Investment Property 101: How To Get Started [Tips From 19 Experts]
An investment property purchase structure is all about how you buy a property. There are many ways you can do that in Sydney, and each has its own advantages and drawbacks. Depending on your financial goals and circumstances, your Sydney Conveyancer or Property Lawyer can help you pick the property purchase structure that best suits your conveyancing needs.
Some Common Property Purchase Structures
Purchasing a Property as an Individual
One of the easiest way to buy a property is making the purchase in your own name. This is usually very straightforward and involves no setup cost.
For example, if you attend an auction and are the successful bid, you would write your name (i.e John Smith) on the front page of the Contract.
Purchasing a Property as a Company
When you buy a property, you may gain some advantages when you do it through a company structure. A company is entitled to purchase a property as it is recognised as an entity.
When signing the Contract, the Company Name and Australian Company Number (ACN) should be inserted on the front page of the Contract.
Purchasing a Property as a Partnership
Buying a property with someone else allows you to share the cost. You can form a joint tenancy or tenancy in common with anyone from a friend to a family member. By pooling funds together, you can buy properties that you might not be able to afford on your own.
However, a partnership is a long term commitment. You can’t be sure that you and your partners will always see things eye to eye. When there is a conflict, such as when someone can’t make the mortgage repayment, you can easily damage your finances and the relationship with your partners. It is common for agreements to be established between individuals when buying properties together.
Purchasing a Property as a Trust
In the past, trusts were considered the investment vehicle of the rich, but nowadays, people from all walks of life have begun using trusts to purchase property.
A properly set up trust can provide valuable asset protection to all investors of the trust. You can receive income from properties in a trust without having them in your name.
However, the process for setting up and maintaining a trust can be complex. Some forms of trusts include Unit Trust, Fixed Unit Trust, Multi-Class Unit Trust, Special Trust, Discretionary Trust and Family Trust.
Purchasing a Property as a Self-Managed Superannuation Fund
A self-managed superannuation fund (SMSF) provides financial options to its investors in retirement. These investors are also trustees of the fund who have full control of the fund to meet their individual needs.
Establishing and running your own SMSF can often be complex and consideration should be made in relation to taxation, contributions, benefit payments and winding up.
Advice – Investment Property
Given that the structure that you purchase your property could provide certain tax, financial and liability advantages, it is important for purchasers to seek advice from their accountant, financial adviser and solicitor.
If you’re attracted to the prospect of flipping an investment property, we’re willing to bet that you’re looking for a little more adventure than you’re going to get by signing a check over to your broker and checking the NASDAQ or ASX a few times a week. The real estate market is a setting where your money does the work for you, but it does not bestow fortune upon the inattentive. It’s engaging, it’s challenging, and the biggest pay-outs go to those who do their research; assertive, competent people who are smart enough to catch the opportunities that others miss.
In some fields, the clueless do just fine. Not in real estate. Investment property professionals who don’t know what they’re talking about don’t get far. These are tried-and-true experts, and if you know how to take a dollar’s worth of free advice, they can help you to earn what you’re after, whether that’s an exciting, hands-on investment opportunity, or just a steady income.
What You’re Going To Need Before You Get Started
Getting started in property investing requires two things above all else:
- Access to start-up capital
- Willingness to learn
If you have all the start-up capital on hand from your salary, a great stock tip, inheritance, settlement or similar, great. If not, then it may take you a little longer to get started, but it’s not impossible to get outside investors interested. More on that later.
Larry Goins is a Visionary, CEO, Entrepreneur, Real Estate Investor, and Educator at LarryGoins.com.
Follow Larry on Twitter.
[clickToTweet tweet=”Real estate isn’t being risky, being uneducated is what’s risky. @larrygoins” quote=”Real estate isn’t being risky, being uneducated is what’s risky.”]
If you have a background in marketing, great. If you have a background in investing, great! If you have an experience in construction, great. If you’ve never worked in any of those fields, then you might have a little extra reading in front of you before you can make your first sale, but we all have to start somewhere.
1. Study The Local Market
Wendy Chamberlain has a strong passion for educating and empowering others for following her real estate journey. Catch Wendy on her personal website, Twitter and LinkedIn.
[clickToTweet tweet=”Know your product, do your numbers and know who your buyer is before YOU buy. @wendy_moore” quote=”Know your product, do your numbers and know who your buyer is before YOU buy. Then make sure that the property product that you are offering back to them is actually something that they will want to buy.”]
