Burnout isn’t fun. It’s a result of investing in everything except yourself. As a property investor, you must be on the top of your game if you want to grow your portfolio and increase chances of financial freedom. Not all of these tips are based on financial success. They’re about investing in yourself and your worth.
The property investor community is full of people boasting about their annual return, how they got a discount on their capital gains tax, adding a family home (not an apartment) to their portfolio, etc.
No two investors are the same, so stop comparing yourself to that person in your head right now. Their strategy works for them and your strategy works for you. A self-described guru might be up until early hours looking at deals. You prefer 8 hours of solid shut-eye and check your emails for alerts the next morning. And that’s okay.
Talk to a professional
Asking for help isn’t a sign of weakness. Confronting problems head-on and admitting what they are is strength itself. People don’t know who to turn to sometimes, especially when it comes to their ‘failures’. Go to your GP for a referral to a psychologist and book an appointment. Mental health is just as vital as physical well-being. That brings us to the next point.
Take a day
Is your property investor role more of a side hustle? A majority of people in the game work full or part-time jobs and devote a small amount of time to the real estate market. Juggling two roles will lead to burnout and that’s why it’s important to take a day off. Don’t be a hero, it’ll result in a meltdown.
Do things that make you smile
You enjoy being a real estate aficionado but it’s a business, not a hobby. What would you say you don’t have time for anymore? Take an hour, half an hour, out of your day and do something that fills up your soul. Exercise, art, reading, swimming, baking are some suggestions to get you started.
Distance yourself emotionally
Emotionally investing in real estate is a recipe for disaster. That’s stress you don’t need in your life on top of work and family.
Detachment and being brutal in your choices will feel uncomfortable at first. But those tenants who keep disrespecting your investment home, for example, aren’t your family. The property manager dragging their feet and not returning your calls isn’t your best friend. Evict, cut the cord, and look for what serves you better. You’re a property investor, a businessperson. And people in business are successful because they make uncomfortable choices.
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Your rental property won’t earn you income straight away, but there’s ways to get to that point a bit faster.
80% of property investors are unaware of the tax benefits they can claim through depreciation. Imagine getting back thousands of dollars every year, on top of your (still meagre) rental income. The value of what you purchased this year won’t have the same value ten years from now.
Book an inspection as soon as you settle the property. The quantity surveyor will write up the report and send it back to you a month after their inspection. Get it to your accountant as soon as possible after that so it’s on hand in time for your annual return.
Increase the rent
As the area’s profile grows, so will demand and rental prices. It’s not unreasonable to change the rent a little. 2 – 3% is enough annually. Link it with new amenities like appliances or a paint job to show the tenants that it’s worth the increase.
Charge for amenities
‘Little luxuries’ can also boost the cash flow for your rental property. Cleaning services, internet connection/wifi, gardening, Foxtel and the like are all extras that can earn you a couple of extra hundred dollars.
Charge for the parking space
Same as renting out the apartment, rent out space in the parking garage (if your property is part of a complex). Inner-city parking is especially coveted. If there’s no parking on-site, look a one of the links below to investigate the possibilities of leasing a space.
Tenants are picky and they’ll choose properties that suit their needs. They’re busy people with kids, pets, and full-time jobs. Their home should be a place to relax and let the dog off the leash. Here’s some of the items on their list;
Location: tenants want a rental property close to work, school and the shops. Public transport right on the doorstep and lifestyle in the neighbourhood is a plus.
Housekeeping: A dishwasher, laundry area with at least a washing machine and a fully equipped kitchen is a big one. Bonus points if the appliances in the rental property are stainless steel!
Nature: Natural light, balconies, and yard areas for pets are also on the list. You might be hesitant to lease to tenants with pets, but more and more people are adding furry friends to their family.
The list goes on, but upgrading the appliances and raising the rent to cover the garden/maintenance fees is a place to start!
Read this before using your investment property as an Airbnb
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Leasing your investment property on Airbnb is a risk. You dream about earning extra income, and it’s wise to find a few extra streams to boost your bank balance. But is it worth the extra work we’re about to remind you of below?
