EARN AN EXTRA $2000 PER WEEK FROM YOUR PROPERTY PORTFOLIO
Side Hustle Your Way To Your Best Life
Strategic Selling with TOM PANOS
KAREN & MINA: It All Starts With Good Bones
THE MARKET’S CHANGING
So what should you do? Hold, sell, upgrade or invest? Do You: ●
Know the key issues to consider when making your decision?
Know which data points to use and how to use the information?
Understand the range of options you have available?
Want to learn how to determine whether you should upgrade or renovate?
Understand why selling isn’t your only option?
Want to gain insights into the range of strategies you can use to take advantage of the opportunities within the market?
Want to see what others are doing in reaction to the market changes that may influence your views?
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CONTENTS Tom Panos: Strategic Selling
How to organise your inbox Maximising Your Rental Returns like a BOSS
With John Gilmovich
2. 15 17
Jay - Z the Prolific Beware The Hotspotting Trap Businessman The Changing Face Of Property
The lowdown on Business Karen and Mina: It All Starts With Systems
Know Thy Customer
Live Your Best Life 7You Reasons you should own your own business
3 Property Side Hustles To Help
Enhancing Your Wealth:
With Finn Kelly
6. No Excuses - Why 30
Entrepreneurs should take Pros And Cons Of Investing holidays In Property Overseas 7 Amazing office gadgets you Want To Earn An Extra $2000 A Week will wonder howProperty you lived Building A Profitable without Portfolio?
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CHIEF Debra Beck-Mewing
et’s be realistic, property can be tricky. Get it right and you can put yourself in a great financial position, but get it wrong and it can haunt you forever. Property Portfolio Magazine was created to provide practical information to time poor professionals looking to make good property decisions and build financial independence. We’ll cover insights into buying your home as well as investment properties because we know these two categories can intertwine. That is, when managed correctly, your home may fund your investments and your investments can help you purchase your ultimate home.
The good news is there’s many opportunities for those in the know, and my aim through Property Portfolio Magazine is to provide you with the full range of information you will need to make the best choices for your particular situation. I have spent many years studying and being active in the market. Through the magazine I hope to save you time, show you what’s possible and help you make property really work for you. If you have questions or feedback, I would love to hear it so please contact me at email@example.com All the best,
KAREN LAINE AND MINA S TA R S IA K When mother-daughter duo Karen E. Laine and Mina Starsiak flipped their first house in the late 2000s under their banner Two Chicks and a Hammer, neither expected to eventually find themselves on an HGTV houseflipping show. But the self-proclaimed Midwestern girls are the stars of the hit show “Good Bones”, now in its fourth season. Racking up to the tune of 13 million viewers, the show has proven to be one of the network’s breakout hits. In Good Bones, the pair hunt down battered homes in bleaker Indianapolis neighborhoods, transforming them with an average budget of $180,000 — with help from some rough-and-ready demo teams. The show has an odd couple appeal, contrasting Karen’s “hippie personality” (to quote Mina) who has more of a no-nonsense, methodical style. The ladies are currently working on their first book and Mina welcomed a beautiful baby boy in August.
www.hgtv.com/shows/good-bones www.kmrealestateeducation.com Karen & Mina’s Real Estate Education
JOHN GILMOVICH John Gilmovich is a real estate expert and thought leader specialising in property ownership for property investors. He has a two decade background and is highly skilled in management of rental property. Prior to going into his own business ventures he worked inside Australia’s largest and best known real estate franchise brands in senior level roles and developed business and life skills including management and leadership which he still applies today. John is a fully licensed real estate agent with certificate 4 in training and assessment. He also conducts Meetup groups,public speaking events,networking, media appearances and property educational seminars as well as conducting property and charity auctions for fundraiser events.
W E A LT H ENHANCERS, F I N N K E L LY Finn Kelly is Wealth Enhancers cofounder and Chief Investment Officer. He is a money expert, sought out keynote speaker and tv business personality. Finn’s purpose and passion for life has driven him to build businesses that are game-changing, and focused on helping individuals and businesses determine their values framework and have a positive impact on the world. He has been recognised as one of Australia’s leading young entrepreneurs in business and the finance industry, being the recipient of multiple awards including the AIM National Young Manager of the Year and the prestigious Money Management Fund Manager of the Year award. He has also been recognised as one of Australia’s top 30 entrepreneurs under 30 three times.
10 NEW RULES FOR SUCCESS IN THE CURRENT MARKET Free tips to download for success THE MUST HAVE GUIDE In This Guide You Will Learn:
The number one issue to consider when making your decision about locations.
How many properties you’ll need to deliver an income.
Three key ways to respond to market changes - there’ll be more on the way so you may as well be ready.
How to select property that will perform in the current market.