99% of what you’re going learn in your career as a real estate flipper is stuff that you can’t learn until you get elbows-deep into the process and start buying and selling investment properties, but that first percent is the foundation for the rest of your education. It’s the 20 years of experience that sets a great chef apart from a good one, but it’s the NSW Food Authority guide on sanitation that sets a good chef apart from a bad one.
Neil Vorster has a total of 24 years of experience in property investment. He owns Targer Realty (PTY) LTD and works a property coach at Organic Growth. Catch Neil on Twitter.
[clickToTweet tweet=”Make sure that you know the local market well by physically looking at dozens of properties. @neilvorster” quote=”Do your homework – Make sure that you know the local market extremely well by physically looking at dozens of properties in the area to get a good idea of values.”]
The good news is you don’t need to know everything there is to know about the business on your very first venture, you just need to know the neighbourhood.
Bill Gassett has 29 years of experience in the real estate industry. He founded Maximum Real Estate Exposure to help condo or home sellers establish a dominant exposure online. Connect with Bill on Twitter.
[clickToTweet tweet=”When flipping a home, it’s best to understand where you’re starting from and where you’re going. @massrealty” quote=”One of the most important things you can do when flipping a home for the first time is understanding where you are starting from the where you are going. So many rookie investors make the mistake of buying a home and thinking they can make more money than they really can.”]
2. Select The Right Neighbourhood
Select the right area and learn it like the back of your hands. You need to get on the ground floor, so look at trends and activity going on in that neighbourhood now and into the near future. Are developers looking to build new supermarkets nearby? Is a school district hoping to establish a new school here? Don’t look for great neighbourhoods, look for neighbourhoods that are getting better.
Laura Alamery is engaged in Real Estate Investing Coaching & Mentoring. Check out Laura’s website or follow her on Twitter.
[clickToTweet tweet=”Tap into hidden properties, do things differently, and work with private lenders to find your niche. @LauraAlamery” quote=”Find your niche in the market by tapping into hidden properties (not the ones that are for sale already, but reaching out to owners in distress), doing things differently than other investors (don’t be afraid about experimenting with strategies on how to reach distressed sellers), knowing where to find and work with private lenders and always making it a win-win situation for all the parties involved.”]
You only need to know one neighbourhood. You need to know everything there is to know about that neighbourhood, and it has to be the right neighbourhood, but you only need to know one neighbourhood.
Kylie Davis is the Head of Property Marketing at CoreLogic tweeting on the Australian real estate market. Reach out to Kylie via Twitter.
[clickToTweet tweet=”Look for well-positioned property that you can gear up so you get the best of ongoing revenue. @KDavisCorelogic” quote=”My advice is to look for well-positioned property that you can positively gear and then hold onto it. That way you get the best of ongoing revenue and the benefit of capital gains. If you can make some small improvements to increase the rent, even better.”]”
3. Select The Right Building
Jilliene Helman is passionate about real estate and technology. She founded RealtyMogul.com to simplify real estate investing by connecting investors through technology. Be in-the-loop with Jilliene through Twitter.
[clickToTweet tweet=”My #1 tip is ‘Buy Right.’ You make money in real estate when you buy. @JillieneHelman” quote=”My #1 tip is ‘Buy Right.’ You make money in real estate when you buy.”]
The perfect home or office building for your first investment property is going to be:
- Within your budget
- In the right neighborhood
- Not a money pit
Barry Cunningham is an innovator and social media marketing consultant to major consumer brands, entertainers, and sports teams. Catch Barry on his personal website and his business website Real Estate Radio USA. Tweet with Barry on Twitter.
[clickToTweet tweet=”If you can locate properties in low DOM areas, then you know you can flip quickly at any price. @barrycunningham” quote=”I like to find undervalued properties in areas with the LOWEST DOM (look for 30-45 days or less, regardless of price). If you can locate properties in low DOM areas, then you know you can flip quickly at any price.”]
If you’re looking to make an investment, the truth is that you don’t need to be too picky about the building itself. You’re here as an entrepreneur, not a home-buyer. The building has to be within your budget, it has to be in a neighbourhood with a promising future, and it shouldn’t come with any major repair costs.
Kevin Vitali is a Realtor, serving the Merrimack Valley home buyers and sellers. Get to know him more at Merrimack Valley MA Real Estate. Join Kevin on Twitter.
[clickToTweet tweet=”My number one tip for the novice or newer investor is don’t skip the home inspection! @tewksbury_re” quote=”I am approached by many people who are first-time flippers. They see the home improvement shows and people making a ton of money so they want to jump into the game. So my number one tip for the novice or newer investor is don’t skip the home inspection!”]
