The Smart Investors Guide

1. The SMART Investor's Guide to Building a Property Portfolio By www.propertywizards.com.au Your step-by-step guide to achieving increased �nancial certainty through strategic property investment

2. 2 Contents INTRODUCTION ...................................................................................................................................... 3 STEP 1: CREATE YOUR WEALTH PLAN & INVESTMENT STRATEGY ......................................................... 6 Setting clear goals ............................................................................................................................... 6 Create your property investment wealth plan ................................................................................... 7 STEP 2: FINANCIAL ASSESSMENT & FINDING THE RIGHT LOAN ........................................................... 13 What can you afford? ....................................................................................................................... 13 Selecting the right financial partners ................................................................................................ 14 The importance of loan structure ..................................................................................................... 16 STEP 3: RESEARCH THE MARKET & CREATE A SHORTLIST .................................................................... 17 Are location and property type really that important? ................................................................... 17 Draw up your shortlist ...................................................................................................................... 22 STEP 4: RISK MINIMISATION & DUE DILIGENCE ................................................................................... 24 Minimising risk .................................................................................................................................. 24 Due diligence ..................................................................................................................................... 26 Arriving at the right price .................................................................................................................. 28 STEP 5: GET YOUR PROPERTY PERFORMING & PROTECTED ................................................................ 29 Managing your property ................................................................................................................... 29 What does a good tenant look like? ................................................................................................. 31 How can you protect your property? ............................................................................................... 31 STEP 6: ADD VALUE TO INCREASE RETURNS ......................................................................................... 32 What are the add-value options? ..................................................................................................... 32 Development..................................................................................................................................... 34 Renovation or refurbishment ........................................................................................................... 34 STEP 7: REVIEW AND REPEAT ............................................................................................................... 36 The next investment ......................................................................................................................... 36 CASE STUDY:.......................................................................................................................................... 40 GETTING STARTED................................................................................................................................. 42 Overcoming obstacles ....................................................................................................................... 42 What’s the secret? ............................................................................................................................ 43 About Property Wizards ........................................................................................................................ 44 GENERAL ADVICE WARNING Any information or advice provided in this document is general in nature and does not take into account the particular objectives, financial situation or needs of any person. The material and opinions of the company should not be relied upon when requiring specific advice and, in that regard, readers need to seek further professional help from an appropriately-qualified adviser or lawyer. www.propertywizards.com.au

3. 3 INTRODUCTION DOES THIS SOUND LIKE YOU? •You are thinking about buying a property and are not sure where to start? •You’ve already bought your first property but are unsure how to build on this investment? •You know that you need to start building passive income and wealth but you don’t know which strategy is best? IF IT DOES, THEN THIS BOOK CAN HELP YOU. www.propertywizards.com.au

4. 4 A 2014 study by the University of Melbourne and Towers Watson on the adequacy of savings found: With life expectancy increasing too (79.7 years for males and 84.2 for females according to the Australian Bureau of Statistics), this creates more financial pressures. “Only 53% of couples and 22% of single people are on track to achieve a comfortable retirement income.” So why do 70% of property investors own only one property? level of They are missing out on the massive benefits of building a portfolio to generate the capital growth that creates future wealth, cash flow and passive income. The fact that three-quarters of a million Australians own investment properties shows that they know that working and paying into superannuation alone will not be enough to fund their futures. Could it be that they don’t know this – or that they just don’t know the strategy to getstarted? www.propertywizards.com.au

5. 5 YOU DON’T HAVE TO BE WEALTHY TO BUILD WEALTH… The time to start thinking about this is now – not in 10 or 20 years’ time. A high-performing investment strategy usually start when you are in your late 50s or 60s; it’s a lot harder then. Providing investment advice, starting early and building a portfolio of multiple properties is far better than panic buying a property when you realise you don’t have enough money to fund the future you’d hoped for. you get the right property does not You may be surprised how much needs to be done before you actually sign any paperwork. Good planning, research diligence is predominantly what separates the savvy investor from the novice. Remember: you don’t have to be wealthy to build wealth! and due In fact, you don’t even need to have a huge salary. It’s never too early to start buying good property, in the right location, with a long-term strategy of improving it, adding value, and creating wealth. We have broken it down into seven actionable steps that you can start taking now... www.propertywizards.com.au

