3 Reasons Why Your Property Investment Strategy Isn’t Working (And How To Fix Them)

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Property investment is a business, it’s something people make a career out of. And they’re successful because they worked on a strategy. If your own isn’t generating some sort of flow, then it’s probably because you’ve made one or more of the below mistakes.

You haven’t educated yourself
Property investment strategies aren’t basic. They can be explained in simple terms but implementing them is anything but.Understand this: you can’t live off the income of one property alone. It won’t generate the income you desire. But a diverse portfolio of three or more will get you closer. Look at the different strategies out there and ask yourself a few questions, such as:

  • What is your risk tolerance?
  • Are you buying commercial, residential, or want a portfolio of mixed property types?
  • Is your aim for long-term growth or short-term return?

Real Estate’s guide to property investment strategies

Think as a business person, not a homeowner

You’re buying with your emotions
Remember, you’re buying properties for tenants, not your future family. Emotional investment leads to burnout and feeling jilted because you didn’t get that property you loved so much.

Find a mentor and start networking with the community. People in the industry are only too happy to share advice about a property investment strategy that’s worked for them. Ask them how they detached themselves from the homes or office blocks they were inspecting.

Another solution is to put yourself in a business person’s mindset. You’re running an enterprise, building your portfolio. If you act the part, everything else comes naturally.

There’s no team backing you
This is a big mistake new investors make. Creating an effective property investment strategy is NOT a DIY-type of project.

Successful investors have a team of professionals behind them not only to keep them grounded but also to keep them from losing all their hard work on a bad investment. You’ll need a savvy accountant to incorporate your strategy into your annual returns, a financial advisor to monitor your investments, a depreciation specialist to create a tax schedule and a property manager to handle general tasks around your portfolio. Asking for help isn’t a punch to your pride, it’s good sense.

Read this to increase the value of your commercial investment property

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Those who foray into the commercial investment property sphere know the benefits it can bring. Longer tenancy agreements, high rental returns, and fewer expenses, as opposed to residential investments, are among some of the benefits. But if you’re interested in boosting the perceived value of your space to tenants, consider these.

 

Parking

This is a first-world problem that wastes worker’s time in the morning when all they want to do is get to the office on time.

Websites like Parkhound enable landlords to hire out car spaces. Undercover, on the street, and on a monthly basis. Including this in the rent will attract tenants looking for value and convenience.

Cleaning

Restaurants do it, offices do it, and you can do it as well. Nothing brings a smile to someone first thing in the morning and seeing the floors are freshly vacuumed and new trash bags in the bin.

When you’re doing up a contract with a cleaning company, make a list of items that need to be checked off with every visit. It can be something as simple as wiping down the desks or more detailed tasks like cleaning the fridge/microwave.

 

Appliances

If your commercial investment property is a cafe/restaurant space, adding high-end appliances will kill two birds with one stone. You’ll attract tenants who want the amenities, and you’ll get more from your tax depreciation schedule. Good quality appliances such as microwaves, ovens, espresso machines, and fridges will cost you a bit, but they’ll result in a nice tax return.

 

Light

Nobody works in shoe boxes or cubicles anymore. If you’re a landlord for a commercial office, highlight the open-plan space, including floor-to-ceiling windows. They don’t need to be that big, but easy access to natural light and placing desks near them will have the employees competing for ‘the best desk in the house’. Humans instinctively seek out nature, like sunlight. It’s known to boost employee well-being and all around satisfaction during the day.

Tech

We live in a connected world and humans are drawn to free wifi as much as natural light! Get several wifi routers, good aircon, a security system, and lots of outlets for future tenants to plug in their devices. Running out of battery is a 21st century nightmare.

 

We support self-education

Read this before using your investment property as an Airbnb

Depreciation rules for your rental property | Articles from around the web

Self-care strategies for the property investor

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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.

 

Stop comparing

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.