The truth about market timing and how to use it to your advantage.
PLUS insights into the best strategies you can use to take advantage of the opportunities within the market.
DOWNLOAD YOUR FREE GUIDE NOW!
TOM PANOS: STRATEGIC SELLING When you’re building your portfolio, your aim should be to retain as many properties as possible. In some cases though, selling may be part of your strategy. When it comes to selling, having a great agent on your side can make a huge difference to your overall success. These people are trained, experienced and passionate about the real estate game and can help guide you in the right direction for fast and efficient portfolio growth. But how do you find a great agent? It’s not always the cheapest or loudest who are going to get you the best dollar for your property. Real estate expert Tom Panos coaches and mentors agents and individuals across the country towards milliondollar listings and lifelong success in the property game. He has many career roles, including founder of the Real Estate Gym and the 5am Club, the Real Estate Advertising Director for News Corp, weekly iTunes podcast contributor with fellow real estate expert John McGrath on Million Dollar Agent and is one of Sydney’s leading Real Estate Auctioneers. He is also regularly sought after as a keynote speaker at industry events and a regular commentator on SKY News Business each week. He inspires, 8
encourages and educates many on the ups and downs of the property market, drawing on many years of personal experience and learning. In one of his segments with SKY News Business - Your Property Empire, Tom shared his top three tips for finding a great selling agent. TIP ONE “There are three things I see vendors [sellers] doing wrong when selecting an agent. The first is they select an agent for selling based on the price the agent gives them...Let’s be very clear, there’s this thing that often happens where agents go in and overprice to get the listing. There used to be a saying that ‘the biggest lie gets the job’. The bottom line is, do not list with an agent that comes in and tells you telephone numbers when the reality is the market is going to determine what the property is going to sell for,” Tom said. The lesson here is to do your own research and really get to know the area you are looking to sell in. Take time to browse newspaper listings, search property listings online, and even go for a drive around the area (if possible) to see what the demand is like. If there seems to be a lot of properties for sale in your street, see if you can find out why. TIP TWO “The second biggest mistake I see with vendors is that they decide that they don’t want to market the property… You can’t sell a secret. Generally speaking, the best properties that get the best prices are those that are the best marketed.”
Tom’s tip here is, when looking to sell a property, spend some money on getting it seen. The more people are aware of what you have to offer, the greater competition you create and more potential buyers knock on your door. A great real estate sales agent will be a great marketer and be able to offer sound guidance on where and how to advertise your property. TIP THREE “Don’t go with the person that gives you the lowest fee. The reality is, that real estate agent is purely going to win business because they’ve got nothing else to offer but a low fee. That should raise alarm bells for a vendor. What you really want is not an agent with the lowest fee; you want an agent that’s got the best negotiation ability, the track record, the ability to get people to fight over a property, because we know competition wins the Olympic Games gold medal - and competition gets top dollar in real estate.” “The cheapest agent and the best agent are generally not the same person.” Before settling on an agent, find out a little about their experience, training and qualifications, recent sales and history in the industry. Don’t be afraid to ask questions, after all, you are putting a lot of trust in their ability to make the best decisions for you and your journey towards wealth creation. For more information on tom panos visit: w w w. t o m p a n o s . c o m . a u For the full sky business interview, see: www.oneagencygroup.com/category/ real-estate-trainers/tom-panos/ 10
YOUR RENTAL RE TURNS with John Gilmovich
aving the option to own assets that produce income is a highly desirable financial strategy. If you own a house or apartment, you know there are taxes, interest, utilities, and a multitude of other expenses that come with it. However, if it was possible to own a house or apartment to rent out and generate income and potential positive cash flow, would you want to? Being a landlord isn’t for everyone, but in today’s market, it can be a smart way to grow your wealth. The demand for rental units continues to be strong due to the failure of wages keeping up with rising housing costs and an increased desire for flexibility among younger generations. However, it should not be mistaken for a way to get rich quick. It’s a long-term investment that needs to be approached carefully and thoughtfully. Real estate expert John Gilmovich specialises in property ownership
and investing with a skilled background in management of rental property. We asked John some common questions surrounding rental returns and investment properties.
What areas can a landlord contract to outside sources? John Gilmovich: It’s ideal that a property investor thinks through exactly how they will manage the day to day management of their property portfolio. There are obligations
galore to meet, and these include tenancy obligations, property compliance, and financial reporting.
income (rent), which will give an indication of whether the property is likely to be positive, neutral, or negatively geared.
In most cases, all of these processes can be 100% outsourced, but it comes at a cost. The investor would forfeit some of their return income to the cost of outsourcing. The decision to outsource is made by the landlord. Will an investor have the time, knowledge, and expertise to handle important management procedures? This has to be thoroughly thought through before they become a landlord.
