My daughter and son in law are embarking on purchasing their first investment property, not a bad effort considering they only purchased their PPOR last October!
This is not an ordinary purchase but one in a SMSF, an area I must confess, I have very limited knowledge, having no super of my own.
I treat my investment properties as my super, much to the discontent of all financial advisers who want to help me.
Monetary wise, they all appear to be less well off than myself, so it just makes me think how can they help me, when they can’t help themselves?
I better get off my soap box and get back to the point....As it's their first investment property, they need to get this right and our way to ensure success is with the Reno Kings tried and true formula, of Re.B.A.T.E.S.
The following description is directly from the Reno Kings Book "Real Property Real People Unreal Profits", first published twelve years ago.
The principles are the same today as they were way back then. We even mention capital gains tax and the benefit of the Ralph Report, so many years ago.
Looks like the opposition must have just read our book and thought ‘the Reno Kings are on to something’, gee they’re quick aren’t they!
You need to know the area, where you are buying.
You don’t want to be competing with everyone else. Look for properties that other people are likely to pass up. I have a saying, “Where there’s mess, there is money” because most people will look at a mess and decide it is too hard to tackle. Actually, cleaning out the mess is easy.
A: Adding Value
This is where cosmetic renovation comes into its own. It immediately enhances the appearance of the property and value of your investment. The banks love you because within a very short space of time you’ve increased the value of the asset. That was how I managed to get those six properties in eleven months. In each case, the value was increased with renovation and so I was able to finance the next purchase.
You need to be able to get in there and start work the day after settlement: before settlement even better, if you can have it written into the contract and to do this, you need to have built up a reliable support team.
I have good solicitors, good accountants and good builders, who I call on when necessary. It’s important that you recognize where your own skills fall short and make use of other people’s expertise where appropriate. It saves you both time and money in the long run.
I work to very tight budgets and over the years I have developed what I call a “cookie cutter” system of tackling a Reno. I only use two paint colours, for example. I also use the same kitchen style every time. The same goes for the fence out the front. By finding a standard and sticking to it, you get to know exactly what you are doing. That’s how you save money and ensure your projects deliver the bottomline profits you expect. Also remember the saying...your project is only as good as your feasibility.
S: Sell, or hold and Refinance
You need to know what you are going to do with the property before you start. The changes to capital gains tax legislation, known as the Ralph Report, which made it more cost-effective to hold a property for twelve months before selling, needs to be taken into account before purchase.
Better still hold the property and refinance, no capital gains involved until you sell, take that pollies!
It’s not too late to book and make some new mates, (or meet your next JV partner, mentor or property loving coffee date). Reno Kings Geoff, Paul, and Justin look forward to meeting with you soon!