 

We encourage self-education;

Read this to improve the cash flow from your rental property

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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.

 

Depreciate

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.

Find A Carpark

Parkhound

 

Listen to what tenants WANT

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!

 

We support self-education;

Yield the most from your property portfolio

Read this before using your investment property as an Airbnb

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.

 

Slow seasons

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

Double duty

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.

 

Need more advice? Read on;

Tax depreciation, property investment and our other greatest hits; 2017 in review

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2017 was a year of rising property prices, people educating themselves about property investment, and a massive change in tax depreciation laws. We’ve collected some of the best articles that hit our news section in 2017 and bring them to you here.

 

The release of the 2017-18 Federal Budget sent investors into a tailspin, and for good reason. It doesn’t matter if you buy commercial properties or homes to let. These changes apply to everyone.

 

smashed avo and property invesment

It’s the debate that just won’t die! A scathing critique by property expert Tim Gurner about Millenial’s ability to save for their first home became a repeat headline over the year. Now smashed avocado is a tangible comparison to property prices. We even found a ‘luxuries’ calculator showing people how much a house deposit is equal to in yoga classes, trips abroad, and takeaway coffees.

 

When a mate tells you they invest in property, the likelihood is they’ll only have one or two items in their portfolio. Less than one percent of investors have diverse holdings of six or more assets. If you want to emulate the one percent, educate yourself here.

 

It’s common practice to buy a home, renovate it, sell for a profit and then repeat the cycle all over again. From curb appeal to the garage, we found 8 inspiring builds and overhauls to help your project along.

 

From an apartment block built for retirees in South Australia to a two bed, two bath home with a pool in the Northern Territory. We found properties from each state that you could snap up for half a million dollars or less (at the time the article was published).

 

Tax depreciation specialists, accountants, and property managers are part of your team when you get into the game. Use this article to give yourself a basic understanding about what a great manager should do before you go hiring that guy off Gumtree.

 

We support self-education:

Yield the most from your property portfolio

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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:

  • Schools
  • Apartment/land development
  • Shopping centres
  • Retail outlets (cafes and boutiques)

Are there cafe’s in the area you’re house-hunting? What will appeal to potiential tenants?

Positive gearing

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:

  1. Residential properties that guarantee an ROI
  2. What $500,000 can buy you in the 2017 property market
  3. Rental property depreciation mistakes to avoid

Working as a quantity surveyor; their job in 4 points

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“What do you do?”

“I’m a quantity surveyor.”

It’s common for blank stares to follow this statement. Quantity surveyors don’t get as much of the limelight as accountants, engineers, or architects but their job is a crucial part of any investor’s world. Here’s 10 more things to know about them.

 

  • They’re well educated

There’s a lot of work that goes into becoming a quantity surveyor, starting with going to university. For example, there’s a Bachelor’s of Urban Development with Honours (Quantity Surveying and Cost Engineering) from QUT. This course involves majors like urban planning, accountancy, and applied economics. There’s more to working as a quantity surveying than just good maths.

  • They’re quite worldly

This job allows people to travel. The construction industry needs quantity surveyors far and wide, especially during the initial stages of a project. Those who work for a company with offices abroad will find themselves on worksites from Hong Kong to Dubai. A quantity surveyor working for Deppro visits both regional and capital cities all around Australia at scheduled times of the year. So they definitely rack up the frequent flier miles.

Perks of the job? Qantas Club access!

 

  • Part of the group

To legally work as a QS, you need to become a member of the Australian Institute of Quantity Surveyors. This group represents all surveyors across Australia. Members are bound by a code of conduct to operate at a high standard. They have access to further education, professional executive events, and other resources.

Another institute both individuals and companies must register with is the Australian Tax Practitioners Board. This is especially the case when the quantity surveyor is working on calculating property depreciation. This way the tax depreciation schedule is fully ATO compliant.

