Transcript
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You’ve decided to go ahead and try and purchase your first investment property, firstly let
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me just say a massive congratulations to you, purchasing property can be a great step towards
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securing your financial future and creating financial freedom for yourself and your family,
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today I’m going to talk about the eleven tips that I have for buying your first investment
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property.
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Hi, I’m Ryan Mclean and I’m from positivecashflowaustralia.co.au where we help people like yourself find and
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invest in positive cash flow properties, go ahead and check us out and we’ve got a free
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eBook showing you the 12 places where you can find positive cash flow properties in
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Australia.
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You can get that by going to positivecashflowaustralia.com.au forwards slash free, the short link is pca.im
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forward slash free.
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What are my 11 tips for buying your first investment property?
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Tip number one is to look at 100 properties, that’s right, what most investors will do
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is they will go out maybe look at two maybe three properties in their local area and then
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they’ll purchase one, they’re probably going to pay more than what is actually worth, by
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looking at multiple investment properties in multiple areas you can get a better understanding
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of each area, better understanding of what properties actually worth and you can ensure
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that you buy a property that is going to move you towards your financial goals not something
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that you’re going to pay too much money for.
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Many famous and successful investors use the 100, 10, three one rule what that means is
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that they look at 100 properties and of those 100 they might make offers on just 10 of those
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properties.
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Of those 10 they might have three offers accepted and of those three offers accepted they might
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actually go ahead and purchase one property, they are looking at 100 properties just to
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purchase one.
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100 sounds like a lot of properties but with the internet is actually much easier to look
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at 100 properties to analyze 100 than it used to be in the past, to make sure you’re looking
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at a lot of properties before you go ahead and buy.
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Tip number two is to research the area, just because you live in an area doesn’t mean you
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know what the property market is like and doesn’t mean you know how that going to perform
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in the future, if you are buying out of the area then obviously it’s going to be very
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important to do your research as well.
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Research is so important because it’s important to understand how the area is going to perform
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both in rental returns and in capital growth you know that you are buying a solid investment
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that I going to deliver on your financial goals.
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I recommend a tool called ripe house which you can get by going to pca.im forward slash
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ripe and that would direct you to ripe house, you can check that tool they’ve a free trial
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that allows you to look in an area, look at where the hotspots are, look at where the
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blue cheap properties are, look at where the government housing is and they’ve a bunch
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of great features out of there.
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I do suggest that you use ripe house when doing your research, I also suggest that you
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do more research by looking at the purchase price of properties gone, comparing other
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previously sold properties in the area and just going to more detail in the area before
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you go ahead and buy.
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If you want more details on how to research an area because that’s beyond the scope of
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this video then I have a full module dedicated to it in at positivecashflowacademy.com.au
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you can check that out and become an expert in researching.
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Tip number three is to don’t always believe the real estate agents, just because a real
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estate agent says there’s another offer on the table doesn’t necessarily mean that there’s
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another offer on the table.
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Just because the real estate agent says that this is a great investment property doesn’t
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mean that is going to be a great investment property.
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Always do your own research and where possible get outside opinions on the property, if the
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real estate manager whose selling the property advices you that this property is going to
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rent for 360 per week, well maybe it’s a good idea to go to another real estate manager
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and say I’m looking just considering purchasing this investment property and I may want to
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rent it out through you guys, would you be able to give me an evaluation of the rental
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income for this property.
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In that way you are getting a party you evaluate it whose not involved in the selling of the
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property and it’s not going to get a commission on the sale of that property.
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Don’t always believe what the real estate agent say they are very helpful but sometimes
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all sales reps can stretch the truth just a little bit.
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Tip number four is convincers versus solicitors which one would you use, I suggest you look
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into both depending on the property if it’s a more complex transaction if there’s more
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you need to look into that you need to do then the solicitor might be a better option
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for you, if it’s a very simple transaction then nothing is going to go wrong then the
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convincer is going to be cheaper than the solicitor then maybe able to do the same job.
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When I talk to convincers and I say well what’s the difference between you and the solicitor
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then they basically say to me if things get complicated and things get messy then we are
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restricted at what we can do whereas the solicitor can do everything, but they also say that
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if it does get complicated if it does get messy we can just hand you over to a solicitor
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and then they can deal with it from there.
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Look at the difference between convincers and solicitors because you can save yourself
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a couple of grand going with the convincer instead of the solicitor.
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Tip number five is to get a building and pest inspection done, still amazes me how many
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new investors go out purchase a property and be without any building or pest inspection
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only to find out that is termite ridden or its got issues with the foundation and or
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something that is really expensive and structural to fix.
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Paying for a building inspection or pest inspection which I’ve created a video about the cost
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of those but you are looking around probably three to five hundred dollars apiece if you
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get that done then you can be assured that the property is up to you to your standard
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and doesn’t have any major issues that are going to cost you an arm and a leg down the
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crack.
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Tip number six is not to get emotional, what happens when we go out and purchase our first
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investment property most of the time we are going to get emotional, I love this property
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I love the way it looks, I love the feel, I love the wallpaper or the carpet or the
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straight that it seems or the tree that’s in the backyard and by getting emotional this
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leads to go ahead and pay more for the property than we should have.
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If we are not thinking in financial terms we’re just thinking in emotional terms then
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we will often make poor financial decisions because we haven’t assessed it financially,
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our emotions are driving us to make that decision, when it’s your home obviously there are some
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emotion that’s going to be involved there, when you are buying your first investment
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property well then you will need to try and remove emotions from the equation as much
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as possible look at it as a financial deal as if you are buying stocks on the stock market
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trying to take your emotions out of it and asses it for what it.
