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Real Estate Investar - First Time Property Investors Masterclass

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Are you new to property investing? Have you been putting off that first investment property purchase while you watch the market rising? If so, this webinar is perfect to help you get started as you will learn:

- The importance of goals and how to set them.
- Common terms & jargon used.
- Understand the property acquisition process.
- Finance - different loan types and the difference between banks and mortgage brokers.
- How to choose a strategy that is suitable for your goals and current situation.
- Who should you seek help from - build a team of experts.
- Negotiation Tips.
- Research, research & more research - how to make decisions based on the numbers.

Published in: Real Estate
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Real Estate Investar - First Time Property Investors Masterclass

  1. 1. First Time Property Investors Masterclass
  2. 2. Maximise audio quality • Please ensure your speakers are on, volume is up and not on mute. • You can test your audio in the control panel of the Go To Meeting software, under audio preferences. • If you can’t hear us yet, please ensure your speakers are on and turned up. • TURN OFF: Outlook, Skype, online back-ups and any music or video downloads. • Faster internet = better quality audio.
  3. 3. Dennis Wong • Property investor for the past 10 years. • Personal experience with renovations. • Great amount of industry experience.
  4. 4. Material contained in this presentation is an overview only. It should not be considered as a comprehensive statement on any matter nor relied upon as such. This presentation contains general information only and does not take into account your personal objectives, financial situation or needs and you should consider whether the information is appropriate to you before acting on it. Before acting on any information you should consider seeking advice from a financial adviser and your accountant before making any financial decision in relation to any matters discussed in this presentation. General advice disclaimer
  5. 5. We help investors build and manage their property portfolios
  6. 6. • Guided and mentored thousands of clients to plan and purchase property since 2006 • Helped clients build wealth through properties • Provides superior real estate information • Assisted clients reduce debt and retire early • Over 260,000 members Real Estate Investar
  7. 7. ASX listed, data and research based company providing industry-leading: • Online property investment software • Strategy and advisory services • Invested heavily to be data driven • Operate according to strict public governance Real Estate Investar
  8. 8. In partnership with…
  9. 9. Get your FREE tickets at – https://info.realestateinvestar.com.au/events
  10. 10. Poll: When are you purchasing your next property?
  11. 11. Why invest in property? • Tax benefits • Additional income • Replace current income • Building wealth • Setting up for retirement
  12. 12. Why invest in property?
  13. 13. Why invest in property? • Superannuation at retirement - $640,000 • 20 years of retirement - $32,000 per year • 1 holiday per year - $10,000 • $22,000 remaining or $458.33 per week to spend Would you be happy with that?
  14. 14. Why invest in property? • $60,000 per year required for retirement • Superannuation required at retirement - $1,200,000
  15. 15. Why invest in property? • $640,000 in superannuation • 1 investment property – annual net income of $19,580 • Superannuation $32,000 + Rental Income $19,580 = $51,580 per year
  16. 16. Why invest in property? Portfolio of 7 properties worth $3.5M $100,000 of rental income coming in
  17. 17. Setting achievable property investment goals • What is your actual goal? • Hint: If you are watching, it should involve buying a property! • How do you plan to achieve this goal? • Is it reasonable to expect you can complete that goal? • Do you have the time? • Do you have the know how?
  18. 18. Setting goals, some helpful tips • Start at the end! • Identify where you are now • What are the steps you need to take to get to your goal • Your goal should be comprised of several smaller goals • What do you need to complete those smaller goals, write out those details • Start! • The number one reason most people fail is they don’t do that last step!
  19. 19. Common Terms • Capital Gains – is the profit from the sale of a property. • Capital Growth – the increase in value of a property. • Cross Collateralisation – when the collateral for one loan is used as collateral for another loan. • Average Days on Market – the average time it takes property to sell or rent. • Depreciation – is the wear & tear on your investment property where investors can claim the depreciation on their investment property against their taxable income. • Equity – is the value of ownership built up in a property. Calculated by current market value – loan balance.