 

  • More money, less tax

A quantity surveyor is also known as a cost estimator. Their job is to save money on the build without compromising quality. They’ll complete their job before the developers break ground and consult through the project.

Those who work on calculating depreciation, though, start their work when the buyer settles the home. After a walkthrough of the property, taking photographs, making notes, and inspecting plans, the quantity surveyor writes up a depreciation schedule. This sets out the lifespan of the fixtures in the property and how much value they’ll lose over time.

Depreciation rules for your rental property | Articles from around the web

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Confused about depreciation rules for your rental property? Did you even know there were rules in the first place? Depreciation, tax and claims processes are large and confusing mazes, so we gathered articles from around the web that make things crystal clear.

 

The One Depreciation Law Change You Absolutely Need To Know by Deppro

Investors who hold both commercial and residential properties were thrown for a loop in May 2017. Starting from July, the beginning of the new financial year, the Federal Budget came into effect with new depreciation rules. These rules affect what owners can claim which in turn claims how much they get back over time.

 

How Rental Property Depreciation Works by Investopedia

Investopedia is a useful website both novices and experts can refer to. The page linked above goes into the basics of depreciation such as how it’s calculated and when it ‘begins’. Hint: it’s not actually after the settlement date.

Make sure you’re square before the tenants move in

 

Top 10 tips to help rental property owners avoid common tax mistakes by the ATO

Rental property owners must navigate complicated tax rules. Not navigating them correctly leads to costly penalties. To help the common Australian investor, the ATO made a top 10 list of tax mistakes to avoid. These include what type of expenses to claim, as well as the right portion of costs and how to keep the right records.

If you need a printout to have on your nightstand, there’s a PDF available to download.

 

Claiming Depreciation on Investment Property: The property investor’s complicated friend by Investor Assist

This page is a one-stop-shop for investors wanting to know more about the process. There’s an uncomplicated list of depreciation rules, definitions and examples of what assets you can claim.

The page also describes the methods used to calculate depreciation costs, prime cost vs. diminishing value. But the quantity surveyor handles these calculations, not the investor. Once the values are worked out they go into the depreciation report. This crucial investment tool is recommended at the end of the page as the final step of claiming depreciation on an investment property.

Need more advice? Read these:

  1. Rentvesting: a forgotten way to own and rent at the same time
  2. Behave like a 1% investor with these tips

Residential properties that guarantee an ROI

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Being selective about what you invest in, whether it’s commercial or residential properties, is a blessing. You invest wisely and earn enough to make your next purchase. When you’re shopping around, you already know the type of tenant you want to target.

 

Student accommodation

University and international students either live on-campus or in suburban properties close to their school. Residential properties like this need to be monitored closely so that nobody skips rent or causes damage. But in spite of the horror stories, the tenants are normally very well behaved.

You can rent out your properties as student accomodation

Student accommodation can take many forms. It can be a block of units, a single family home or even a townhouse. The home is ideal if it’s close to any given university or college campus and public transport.

 

Retirement living

These residential properties are often built by specialists and handled by a company with specialist experience (Aveo is an example). But on Real Estate, there’s some properties marketed as ‘retirement living’, geared towards investors.

Retirement homes are marketed to those who are over sixty but are by no means invalid. Residential properties on the market have high-end amenities and appliances included in the apartment or home. ‘Old’ doesn’t equal ‘dated’.

Mansion on the outside, retirement living inside

Retirees are good tenants because they respect their home and maintain it to the best of their ability. If they can’t, they’ll have a nurse or family member help them. If you’re looking at residential properties for retirees, it’s worth looking into these medical/nursing services and market them as optional amenities.

 

Single family homes

Small families will rent before they can afford their first home. Single family dwellings that are close to schools and shops are absolutely worth the investment and the fight that comes with trying to purchase one. Competition is fierce because other investors know there’s money to be made in this area of the market.

 

Need more advice? We have these for you…

  1. The great debate | Buy old property or build new?
  2. 6 signs of an amazing property manager