Putting in stainless steel sinks and beautiful bamboo flooring to make it more appealing to your buyers is your job, and a few grand in remodelling costs can pay off ten-fold if you know what your customers are after.
Anita Clark is a residential real estate agent in Georgia. She helps both buyers and sellers with their middle GA real estate needs. Check out Anita’s personal website. Keep up with Anita’s tweets on Twitter.
[clickToTweet tweet=”Make sure you get a good deal by always having a home inspection performed by a licensed professional. @Anita_Clark” quote=”A key to making sure you get a good deal and do not end up purchasing a money pit when trying to flip properties is to always have a home inspection performed by a licensed professional. Saving a few hundred dollars by skipping inspections is not worth it if the home ends up having structural issues, needs a new roof, has encroachment issues, etc.”]
4. Get Your Budget Together
David Ning is a personal finance blogger, published author, and entrepreneur. Grab tips on retirement and financial freedom from David’s personal website. Follow David on Twitter.
[clickToTweet tweet=”The transaction is all about numbers, so don’t ever fall in love with a property that you overpay for it. @MoneyNing” quote=”The key to making money flipping real estate is the entry price. The transaction is all about numbers, so don’t ever fall in love with a property that you overpay for it.”]
The process of flipping homes can be easier, and the profit margin will certainly be wider, without any outside investors. And if you can cover the purchase with cash up front, all the better. If you can cover the costs yourself then you need to simply set a number that you’re comfortable with. The chances that you’ll lose your full investment are slim. Real estate is always worth something. If you can’t cover the costs yourself, you still have options, including:
- REIA meetings. These are Real Estate Investor Associations comprised of people who have worked in the real estate or construction industries along with people who have no experience in that field but are looking to invest in someone else’s development project. It can be difficult for a new face to earn trust, but if you can cover part of the costs yourself and put together a persuasive pitch, then you have a leg up.
- Private lenders and investing partnerships. This can be anyone. Co-workers looking to invest some money, your dentist, your golfing buddies, your cousin who just landed a major settlement. They say never to borrow money from friends and family, but going in on an investment together is a different story. If you can make your friends rich while establishing a new career for yourself, what’s the downside?
- Hard money lenders. Proceed with caution if you’re pursuing hard money lenders. A hard money lender charges a high-interest rate plus points on top. These lenders can be useful for very, very short-term projects, but we’d advise waiting until you have some experience under your belt so you don’t wind up paying back a quarter million on a $100,000 property.
William Bronchick is a real estate author, attorney, and public speaker. He’s also a host at Legalwiz. Catch William on Twitter.
[clickToTweet tweet=”Round up your repair estimates to the next $5k increment. @bronchick” quote=”Round up your repair estimates to the next $5k increment. “]
You need more than just the cost of the property. You need to cover the initial purchase, repairs and remodelling, marketing, fees and taxes, closing costs, and you need to have enough left over for any legal issues and other unforeseen circumstances that might come your way. Even if you can afford the initial sale price on your own, it’s not always a bad idea to supplement your funds with a loan or an investing partner.
5. Build To Maximize Resell Value
An entrepreneur and a real estate consultant, Spencer Cullor gained many years of experience in business development, business ownership, management, acquisitions, and dispositions. He co-founded Cullor Properties, a Kansas-based real estate company. Reach out to Spencer via Twitter.
[clickToTweet tweet=”Buy based on real numbers and to have a plan in place before you buy for how to improve the property. @SpencerCullor” quote=”Our number one tip is to buy based on real numbers (Not Proforma, aka ‘Fake’ numbers) and to have a plan in place before you buy for how you are going to improve the property.”]
You don’t have to know a hammer from a pitchfork in order to build and remodel a home. You just need a good construction crew.
David Drake is the CEO and Chairman of The Soho Loft. Interact with David on Twitter.
[clickToTweet tweet=”The reliance on your construction crew is key ingredient in flipping real estate and for your sanity. @DavidDrakeVC” quote=”The reliance on your construction crew is a key ingredient in flipping real estate and for your sanity.”]
You’ll want to do a little market research. Here’s an easy way to get that out of the way: Tour similar homes for sale in similar neighbourhoods and take notes. What are the trends? If the realtor is really talking up the oak flooring, then you can bet that it’s because their clients love oak flooring. If the French doors look new, that’s because they read that French doors are hot right now so they had a set installed.