As a landlord, am I required to pay for utilities?
Your time is a commodity, and trading it for professional services may be more beneficial that DIY projects.
How do I know I’m getting adequate rental income? JG: Never assume the rent you’re getting now is at current market levels. Some tenancies can go on for years without a rent review, as both landlord and/or their agent have been complacent about it due to the tenant’s longevity in the unit. It’s best to do your own research and look at the data to determine if the current rent is fair and reasonable. There are many online data searches available that are free. One of the best is the Rental Bond Board postcode search. SQM Research offers weekly rental and yield searches by post code and is another great free resource. And of course check the rental listings online through sites like realestate.com.au and domain.com.au which also give you postcode and dwelling type rent value results.
How do I know if I have enough rental income for my investment cost to be neutral? JG: Neutral cash flow property investments are a great way to hold multiple rental income properties. Ensure you know your cash flow position prior to purchase and can make educated assumptions about the actual outgoing numbers (expenses) versus
JG: Depending on the strategy and set up of the rental agreement and whether you are doing short term letting versus long term, utility costs can vary. In the majority of cases, investors who are entering into standard residential tenancy agreements with their tenants in strata complexes will be required to cover the costs of water and council rates, but tenants cover their gas and electricity. If renting out a separate house, tenants can be billed for water consumption, and landlords can recoup water consumption charges if their house is made water-efficient. In short term letting arrangements, like Airbnb, the expectation is that the nightly charge includes all utilities and that there are no hidden extras.
Am I required to accommodate disabled tenants? JG: Special needs tenants have requirements that some modifications be required to the property. These modifications will fall under the “Alterations of Premises” rules which are state-based laws. Any modifications a tenant requires should generally be negotiated prior to signing an agreement, but there are instances where during the tenancy the occupant will have special needs. For example, if a current tenant sustains a personal injury and extra hand rails are required in bathrooms for added support. Such alterations are seen by the law as being reasonable, providing that the tenant has agreed to re-instate any additions/alterations back to their original condition upon leaving. A landlord cannot deny what is a reasonable request; however, costs do now have to be met by the landlord, but rather the tenant.
Are landlords allowed to conduct any types of screenings prior to renting a property out to a tenant? JG: Yes! Conducting tenancy background checks is a crucial risk management process. As a property investor, who you allow to reside within your property can make or break your investment in a financial sense. Conducting background checks can be tricky, as it requires paid subscriptions to access certain data. Providing the tenant has signed a written consent disclaimer giving the landlord permission to do searches, there are many checks that can be obtained and verified. Some of these include, but are not limited to: • • • • •
Rental history and breaches Salary/income verification Identification and passport/visa status Financial defaults, such as bankruptcy Personal references
The majority of tenants is willing and able to provide references and documentations to fast track their applications and will be transparent about it, and of course there are tenants that won’t be. Watch out for those.
What if a renter doesn’t comply with property rules, fails to pay rent, or damages something? JG: All tenancy agreements tenants enter into with landlords come with rules surrounding each party’s obligations. If there is a fundamental breach of tenancy, such as frequent and serious non-payment or rent or serious property damage, malicious or not, the tenancy agreement can be terminated by the landlord, who also has the right to seek financial compensation for any loss that has occurred as a result of that breach. This can be done directly with the tenant or via a tenancy tribunal if both parties cannot come to settlement on costs.
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THE HOTSPOTTING TRAP When looking to invest in the property market there are plenty of pitfalls and one of the most common traps is to rely on hotspotting reports enticing you to invest in the latest ‘hot suburb.’ This is a big mistake. A property investment hotspot is an area or suburb that has been identified as having potential for stronger growth and development compared to the rest of the market. They are often identified as areas that are underperforming, usually within close proximity to more popular suburbs. It all sounds too good to be true and that is because in the majority of cases it is. Hotspotting won’t even be okay for a quick lucky buy, but using hotspotting reports for long term property investment will not deliver good results. Successful investors never buy real estate in the next ‘hotspot.’
They are not enticed by ‘quick wins’ via investing in the latest hotspot. They know that giving into this urge is detrimental in the long term. They know that hotspotting is for mugs and here are the reasons why. It’s an easy trap: Hotspotting reports are one of the latest trends in the property sector with a plethora of organisations and businesses offering advice on the next ‘hot suburb’. While the premise of this is hugely appealing to smart investors who use data, statistics and facts as a base for their property purchasing decisions, the problem lies in the quality and accuracy of the reports. Many of these organisations produce reports on unsubstantiated evidence and then sell these reports to the unsuspecting public. Smart investors know to do their own research.