Rules and regulations
And there’s a lot of them. There’s zoning laws, tax income laws (it must be declared; but this is often ignored) and local council approvals to look at. As written by Cortado Lawyers;
An Airbnb host will need Local Council approval (and a licence) as Bed and Breakfast accommodation (B&B) if they provide on a commercial basis: (a) rooms for overnight accommodation; and (b) at least breakfast or common cooking facilities; and (c) more than two or three double rooms for rent (which accommodate more than 6 people). A manager will usually reside in the property. The precise requirements vary between Local Councils.
AirBnB has also partially answered the question;
…please review your local laws before listing your space on Airbnb. More information about your city’s laws and regulations may be available on our Responsible Hosting page in the Your City’s Regulations section.
By accepting our Terms of Service and activating a listing, you certify that you will follow your local laws and regulations.
Costs over income
Cleaning fees, gardening, maintenance, and even insurance are only some of the costs you must consider. The latter is especially painful for landlords whose tenants are illegally subletting. Any insurance on the investment property and the tenants living there is made void.
You can charge more ‘rent’ because the cleaning fees are included in the final cost per night. You can also raise the rent as you like when it’s peak season because people will be looking for an alternative to hotels. But don’t expect your investment property to magically attract income within a week of putting it up. Short term rentals equal higher maintenance costs, on top of AirBnB taking their fee.
With regular tenants, you have guaranteed income for the duration of their lease. They could be in your rental property for years.
AirBnB, like hotels, is more seasonal. Holidays, festivals, and other events affect vacancy rates. Can you afford your investment property being empty for weeks at a time?
You’ll pay more than you make if you don’t play smart
Investors leave most of the care duties to their property managers; collecting rent, organising maintenance, and evicting troublesome tenants. But when you own the property, you become your own agent. Hosts with great reviews get more bookings, so you must be prepared to act as a concierge if necessary.
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There’s two main strategies in the investment game: yield vs capital growth. They’re different, but the goal is the same: to make the investor money.
What is yield?
This is complicated for the new players in the investment game. Agents will speak about ‘yield’, the percentage of an asset’s market value. There’s gross yield (before expenses) and net yield (after expenses are deducted). Your Investment Property gives us the formula below:
Weekly rent x 52 / (value) x 100
The result is your annual return, or yield, of that property.
What is capital growth?
One common strategy in property is to buy the house, hold it as an investment for a period of time and then sell it for a higher price. The surplus is called ‘capital growth’. But this strategy isn’t for those looking to ‘get rich quick’. Capital growth occurs over a decade or more. In this time the area demographic changes thanks to developments. This includes land/apartment buildings, schools, and public transport.
As always, with whatever strategy you choose, make sure you listen to your advisors (accountant, property manager etc). They’re the experts for a reason.
Do your research
If you want capital growth, you might choose to buy in a satellite city or an up-and-coming suburb. Research trends in the areas you want to buy. These include:
Retail outlets (cafes and boutiques)
Are there cafe’s in the area you’re house-hunting? What will appeal to potiential tenants?
Positive gearing happens when you receive income from your tenants after paying maintenance fees. This type of investment gives you cash flow but the disadvantage is paying tax and a slow rate of capital growth.
But some investors will snap up positively geared properties to yield the benefits of the income. Because they’re earning money, it makes them more attractive to lenders. They have the potential to buy another home and grow their portfolio in a shorter period of time.
Plug the gaps
After you’ve done your research you’ll know that there’s rules and regulations that other landlords are imposing on tenants. What can you do differently? Your Investment Property did a survey asking tenants what they look for and the results show that:
38% of tenants look for parking
31% want cable internet connections
32% look for pet-friendly properties (dogs are family too!)
25% want a strong mobile connection
22% check for an abundance of powerpoints
So after reading this, what would you do to build a strategy to yield the most from your portfolio? If you want more advice, read these articles:
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Are you holding out for a heritage home? Or would you rather build a house that pays homage to era’s past with heritage ‘features’? We’ve gathered articles around the web that compare the pros and cons of buying vs. building for investment purposes.