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Tip number seven is to set your investment goals before you go ahead and invest this
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is a mistake that many people make is that they say I want to purchase 10 properties
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in 10 years or I have a new year’s resolution to purchase a property this year they say
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well what do you want to get out of 10 properties in 10 years or purchasing a property this
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year.
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I want to be rich or I want to make money but by understanding exactly what your financial
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goals are then you can actually purchase property for you that will move you towards that.
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If you want passive income then it’s not going to make a whole lot of sense for you to go
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out and purchase a negatively geared property, if you want fast capital growth then it might
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not necessarily be good to purchase in a rural area even though its positively geared and
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may not have the predictions of capital growth that you want, understanding what your financial
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goals are first you can then go out you can then look at property then you can assess
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it based on will this help me achieve if my financial goals or will this actually take
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away from what I’m trying to achieve financially.
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Remember investing in property is a vehicle for financial success it’s a means to an end
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it’s not the end itself, you may not just want purchase that property you want to achieve
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something financially know what you want to achieve and try to buy property that will
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help you to achieve that.
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Tip number eight is to talk to the neighbors, go around do some door knocking talk to little
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old Mrs. Jones talk to the neighbors and ask them about the street ask them about the neighborhood,
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ask them about if there’s anything that they need to know.
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Sometimes talking to the neighbors and asking the neighbors is less about the neighbors
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actually say and more about who the neighbors are, you can find out a lot about the street
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a lot about the suburb by talking to the people who live there and understanding what kind
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of people they are, I do suggest you go out and talk to the neighbors go to the local
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coffee shop sit there talk to people there who come in, find as much about the area from
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the locals as you can.
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Tip number nine is not to be in a hurry, slow down, let’s just put the brakes a little bit,
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when we want to buy our first investment property we want to buy out we want to go out we want
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to smash it, we want to purchase it as quickly as we can but hold your horses property market
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is not going anywhere there’s always going to be properties for sale, there’s always
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going to be great investment deals somewhere in Australia don’t be in such a rush to purchase
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an investment property that you pay too much for a property or that you buy the wrong property
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at the wrong spot isn’t going to deliver your financial returns that you want, don’t be
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in a rush, wait for the right property to come your way that suits you that you haven’t
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go out and hunt it, just come and sit on your lap.
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You have to go and look for it but wait until you find the right property and then go ahead
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and consider investing.
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Tip number 10.
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Do the cash flow analysis, this is something that is that easy to do and this is why many
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first home buyers or new property investors don’t actually do the cash flow analysis,
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they say well a property is going to cost me x amount and the mortgage is going to cost
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me $400 a week.
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The property rents for $400 a week my costs are going to be covered because they are the
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same; you obviously haven’t done the cash flow analysis.
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You need to analyze all of the expenses of the property and all of the income including
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vacancy rates where the property might seem vacant and you need to assess whether this
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is a property that you can afford and again whether it’s going to achieve your financial
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goals.
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Just an idea some of the things to look at need to look at obviously your mortgage, then
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you got things like managerial costs you got council rates, you’ve got maintenance on the
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property, you’ve got improvements, you’ve got insurance, there’s many different expenses
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that you need to pay for that you need to understand exactly what they are, when they
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are coming you can predict it moving forward and you can prepare your finances for it.
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The last thing you want is to purchase a property thinking it’s going to be positively cash
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flowed because you didn’t do the analysis properly that’s actually costing you hundreds
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of dollars per week that you cannot afford.
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Last tip, tip number 11 is to don’t just negotiate on price, almost everything in property is
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negotiable, they are something’s by law that you can negotiate but most people what they
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do is that they go in and negotiate on price, I want to get this property for 10 grand cheaper,
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or five grand cheaper.
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Sometimes it’s even a couple grand cheaper, but they don’t consider negotiating on the
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terms of the arrangement, what I mean by that is you can negotiate your things like settlement
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dates, you can delay settlement dates you can move them forward you can have all the
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access to the property you can put down a small deposit, a bunch of things that you
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can do that can actually make the deal more beneficial to you that can help the person
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selling the property feel like they got the price that they want.
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This can be difficult for new investors to understand but think about it if you are holding
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maybe a deposit of $100,000 for an extra month and you getting 6% on that that means you
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got to earn half a percent on that $100,000 which is worth $500 in that one month, by
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delaying the property for one month its actually worth $500 for you and just very rough and
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very simple example, there are ways in which you can negotiate a better deal without negotiating
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on price.
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You may want to do both negotiate on price and then negotiate on the terms as well if
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you can but do consider the terms and see if you can create a better deal for yourself.
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There you have it, there’s my 11 tips for buying your first investment property, we
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wanted to look at hundreds of properties and research the area in great detail, I also
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said don’t always believe everything the real estate agents say because they may stress
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the truth just a little bit, consider convincers and solicitors which ones going to work better
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for you, get your building and pest inspections done, avoid getting emotional when purchasing
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your property, make sure that you set your investment goals before you start looking,
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do some door knocking, go and talk to the neighbors, don’t be in a rush, do the cash
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flow analysis can’t stress that one enough and don’t always just negotiate on price.
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If you want more videos, audio and articles just like this one you can get them over the
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blog, head over to positivecashfloaustralia.co.au and I will see you on the next episode.