Questionable data: Using hotspotting reports to influence your property purchases can often be a waste of your time and money and may lead you to invest in unsuitable properties and miss out on purchases more suitable to your portfolio needs. The data can be questionable for a number of reasons: Reports are based on the sales history in particular areas, which may be out of date and simply the history as opposed to a sales predictor. Due to the often out-dated nature of the reports, investors may be influenced to purchase in areas that have already peaked. The reports often lump suburb information and data together when more detailed comparisons are needed. They often do not accurately compare ‘apples to apples’. Reports may appear to contain all the information investors need to know about a particular area which could stop them from doing their own independent research and discovering crucial information. Hotspotting reports can often cause a pack mentality with investors flocking to purchase property in a particular area that is deemed ‘up and coming’. Real investing success happens when you are one step ahead of the rest, not when you are blindly following whatever trend is happening. So, what are the more critical elements that keen property investors should be looking for when adding to their portfolio? Successful investors understand the market is always changing and that real estate success is a long term journey with both highs and lows. In order to maximise the highs and minimise the lows successful investors consider: 16
Strategy: The most important factor in property investing is to have a strategy. Resist the temptation of short-term success and rather focus on having a long-term plan and an achievable strategy to execute the plan. Economics: Successful investors study the economics of their specific property market rather than city, state or national ‘averages’. Ensure you review predictive data such as jobs growth, population changes and vacancy rates as well as sale prices. Teamwork: Smart investors need a smart and loyal team around them. Choose your team carefully and ensure it contains specialists such as an accountant, mortgage broker, lawyer and buyers agent. Be sure to consult experienced advisors - not just friends and family unless they’re qualified professionals. Realistic timeframes: Real estate investment success is achieved over a period of time, so set realistic timeframes and don’t get disheartened when things don’t happen over night. Look at the big picture objective. Accurate data: Choose your data wisely and ensure it is accurate and comprehensive. Be sure to use information that offers sound comparisons. Successful property investors achieve their results by analysing quality data. Questions: There are no bad questions so don’t be afraid to ask them. Top investors are not afraid to be inquisitive and to ask as a many questions as they need to uncover the most information they can. Tap into every available resource on offer and don’t try and problem solve on your own. There are lots of ways to excel in the property market but beware of the hotspotting trap. Take your time, do your homework and you’ll have a portfolio that performs well and delivers good returns.
THE CHANGING FACE OF PROPERTY From family home to financial freedom
It’s the dream held since settlement began in Australia – owning your own home. In centuries gone by, it was enough to own a piece of land and painstakingly build brick by brick. For most, it was a chance to literally put a roof over the family’s head, although for the wealthy, property came with an abundance of space, opulence and bragging rights. These days, many Australians have started to see property not just as a home, but as a wealth platform and income generator, particularly after the significant price increases some suburbs have achieved over the past few years. And, there is evidence to prove this - Australia’s 2018 AFR Rich List showed four property investors in the top 10, and 51 in the top 100 wealthiest individuals.
Attitudes towards property ownership are continually changing. With the market dropping in many areas and a change in government on the horizon, the changes are not about to stop. But, where there is uncertainty about the future there is also opportunity. As strength in the market deteriorates, prices fall and suddenly the deposit required for a property falls too. If you’ve been waiting for your time to come, low interest rates and lower prices are making property more affordable. NEW TWIST The new twist in our changing approach to home ownership is the opportunity to ‘rentvest’ which accommodates the ability to rent where you want to live, and purchase property in a range of different areas. This approach opens up the ability for more Australians to enter the property market at a reasonable price point, and then leverage any gains into further purchases or a portfolio that delivers an income. An investment property, or portfolio, is a goal for many Australians to forge a path to financial freedom in retirement. While potentially lucrative, no property deal is a sure bet, and it’s important to get personalised advice to fit your situation. But there are a few tips to get you started. • Aim to develop a balanced portfolio that includes properties with capital growth potential as well as high yield potential. • Work with an experienced mortgage broker who can help you unlock the equity in your home to either start your investment portfolio or make your first purchase.
• Decide on your appetite for risk (which might relate to your age and how quickly you need to generate an income from property) and your appetite for a renovation. One person’s minirenovation can be another person’s nightmare, and what seems to be a bargain can turn into a money pit. • Ideally avoid ‘new’ developments, offthe-plan or house+land purchases as they’re often overpriced and will devalue quickly - this will impede your ability to build equity and slow your portfolio growth. Of course any potential money-making opportunities come with their own traps and that other ‘T word’, taxes. A property used to generate income is treated as a business, meaning expenses (including loan interest and depreciation) are deductible for tax purposes. This concept is known as negative gearing, and means that property owners can use deductible expenses to generate cash flow. The current tax law in Australia allows those tax losses to be offset against your personal tax liability. And this leads us to the Federal election battlefield. Labor plans to overhaul negative gearing, specifically the ability to offset losses from future property investments against employment income. With careful planning, property can deliver significant returns. Property has become one of the main revenue generating opportunities available - not only in Australia but globally. Home ownership is about more than just shelter, your home can also help secure your financial future and grow your wealth as its value increases.