Banking, insurance, and investing are all part of CanStar’s services. It’s natural they’d write something about property investment and the associated costs. They look at both sides equally, listing the pros and cons of each. This is frustrating to those who want a simple ‘yes or no’ answer but their advice is not to be taken for granted
Domain interviewed several experts in the property field about this topic. A buyer’s agent, realtor, builder, and lecturer all have their say. Ultimately though? It depends on the investor and their priorities.
This article is written by Lindy Lear, a successful investor who built a portfolio of eight properties in three years. She takes readers through the process of building a home for investment purposes. This starts with choosing a property and ends with the amount of the (many) tax benefits the reader can claim if they follow through on their plans.
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Thanks to constant news coverage about rising population numbers, employment, and therefore housing affordability, the property market seems less accessible than ever. Investors are asking themselves what they can buy for half a million, so we’ve compiled a short list. One home for each state around Australia.
This apartment is in the trendy suburb of Teneriffe. It comes with river views, easy access to the city, and a host of gyms, shops, and restaurants. Similar properties are around the same price, going up to as high as $2 million.
This home is in the rural village of Dunedoo, 100kms from Dubbo. It’s on the market as a ‘recently renovated property’ though new owners can modernise it as they like. This is a steal in today’s property market, and has the potential to be a home for holiday tenants.
Not bad for a Ballarat townhouse. This home, only three years old, is good for those investors looking at homes for empty-nesters and downsizers. There’s a small backyard area and spacious bedrooms inside. The townhouse is close to shops and schools for small families.
Investors looking for a small family home on the property market would snap this up for a minimal amount. Zeehan is a small town of less than 800 and the house is down the road from the local school. It’s marketed as having a double block of land, new external Colorbond, and a rumpus. The interior is quite dated, making it a prime candidate for renovation.
Just within the $500k budget, this stunning house is a rarity. On the outside, it looks like a grand home, a mansion, even. When really, it was renovated to work as an apartment block with three units. The exterior keeps its Mediterranean style character from when it was built in the 1930s, but the interior is totally modern, complete with an elevator. This is definitely a steal in the 2017 property market.
You can spend just over half your budget and get a lot back in return in WA. This cottage was built in 1927 and leaves investors some room to redecorate, so you can claim depreciation on any new fixtures you install. There’s a large amount of exterior space, perfect for tenants with pets and children.
Getting a home with a pool for less than $500,000 is a miracle, but it can be done if you’re looking at the property market in the Northern Territory. This home recently underwent a massive renovation that included the installation of the pool. Located in Katherine South, the home is close to the library, the public hot springs, and national parkland, making it good for family/tourist tenants.
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On May 16th 2017, property guru Tim Gurner appeared on 60 Minutes to talk about the property market and he didn’t hold back. What he didn’t expect, though, was to set off a chain reaction of jokes, puns, and a genuine debate about breakfast.
His comments that young people can’t afford to get into the market thanks to meals out and their daily coffee hit received a lot of backlash, but also changed the way we looked at Australian property investment. We collected some of the best articles about the issue from around the web so you can make your own judgement.
‘There was no discussions around, could I go out for breakfast, could I go out for dinner. I just worked.’ – Tim Gurner
A quote from the original interview that sparked an uproar. Tim Gurner, property investment advisor and developer speaks candidly about his struggles when he entered the property market…and why the new generation has no chance of getting their foot in the door.
Travel, smashed avo, or that avocado farm in rural WA? Mark Campbell, writer for the Sydney Morning Herald, looks at the ‘lazy’ millennial generation and their prospects for entering the property market. Are they really in trouble when they’re spending money on trips to South America and $15 smashed avo with a sprinkling of dukkah?
What if it’s not the breakfasts’, or millennial’s, fault? Nick Evershed from The Guardian helpfully points out that markets and general affordability, or lack thereof, are putting young people out of the running.
This article even comes with a fun ‘luxuries’ calculator that equates the amount of ‘fun stuff’ people can do, eat, and more with the equivalent of a property investment deposit.
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The property market is competitive, no doubt about that. Internationally and locally, investors are getting priced out of one market and moving onto another, before the same cycle repeats itself. Australia’s had a ‘golden age’ of affordability, but in recent months that rosy period has come to a screeching halt.