Tracy Royce is a real estate all-arounder. She also is an avid blogger, vlogger, and contributor to real estate magazines.
[clickToTweet tweet=”Make money in flipping real estate by sticking to your guns with numbers and types of deals to pursue. @RoyceOfRE” quote=”My #1 tip for making money in flipping real estate is to stick to your guns with your numbers and types of deals to pursue. Thin margins, funky houses and properties outside your wheelhouse can lose you money, they can take you out of the game and sour you to the entire process. Focus, focus focus; that’s where your funds will fly in.”]
Find a good construction team, bring your notes and brainstorm with them, and let them do their thing.
6. Turn On The Real Estate Marketing Machine
Joe Bauer is a Crossfit enthusiast and real estate agent with Seattle Investors Club. He also blogs about fitness and nutrition at AllAroundJoe. Stay updated, follow Joe on Twitter.
[clickToTweet tweet=”Focus on marketing. We say we’re in the real estate business, but we’re really in the marketing business. @Joe_Bauer” quote=”My number 1 tip would be… To focus on marketing. We say we are in the real estate business, but we are really in the marketing business.”]
Marketing is roughly ninety percent of the job. Marketing doesn’t mean “advertising.” Advertising is a branch of marketing, but marketing entails a lot more than just posting a few real estate listings.
Finding a niche can help in this regard.
Minh Q. Tran
Minh Q. Tran is a General Partner at AXA Strategic Ventures. He blogs about all things money and insurance at The #Insurtech #VC. Tweet with Minh on Twitter.
[clickToTweet tweet=”Invest in early-stage ventures around proptech and asset & wealth investment tech to avoid disruption. @Minh_Q_Tran” quote=”My 1 tip is to invest in early-stage ventures around protect and asset & wealth investment tech. The reason is that industry is also facing disruption via digitalization.”]
Marketing starts when you’re doing your neighbourhood research. Marketing means knowing who you’re selling to and what they like to buy. Remodelling is marketing. Choosing the right neighbourhood is marketing.
More than an entrepreneur and a science nut, Michael Borger dedicates himself as a real estate investor for Oahu Home Buyers. Check out his tweets about personal and all things real estate on his Twitter profile.
[clickToTweet tweet=”Understand the difference between calculated risk and speculation. It’s your foundation for success. @michaelborger” quote=”Understand the difference between calculated risk and speculation. Understand that risk, when properly evaluated, is your foundation for opportunity and a successful business. Demonstrate this understanding in a solid plan and strategy and you’ll attract others to your mission.”]
Truth be told, a lot of the advertising work can be done by a third party. Enlisting the talents of a real estate agent means one less thing for you to worry about. If you’d rather keep the commission for yourself, we’d recommend reading How To Win Friends And Influence People, and Seth Godin’s ground-breaking marketing book, Purple Cow before you decide to write the listings and give the tour yourself. We’d recommend reading those books regardless, but especially for anyone who needs a crash course in closing a deal face to face with the buyer.
7. Build Your Pipeline of Sales
Congratulations on your first sale! Once you’ve finished off the champagne, it’s time to consider whether or not you want to make a career out of this. Some people are happy to make one sale to establish a neat little nest egg. Others love the process and can’t wait to get back out there.
Brandon Turner started in real estate at the age of 21. Presently, he co-hosts the podcast and leads as the VP of Growth and Communications at BiggerPockets. Find out what’s new with Brandon on Twitter.
[clickToTweet tweet=”To make real money, you have to build a real business, meaning a consistent and steady flow of deals. @brandonatbp” quote=”Build a pipeline for deals. Yes, almost anyone can get one deal and flip it. But to make real money you have to build a real business, which means a consistent and steady flow of deals coming to you.”]
If you want to keep at it, the good news is the hardest part is behind you. You’ve got your contacts in the industry, you’ve found your niche, you’ve got some experience under your belt, the foundation has been laid to build and expand on your business, so it’s time to set up a pipeline. This is the process through which you fund, buy, remodel, market and sell investment properties, one after the other.
It gets easier from here since you’ve already gotten your feet wet, you don’t need to reinvent the wheel, and you’ve already built trust with your investors, your partners and your clients. It’s a lot easier to get your dentist to invest when he’s still sitting on the money he made from the last deal, and it’s a lot easier to sell a home when your first client is raving to all their friends about the new house.
We hope you found all the information you were after. Tell us if you have any questions you would have liked to have seen answered here. Sound off in the comments, and good luck on your next investment property!