Buy land, they arenâ€™t making anymore of it. â€“ Mark Twain
Karen and Mina: IT ALL STARTS WITH GOOD BONES
other-daughter duo, Karen Laine and Mina Starsiak are redefining what it means to rehabilitate rundown homes. What started as a personal project, turned into a community project, and has now developed into the inspiration we’ve all come to know and love on HGTV’s hit show, Good Bones, which is currently screening on Foxtel. The pair began rennovations in 2007 when Mina bought her first home that
needed “all the work,” according to Mina. With the rehab of this home, the two not only renovated a house but discovered a passion for renovation, strengthened their bond, and made it their mission to “revitalize Indianapolis one property at a time” under the brand Two Chicks and a
Hammer. In 2014, they were completing 2-3 houses per year in between their day jobs. After propertyportfoliomagazine.com
they were approached by High Noon Entertainment, a pilot episode of a home improvement show was aired on HGTV in the United States in May 2015 under the name Two Chicks and a Hammer. In July 2015, after a successful pilot, they began filming the first season of Good Bones. They’re now working on home rehabilitation full time, completing around 13 homes per year around Indianapolis. We spoke with the duo about how to get started, working with family, and whether or not fixer upper homes are always worth it.
ON BEING CALLED ‘HOUSE FLIPPERS’: Mina passed the ‘flipping lecture’ over to Mom, who explained: “Flipping implies a certain scope of work: low investment, short time frame, high return…We work in neighborhoods where the people love [it] as much as we do. We…buy the worst house in the neighborhood… and try to make it the best house in the neighborhood. It’s the community support that allows us to change the face of the neighborhood. Doesn’t sound much like the flipping model, does it?”
ON WORKING WITH FAMILY: Mina (M): Of course! Working with family is tough. Some days it’s great, and some days we all want to give each other a good sucker punch. Karen (K): As Mina’s mom, I want the world to see her as the talented, beautiful, 22
hard-working, smart, dedicated person she is—which is why I correct her grammar and [let her know] when I think she is making decisions that don’t flatter her. She never appreciates this commentary, so I’ve tried to tone it down. On the flip side, she seems to feel pretty comfortable calling me out for pretty much anything. I just roll with it. Yes there are challenges, and each challenge helps me grow. Each challenge met and mastered makes our bond stronger.
ON TRAINING: M: No training; it was all on the job. I read directions, watched videos, and just figured it out. [We] got better as [we] went. K: Fixing things is probably in my DNA but no formal training.
ON GETTING STARTED: M: Just be smart. Know the areas and that the community is supportive of the work. You can renovate anywhere, but if you don’t have a strong community committed to bettering the neighborhood, it’s hard to keep positive momentum. K: Start where you live; start small and within your budget. Anyone can turn on a porch light to make the neighborhood safer and more inviting at night. Anyone can shovel and pick up blowing trash—if you want to start [getting the community
on board], offer to paint the front of a neighbor’s house or help in their yard.
ON THE WORTH OF A FIXER UPPER: M: You can do a lot with sweat equity if you know what you’re doing. If you don’t, you can also end up in a money pit. Know your strengths. If you don’t have a skill set [or resources], you are definitely better off shelling out a bit more for something a little more renovated. K: A fixer upper can save money if you have the skill to properly assess the work
that needs to be done and to do the work. Things like foundations are not for the faint of heart. Electrical work needs to be done by a professional. Don’t take on roof projects if you don’t like heights.
ON RENTING OUT A PROPERTY: M: Think about what kind of maintenance the home needs in the near future and make sure you budget for that. I’d also look at the insulation, or lack thereof. If you have none, either you or your tenant are going be stuck with pretty tragic utility bills, which makes it less appealing.
Karen & Mina’s Real Estate Education
3 PROPERTY SIDE HUSTLES
TO HELP YOU LIVE YOUR BEST LIFE
Take a minute to picture your dream life, what does it involve? If the answer is anything along the lines of sipping cocktails on a deserted island, travelling the world or, well, simply not working then we’d recommend taking some time to read on. You see, escaping the mundane life of inflexible schedules and working for someone else doesn’t have to be just a dream and can actually be achieved by making some changes in your 24
day-to-day life. Check out our suggestions below on how you can leave your nine to five lifestyle behind for good.
