent, you are more likely to encounter frustration after frustration. As mentioned above, the agents you encounter are sellers’ agents. When you ask them questions, you are not likely to get the answers you need to make an informed decision. You are also more likely to fail to get the home you want because another buyer’s agent was there at the right time with the right offer. The frustrations of property buying are greatly increased without someone guiding you through the process.

5. This is Your First Property Purchase

No matter how much information you source online, you will never have the inside scoop on the property purchase process. This is not an easy process which means it is easy to make mistakes. A buyers’ agent is there to guide you through each step, from researching the right homes in your price range to showing you the homes and from understanding the importance of location to negotiating a fair price for your investment.

As you can see, a buyers’ agent really is right for everyone looking for the best properties at the best price.

The Difference Between Growth and Yield and Selecting the Right One For Your Goals and Objectives

trent@trentbutler.com.au (Trent Butler) — Tue, 23 Nov 2021 17:41:20 GMT

Understanding your goals and objectives when investing in property is an important element to your success. While the simple answer might be “to make money”, there are different ways and different levels of making money through property investment. Therefore you have to understand not only your own goals and objectives but the type of opportunity that will work best to help you meet your goals.

That brings us to growth and yield. Both are integral components of successful property investments, but understanding which is right for you is imperative to achieving the best result from your investment dollars. Here we look at the fundamental difference between property growth and property yield to help you understand where you should focus your investment dollars.

The Difference Between Growth and Yield

Let’s start with the basics:

Growth: Growth refers to how your property’s value increases over time.

Yield: Yield is the money you collect from the property through rent.

As you can see, they are two very different ways of earning money from your investment. In most cases, high growth properties produce low yield, and high yield properties provide low growth. It can be very difficult to find a property offering both, which is why understanding your goals and objectives is key to finding the right investment property. It will determine whether you experience high growth and low yield or high yield and low growth.

Your Timelines in Determining Growth vs Yield

Your timelines are very important when determining which strategy will work best for your needs. Generally, in the case where you are closer to retirement, you are best off looking for a property offering a high yield. This is because once you invest your money, your property will continue to produce high yield rent right from the start, which contributes to your income throughout your retirement years.

However, if you are younger and aren’t dependent on that money in the short term, you have the luxury of finding a property that will see more growth. Of course, there are always unique scenarios that also contribute to your strategy, which have to be considered in detail, including your budget. When you find the right property, over time, it will see impressive growth organic, naturally increasing in value thanks to simple supply and demand principles.

Why Not Both?

You might be wondering why you can’t have both. This is a question we asked ourselves. We were happy we found the answer is you can, as long as you have the right strategy and timelines. The trick is to find a property with high growth that also offers what we call “upside.” Upside allows you to increase the value of the property by manufacturing growth through either development or renovation. Again, it is challenging to find a property offering both, and the timing of your goals and objectives is very important when trying to find a high growth, high yield property. Therefore, the sooner you look at investing in property, the more opportunities there are to benefit from both growth strategies both.

How to Increase the Asset Value

This is where it gets challenging. Finding a property that can increase asset value requires a keen eye first for the potential for what we call “organic growth” and second for what we call “ manufactured” growth. Organic growth is the natural increase in a property over time. In almost all cases this happens, but it is the rate of that growth and the value potential that varies. So to increase the odds of a property outperforming the averages, we focus on a location where properties are in demand but will face limitations in increasing supply.

In hand with the right demographics in an area with wealth to invest in those properties, you create the perfect storm to see your property outperform other areas. This is because limited supply increases demand, which in turn forces prices up. So your organic growth happens faster and for a more impressive amount. Next, you want to find an upside opportunity where the property is larger so you can develop more homes or offer renovation opportunities to increase value.

Understanding your goals and objectives helps you choose whether you should focus on yield or growth. Although there are very rare cases where dumb luck allows an investor to stumble upon a high yield, high growth property, the law of averages is against you. Data-driven research and feasibility tests are the best way to find the ideal property offering both.