Sydney and Melbourne’s property markets are slowly outpricing potential investors thanks to rapid employment growth, among other reasons. While prices in these cities have risen over 10%, Brisbane’s growth remains in the single figures. But is it too good to last?
The UK has one of the priciest property markets in the world, and the younger demographic is certainly feeling the pinch. This is all thanks to changing work conditions, the drama of Brexit, and the ‘silver generation’ using their experience to snap up hot real estate.
This is an opinion piece, but the context is relevant. This debate was sparked by investment professional Tim Gurner’s scathing observation about millennials and their lack of potential to crack the property market. Why? Because they love $4 coffee and avo smash everyday. Even though the debate has raged back and forth, it’s put the way we work, save, and spend in the spotlight and there’s no sign of it slowing down.
There’s a glut of apartments in Brisbane, and developers are so desperate to sell them they’re offering incentives to buyers. This comes as a result of oversupply and minimal demand. ‘Offers’ include the likes of free rent (for a period), vehicles and free avo toast everyday for a year. That’s probably another house deposit…or a new couch.
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You say you’re a property investor. You spend the weekend looking at open houses and you read the real estate section. Domain.com.au or realestate.com.au is permanently open in your menu bar. But did you know less than 1% of property investors successfully build a portfolio?
In a previous article, we spoke more about these statistics. The most common type of property investor only owns one home, apartment, or commercial building (72%). Less than 20% own two. First time investors often fail to truly build their best portfolio thanks to a trail of mistakes that prevents them from growing.
So how do you behave like a 1% property investor? Well for one, you must understand risk and have a high tolerance for it. Property is a business, a game to be respected. Treating it like a side gig or a hobby, or just not taking it seriously, will come back to bite you when something goes wrong.
The 1% are patient and have clear game plans for what they want to achieve. Property isn’t a ‘get rich quick’ scheme by any means. There’s loans to take out, home-hunting to do, and meetings to attend with professional advisors. The general consensus with entering the market is to make money. Investors in the 1% will have 6 or more properties in their portfolio. They make hundreds of thousands, right up to the millions, every year, and that’s only from rental income.
If you aspire to grow your portfolio like the 1%, learn from your mistakes and from those that others have made. Friends and family, though they mean well, aren’t the best place to look for advice. Rather, join an investment group, like a property club, that has a network of professionals. Communities like this are great for accessing financial advisors, meeting fellow investors, and even making new friends.
Don’t just act like the 1% do think like them. This is one of the best ways you can grow your portfolio and your bank balance. Change your mindset to something more clinical and business-like. You’re a property investor, a business person. Not ‘player one’ in the property game.
Liked this? Read more like it:
5 types of property investor
Property Investment is for Stayers not Players
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To make a sale, real estate agents need to rely on cold hard facts. Their clients need assurances that the property they’re seeing is the best investment for them. It doesn’t matter if the property is a commercial building or a home; if there’s benefits available, it’s music to anyone’s ears.
There’s two classes in a depreciation schedule: capital works, and plant & equipment. Capital works are things the ATO considers permanently fixed to the building (bricks, mortar, wiring etc). Plant and equipment is a different matter. Items in this category are things that can easily be removed from the building such as carpet, furniture, and even the smoke alarms. Thanks to age and general wear, the items in both categories will lose value over time. This creates an amount that can get claimed on a tax return every year.
Having access to ATO-approved depreciation schedules almost on-demand is a great asset for real estate agents and property managers. They can present tangible tax benefits to their clients during a sit-down meeting or even during a property inspection.
Real estate agents know that their clients are looking for the best deal. Presenting the depreciation schedule is a huge advantage in helping them close a sale. Depreciation is essentially the same as savings, or money back from a PAYG statement. It shows the property’s earning potential and can be the difference between a negative-geared asset and turning a profit every week.
Property managers will also benefit from professional depreciation assistance. If their client is unsure of the tax breaks their property can provide, managers can look up a deprecation report just as easily as a real estate agent. Oftentimes the investor doesn’t know they can order the depreciation report themselves and turns to their manager for help.
The benefits that real estate agents and property managers can reap from depreciation assistance are numerous. They don’t just build trust with their client by providing the basis for sound advice. They’ll net a sale and gain a reputation for handling properties with amazing tax benefits.
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