Invest in a rental property If you’re looking to escape the rat race and have disposable income available, rather than letting it sit in your bank
account, it’s worth looking into investing it in property. Even if you were planning on spending that money on travelling, an alternative is to invest the money into property and use the returns for travelling. While this may take a little longer to get off the starting block, in the long run these returns could be lucrative enough to continually fund your travels for a much longer period (or for the rest of your life). “That sounds great, but I don’t have six figures to invest,” you may be thinking. That’s not a problem. Contrary to popular belief, you don’t have to be a rolling in money to invest in property. Ideally, you should have at least a 20% deposit for the property you want to purchase. Good investment properties can start from $200,000. If you have a property already, you may be able to utilise equity for your deposit. It’s important to obtain independent advice from a qualified advisor before you start, but the aim is to purchase a property that will deliver an income and cover all the costs of ownership. In other words, if you choose well, the money you’re receiving through renting your property can cover your mortgage payments as well as running costs such as maintenance and council rates.
Invest in a holiday rental business
Coast. Depending on the zoning for your property, you may have the opportunity to adjust an existing structure to add a room or rent out an extra dwelling on the same land. Of course, there will be an initial investment, but once that’s paid off you’ll be continually making money and have your very own holiday house. If you’re considering purchasing overseas, keep in mind the legalities of building in other countries (in some countries you can only lease land, not buy it) as well as the tax implications. Make sure you do your homework if you’re interested in this route.
Rent out a room on Airbnb If you’re not opposed to house mates and have a spare room in your house, why not rent out a room on Airbnb? You can rent it out to short term holiday makers or a long term house mate and make yourself a pretty penny. More and more, people are listing their properties on Airbnb, then stay with friends or family when their property is booked. However, it’s important to know that if you rent your property for 14 days a year or more, the earnings must be reported as income and tax is payable on the rent received.
When you think of your favourite holiday destination, is there a country or city that instantly pops into your mind? If so, it could be worth considering buying a holiday home there. If the place is a popular tourist destination, then this can be extremely lucrative - - think places like the Sunshine Coast, which used to be a holiday destination and is now a place where people live and work or towns within driving range of major cities, such as Port Macquarie or the Tweed propertyportfoliomagazine.com
ENHANCING your WEALTH with FINN KELLY
uying a home, while once a major stepping stone to adulthood, can seem like an out-of-reach goal for most millennials, especially with constant headlines portraying the generation as stunted, afraid of commitment, and one that’s investing their money in frivolous purchases like avocado toast. According to a 2018 Home Buyer and Seller Generational Trends study, millennials bought more houses than any other generation for the fifth year in a row. If they are willing and able to invest in the housing market, why wouldn’t they be interested in building a diverse portfolio? According to one of Australia’s leading wealth experts, Finn Kelly, the financial advisory industry tends to be geared toward older generations that already have built up wealth, ignoring Gen Y and younger clients. To fill the void, he began offering a flat-fee model to provide strategic financial advice and planning to ambitious millennials in the form of Wealth Enhancers. The model at WE
is built on personal goals and values and includes everything from financial coaching to investment management to debt reduction. The company don’t offer a too-good-to-betrue promise of overnight success, but instead believe in a series of conscious actions and behaviors to help members achieve financial freedom. We wanted to pick Finn’s brain about millennials and property buying, the various types of investments they can make, and how to start.
Millennials are different than previous generations in many ways, but how are they different in terms of real estate and investment behaviors? According to Finn, millennials question if the traditional path to owning a home is right for them, so they have a different approach to property compared to previous generations. High property prices compared to income is a major barrier for first time investors, but Finn thinks there’s another reason millennials are
skeptical. “Their desire to live a lifestyle that enables the flexibility to travel and change job locations is making renting where they want to live more suitable and buying in locations where a good investment opportunity arises,” he says. Instead of buying a home during a major milestone, like marriage, and staying put for 20-30 years like previous generations, millennials are gravitating toward the flexibility of rentals and entry-homes, anticipating future moves and investment opportunities.
Every investment has its pros and cons. Property is one of the major investment classes, and there are a number of ways to invest into it. Two main property types are residential (where people live) and commercial (occupied by business). Each can be accessed by buying completely or investing in ETFs (exchangetraded funds) that replace the index of a property market. Finn explained the pros and cons of each type of investment option.
DIRECT PURCHASING PROS
• You have control • You can borrow a large amount of funds.