  20. 20. Common Terms • Listing Price – price listed for sale. • Median Price - the middle price. • Negative Gearing – form of financial leverage where investors can borrow money to purchase an investment property & the rental income can’t cover both the loan repayments & on-going expenses. • Offset Account – is a transaction account that is linked to a property loan & any money is used to offset the amount you owe on the loan. • Positive Gearing – rental income is greater than the loan repayments & on-going expenses. • Redraw – allows you to borrow money you’ve already repaid into a loan.
  21. 21. Common Terms • Rental Yield – rental income as a % of the property’s value. • Gross Yield – calculated without expenses or loan payments • Net Yield – calculated after expenses & loan repayments • Settlement – the day ownership of a property is officially transferred. • Vacancy Rate - % of available properties available for rent • CGT – capital gains tax; is to be paid when selling an investment property at a profit. • LMI – lenders mortgage insurance; for buyers without a large enough deposit to protect the lender. • LVR – loan to value ratio; amount of money borrowed for a home loan compared to the value of the property. • PPR – principal place of residence; the home you own & living in.
  22. 22. Property Acquisition Process • Finance Approval • Select Property Investing Strategy • Select an asset class of property • Research suburb data & choose location • Search for properties • Analyse numbers • Negotiate with Listing Agent / Auction • Engage in Conveyancer / Lawyer • Sign the Contract • Building & Pest Inspection • Property Settlement • Find a Property Manager • Track & optimize your portfolio’s performance
  23. 23. Finance: Loan Types • Interest – only paying the interest or the cost to borrow money from the lender. • Principal & Interest – paying both the cost to borrow as well as the loan itself. • Variable Rate loans – the interest rate changes during the life of the loan as the market interest rates change. • Fixed Loans – the interest rate is fixed & doesn’t change if the market interest rate changes. • Split Loans – allows for a portion of the loan to be on a variable interest rate and the other portion on a fixed rate.
  24. 24. Finance: Loan Types • Package Loans – link other bank accounts with your loan; lenders will offer discounted interest rates, credit cards, offset accounts, redraw facility & other benefits. Often attracts an annual package fee. • Offset – help reduce the amount of interest you pay whilst having access to funds in another account. • Redraw – allows you to withdraw money that has already been paid into a loan.
  25. 25. Finance: Loan Types • Offset – help reduce the amount of interest you pay whilst having access to funds in another account. Over $27,000 in interest savings! • Redraw – allows you to withdraw money that has already been paid into a loan. Loan Account Offset Account Pay Interest on Interest Paid over 5 Yrs Property 1 $500,000 N/A $500,000 $125,000 Property 2 $500,000 $110,000 $390,000 $97,500 Loan Account Required Principal Payments Extra Principal Repayments Loan Account Balance Withdraw Property $500,000 $3,000 $10,000 $487,000 $10,000
  26. 26. Finance: Mortgage Brokers Vs Banks Bank – can easily speak to the loans manager to organise a loan. Most people will approach the bank they have their savings with. Mortgage Broker – acts as an intermediary between the borrower and the bank / lender to find them best product.
  27. 27. Finance: Mortgage Brokers Vs Banks Benefits • Has access to a wider range of lending products • Negotiates with mortgage lenders based on your position • Presents a shortlist of best deals for you to choose from • Translates any mystifying financial jargon • Advise the best product for you • Help & support you through the whole loan application process • Save you time & stress • Their service is generally free Cons • Brokers receive commissions from lenders for bringing them business, so they may have favourites • Non-commission paying lenders may be ignored even if they have the best deals Mortgage Brokers
  28. 28. Finance: Mortgage Brokers Vs Banks Benefits • A loan officer can match you with the best internal product available • Established relationship with your lender • Experience working with bank, policies and loans • Lower interest rates (not always) • Linked accounts with existing profile for automation and ease of access Cons • Limited product range – only have access to your bank’s product offering • Potential for being overcharged (not transparent with commission) • Having all your eggs in one basket Bank
  29. 29. Strategy Identify what you want to achieve out of purchasing an investment property: • Cash flow / passive income • Building equity • Manufacture growth • Replace salary by a certain date • Assist with retirement
  30. 30. Strategy • Positive Cash Flow – the rent from an investment property covers all your expenses and loan repayments, leaving you with surplus cash in your pocket. • Renovations – purchase an old, run down or outdated property with the intention to renovate / refresh to increase the value of the property in line with newer or renovated properties in the suburb. Also gives you ability to increase rents. • Discount – purchase a property below asking price but more importantly, below market value. • Sub-divisions – when developers or land owners create new allotments with a block of land. Most common subdivision is splitting 1 lot into 2 lots with 2 titles.