• Larger exposure to asset class CONS
• • •
Little diversification Large transactional costs Increased risk of large loss
ETF INVESTMENT PROS
Can gain exposure to property with less capital
Increased diversification Management by professionals
• Less control • Higher ongoing fees • No ability to add value via
renovation or development
Where do you start? According to Finn, the first step people should take when they begin investing is to investigate and “understand who they are and what kind of life they want to live.” He explains “identifying values and then setting intentions and goals to match will help determine what the next steps should be.” Investment is a tool to enable this, and different goals will warrant different types of investment, but he stresses that “where people go wrong with investing is when they are too focused on the investment, instead of what they want to achieve through the investment.” A characteristic that makes millennials unique compared to past generations is their saving and investment habits. Their goals are different. Retirement isn’t the top priority; it’s been replaced by working to pay off student loan debt. In the same breath, millennials are aiming to retire earlier than previous generations and beginning to save earlier (around age 24 as opposed to Boomers who began saving at around 35.) propertyportfoliomagazine.com
What’s the purpose of a financial advisor, like Wealth Enhancers? Growing up amid the Global Financial Crisis has left many millennials skeptical of stock market institutions and investment products. If they decide to hire an advisor, they want to be assured they’re hiring an educator working in their favor, not a salesperson pitching a sale. Credentials and knowledge isn’t enough for an advisor when dealing with this set of investors; they need to focus on transparency in pricing and intention.
Socially responsible investing is becoming more important to this group of investors. Morgan Stanley reported that 86 percent of millennial investors are somewhat interested in sustainable investing, compared to 75 percent of the entire population. They care about where their money is going and what it’s doing, and they are more likely to invest in companies targeting social or environmental goals. According to Morgan Stanley, 90 percent of millennials want to see sustainable options in their superannuation. Previous generations were satisfied establishing their roots and staying where they were planted, however, millennials strive for flexibility. A diverse financial portfolio consisting of multiple streams of passive income is appealing, because it gives millennials a sense of freedom and options. Figure out the kind of life you wish to live, set some goals, and possibly find a financial counselor to help point you in the right direction.
So what exactly does a financial advisor do? A good financial advisor will help you organize your finances, projects, and the results of your investments. They’ll help you make financial decisions and help you reach your financial goals as efficiently as possible. Firms are aware of the fear many millennials have regarding financial advisory teams, which is why companies like Wealth Enhancers focus on you. Their membership models are built around your personal goals and values,are transparent from the get-go and focus on every type of investment from cash flow management to property investment to debt reduction. Caution should be used when selecting any advisor, so be sure to check the services and performance history prior to working with a financial advisor. Good financial advisors will help you to design your ideal life, show you how to achieve it, and keep you accountable. “These types of companies go on your journey instead of taking you on their journey,” says Finn.
WANT TO BE IN THE KNOW WHEN IT COMES TODAYâ€™S PROPERTY MARKET?
Property Advisor, Debra Beck-Mewing, interviews industry specialists and delivers insights on the current property market including traps to avoid and opportunities to chase.
PROS AND CONS OF INVESTING IN PROPERTY OVERSEAS
With an increasingly competitive domestic property market, many Australians are looking overseas for investment opportunities. Whilst investing overseas comes with a degree of risk, you can also benefit from some good returns if you know what you are are doing. Over the last few years, there has been a surge in Australian investors turning to overseas options for their property investment needs. With Australian property prices on the increase, more and more Australians are finding foreign property investment an appealing and achievable way to diversify their property portfolio.
As with any form of investing, there are pros and cons to investing in property overseas. Here we take a balanced look at some of the advantages and disadvantages for Australians if they choose to buy property abroad.
P RO S • You have a holiday destination at your disposal all year round: Investing overseas not only offers you a potential rental income but it also provides you and your family and friends with holiday accommodation. • Lower entrance point to the property market: If you purchase property overseas you can potentially benefit from lower start up costs and less stringent eligibility for loans. In some cases,
purchases might need to be made entirely in cash unless the purchaser has citizenship in the country of purchase. • Strong capital growth and rental return: These two factors can often be very difficult to find in Australia’s competitive property market. Well-located overseas property may well offer higher capital growth and higher rental returns than what is achievable in the local Australian market. • Tax benefit: Depending on your level of income, offshore investments have the potential to offer some benefits at tax time. It is vital that you seek the advice of an accountant to determine if overseas property investment offers any benefits to your personal circumstances. • Lifestyle: Purchasing a property overseas to live in can provide many with a much-needed sea change.
CO N S • Lack of local knowledge: One of the greatest risks when purchasing property abroad is that you may not have enough knowledge of that country’s local property market to make sound investment choices. In most cases it is advisable to get professional help and advice, and actually visit and become familiar with the local market in your chosen country before making any property purchases. • Arranging finance: Borrowing money for overseas property investments can be tricky as Australian banks are reluctant to lend money to borrowers for offshore property investment. • Lax property laws: In Australia, we have very tight property laws, which provides buyers with confidence and assurance when they purchase property. Not all countries around the world have the same buyer protection laws and this can come as a shock to some Australian investors. • Tax: Depending on what country you invest in you may be required to pay tax in that country if you are generating an income from rental. It is best to get the advice of an accountant specialising in offshore investment so you avoid any taxation issues down the track. 32
• Distance Management: Managing your investment properties from a distance can be fraught with difficulty. Finding the right property manager and suitable tenants can be a challenge. • Tenants: The majority of overseas countries do not have as strict rules for tenants and landlords as we have in Australia. If you are choosing to purchase property overseas and planning on renting it out you will need to familiarise yourself with the laws of that country and accept that there may well be a significant difference to what you are used to in Australia. • Exchange rates: When choosing whether or not to invest in offshore property it is essential to keep in mind that exchange rates will have a massive effect on the return to your investment. As the Australian dollar increases in value, your returns could fall, so investing in a country with an unstable currency can be particularly risky. Working out whether investing overseas is a viable option for you depends upon your own unique set of circumstances and what you want to gain from your property portfolio. For some individuals it can be a hugely advantageous decision, whilst for others, it may not be a wise investment choice. It’s important that you talk to your accountant and get accurate legal advice in the country of purchase before you make a move. Consider finding an Australian buyers agent to help you through the process of purchasing overseas. The key is to do plenty of research, get advice, be realistic and to make sure that you weigh up all the pros and cons before making any decisions.
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BU I L D I N G A P R O F I TA B L E PROPERTY PORTFOLIO? Youâ€™ve probably read or heard some horror stories recently about the property market crashing across Australia. The media loves a bit of drama and negativity, but with a little research and planning, this could be the
perfect time to start building your property portfolio and take advantage of the price reductions in some areas. The key is ensuring you buy a true bargain and avoid the lemons.
“It’s entirely possible to become financially independent in less than 10 years” writes Debra Beck-Mewing of Crave Property Advisory, “with just a slight adjustment to our approach our ‘work’ years could just be considered as the foundation for creating lifetime income.”
strategy more often promoted on TV shows. The system relies on three fundamental principles – flexibility, balance and resilience to facilitate a personalised investment strategy.
Sounds like a dream? It’s a reality that many Australians are taking advantage of, at any stage of life. While the golden rule for buying property is ‘the sooner, the better’, an individually tailored approach to property investment can reap benefits at any age. Crave Property Advisory’s proven Modular Investing System advocates long term investment in a diverse property portfolio rather than the ‘buy, renovate and flip’
Crave Property Advisory’s Modular Investing System
The ultimate goal is to create a portfolio of unencumbered (no loans) properties that will provide an ongoing income stream to the investor. This is achieved through carefully planned, gradual investment in both capital growth and high yield properties. The number of properties you buy and the time you take building your portfolio will depend on your personal circumstances. Let’s look at an example. Daniel and Sarah are married and in their 40s, with two teenagers. They own their own home worth $780,000, and owe $200,000 on their mortgage. Their combined income is $150,000 per year. Already in their 40s, Daniel and Sarah are keen to make a speedy start towards building a property portfolio, so their investment plan will need to ramp up quickly to achieve a $2,000 income for their retirement. But they are in a strong position having equity in their home and established careers. The equity in their home may be enough to provide deposits for up to five investment properties over a three to five year period. The first step is to set their investment criteria. The focus shouldn’t be about personal taste or favoured areas, but about finding affordable properties in suburbs with a strong rental yield. As first time investors, Daniel and Sarah should look for investment opportunities around the $250,000-$350,000 mark. To help de-risk the portfolio, they should choose one property in a higher capital growth area (say 7%) with a yield of at least 5.5%, and one in a lower but stable growth rate area (say 6%) and higher yield (at least 6%). This strengthens the
portfolio overall as higher income against an increasing asset base reduces the loan/ valuation ratio which aids future borrowing. For optimum performance, the couple should buy the first one or two properties in the first one to two years, and keep building over the next three. With yields of over 5.5-6%, and interest rates around 4%, each property will start to yield some surplus cash, which should be held in an offset account against the couple’s home. Daniel and Sarah will utilise ‘interest only’ loans where possible and will work with an experienced mortgage broker to ensure their loans are structured for their needs. Where possible, the properties selected should have the opportunity to add value through renovation, adding an extra dwelling such as a granny flat, or potential for future development. After the first two investment properties are up and running, the couple should identify another two, on the same principles. Finally, a fifth property should be selected with higher capital growth potential. Once the interest free periods expire, the rental income (growing with capital value) should be used to repay the loans. Within 10 years Daniel and Sarah could plan to pay off their home loan, while within 20 years their portfolio should generate an income of $2,000 per week. If the couple wants access to capital in this time, they can select a high growth property for divestment. www.craveproperty.com.au www.craveproperty.com.au/contact/