  31. 31. Strategy • Strata-Titling – great to manufacture equity where you purchase a set or block of units that are all on one title & splitting the title so each unit now has its own individual title. • Dual Income – purchasing a property where investors can earn two incomes. • Capital Growth – purchasing property in a growing area where the value of your property is expected to increase over a long period of time. • Development – buying land or existing buildings and then making improvements to them or creating new buildings to then sell.
  32. 32. Strategy
  33. 33. Strategy
  34. 34. Strategy – Buy & Hold Assumptions • Purchase Price - $500,000 (20% Deposit) • Capital Growth Rate – 5% • Inflation – 1.8%
  35. 35. Strategy – Manufacture Equity Assumptions • Renovation Costs – 10% of purchase price
  36. 36. Strategy – Equity Growth Buy & Hold Manufacture Growth
  37. 37. Strategy – Cash Flow Negatively Geared Positively Geared
  38. 38. Build a Team of Experts • Mortgage Broker / Lender • Accountant • Solicitor / Conveyancer • Quantity Surveyor • Property & Suburb Data Company • Buyer’s Agent • Property Manager • Contractors – plumbers, electricians, painters, pest controllers, building inspectors or handymen
  39. 39. Insurance • Landlord – covers loss of rent & damages from tenant. • Building – covers unexpected events that damage your building. • Contents – covers items inside the property. • Holiday Rental – specialises in insurance for short term stay properties. • Income Protection – covers you if you are unable to work for a period of time due to illness or injury. • Life – cover mortgage repayments in case of death.
  40. 40. Negotiation Tips • Real Estate Agent isn’t your friend • Don’t make or be pushed into a rushed decision • Be information rich • Ask lots of questions • Understand the seller’s motivation for selling • Know your price limit • Start lower with your first offer so you have room to negotiate • Not always just about price, also use the terms of your offer to negotiate (settlement time, deposit, conditions, furniture, unconditional).
  41. 41. Research – Love the numbers, not the property • Average Days on Market – Sales & Rental • Vacancy Rates • Median Price – Listing & Sold • No. of Auctions • Clearance Rates • Level of Discounting • Comparable Sales • Low, median & high price ranges • Sales History • Listing History
  42. 42. Research – Love the numbers, not the property
  43. 43. Research – Love the numbers, not the property
  44. 44. Research – Love the numbers, not the property • Jellis Craig - Fitzroy: 9 sales with average of 22 days • Nelson Alexander – Fitzroy: 21 sales with average of 30 days • Peter Markovic Real Estate: 2 sales with average of 26 days
  45. 45. Research – Love the numbers, not the property • Hocking Stuart – Brunswick: 10 rentals with average of 18 days • Nelson Alexander – Carlton: 6 rentals with average of 11 days • Nelson Alexander – Fitzroy: 26 rentals with average of 25 days
  46. 46. What type of investor are you? Pros • Save you money • It can be a huge amount of fun • You have the opportunity to buy below market value • You can time the market • You have access to every property in Australia • It can become a passion for you • Learning experience Cons • You can make mistakes • Each mistake can cost you time & money • It can be time consuming • It can be mentally & emotionally draining • You only get access to on market listings • You’re not in the industry on a day to day basis • More likely to buy in boom & bust areas • More likely to invest with your heart than your head DIY Investing
  47. 47. What type of investor are you? Hands Off Investing Pros • Save you time • Develop a property investment strategy • Experts look out for your best interests • Research & experience can save you money • Work inside the industry every day • Make buying property simple & stress free • Deal with real estate agents, developers & builders on your behalf • Access to off market opportunities Cons • Fees (buyers agents generally charge 2-3% of purchase price) + engagement fee • Can be expensive, charge you for every property you purchase • Some buyers agents won’t let you have a say in what you purchase • Some buyers agents are actually property marketers
  48. 48. Are you ready to take action?
  49. 49. Option 1: For Hands Off Investors
  50. 50. Premium Membership • Complete end to end solution to help you purchase profitable investment property • Team of industry experts working for you • Achieve the outcome without the stress or hassle
  51. 51. Option 2: For DIY Investors
  52. 52. Pro Membership – Special Webinar Offer Sign Up at – www.realestateinvestar.com.au/99  Usual price $149 per month  Save $50 per month  No minimum term  Month to month membership  100% tax deductible
  53. 53. Poll: Would you like… Premium Membership: Strategy Session OR Pro Membership: 1-on-1 Demo
  54. 54. Get your FREE tickets at – https://info.realestateinvestar.com.au/events
  55. 55. Questions? Register for a personalised 1-on-1 demo - https://info.realestateinvestar.com.au/1-on-1-demo OR Sign up at - www.realestateinvestar.com.au/99 Book a free strategy session – https://info.realestateinvestar.com.au/premium- membership

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