6. 6 STEP 1: CREATE YOUR WEALTH PLAN & INVESTMENT STRATEGY Property purchases are the biggest financial decisions that most people make in their lives. As with all major commitments, success starts with planning and detailing your strategy. Setting clear goals create the wealth that funds the future that they want to achieve –travelling more, playing more rounds of golf, or spending more time with kids or grandchildren. However, it’s important not to cripple yourself financially along the way. It’s best to formulate short, mid-term, and long-term goals such as the following: financial What do you want to achieve from buying property? Write your goals down and keep them accessible as they will help to dictate your investment strategy. •SHORT TERM GOALS: pay off credit cards, pay off short- term loans, start saving X amount every month •MEDIUM-TERM increase equity on your home or save for another deposit •LONG-TERM GOALS: fund your retirement Do you aim to own a number of properties to fund your retirement? Do you want to improve cash flow or pay for your children’s education with property? GOALS: For many people reading this, the primary long-term goal will be to www.propertywizards.com.au

7. 7 Create your property investment wealth plan Your wealth plan needs to be executable in the long term, while also allowing you to live comfortably in the short and mid-term. You must enjoy the journey! You’ve already decided that property is the way to go but how exactly do you go about it? And what are the main considerations? KEY CONSIDERATIONS: KEY CONSIDERATIONS: •Your business could fail or you may lose your job –build buffers into your calculations. •Your plan needs to work in any financial climate – don’t base your plan on a ‘booming’ market as conditions change. •A depressed interest rates should NOT be a reason not to get started. •Is capital growth or rental yield the most important factor to achieve your goals? •Are you looking to ‘set and forget’ or add value to your properties? •What type of property will you focus on – houses, apartments, commercial? market or www.propertywizards.com.au

8. 8 A strong investment portfolio can help you become ‘future proof’. It provides the financial fall-backs you may need in the rough times, and huge capacity for growth in the good times. RENTAL YIELD: CAPITAL GROWTH: Profit made on an investment or purchase of measured by the increase in its market value over invested amount or cost price A percentage derived from subtracting annual expenses from the annual rental income, dividing this result by the total cost of the property, then multiplying the result by 100. an asset, the www.propertywizards.com.au

9. 9 DO THE NUMBERS ADD UP? Sooner or later you will have to look at the numbers. This is where some people go misty-eyed. When you retire, will you sell up and reinvest elsewhere? Do you aim to retire on the rental income? Or do you plan a combination of these strategies? If your plan is to retire on the income from your properties, exactly how many properties you will need? This is influenced by many factors and you will need to ask yourself the following questions: 1.Will you still want to work part-time before you stop work altogether? Increasingly, people want to free up time to do what they want to do, but don’t want to stop work completely. Clearly this will affect how much time you have to make investments and how much you investments to make. need these 2.How much net income do you need from your properties? If your home is paid off and your kids have moved away, you generally need everybody has expectations. You may be aiming for $50,000 a year or $150,000 a year, which typically translates to $1 to 3 million dollars in property with no mortgage (based on a net 5% return). less, but different www.propertywizards.com.au

10. 10 3.What types of properties are you planning portfolio? have accumulated. This can help you make money well into your retirement, meaning you need to accumulate less than somebody who just wants to put their feet up or travel. for your This also influences how many properties you need. Typically the higher growth properties have a lower rental return so you would need more of them to produce the same income and vice versa, or you may switch from growth properties to yield properties later once you have had the grown and need the income. 5.What are your personal circumstances? Whether you are single person, married, how many children you have or plan to have, and what your life expectancy is will also greatly affect how much you need. Also if you are buying through a superannuation fund (SMSF) it will affect your calculations. 4.Will you want to continue to develop and add value to your properties? self-managed Some retirees love to renovate and develop properties that they www.propertywizards.com.au

11. 11 PROPERTY WIZARDS’ 7 TIPS FOR SUCCESS: Your property investment plan is an effective way to stay focused on your goals while filtering out unnecessary distractions. Always ask how a particular property is going to help you achieve your goals… •Take a small first step up. The hardest part of climbing the property ladder is getting onto it in the first place. It starts with a small step up – don’t aim too high with your first property. Start small and work your way up from there. •Quality over quantity. Your property strategy should be based on quality. Each deal comes with a cost attached to it in terms of time, effort, and finances - so make sure that it’s worth it. Get it right by focusing on properties in locations and repeating it. •Avoid ‘unbelievable’ deals. A sensible long term property strategy temptation to make a quick buck on unbelievable investors who have bought properties off the plan or in “hot spots” like mining towns have been badly let down by underperforming properties. •Stick to the strategy. Many property investors go about their business in a random, ad hoc way without a set strategy, or deviate from the strategy according to market conditions. Once you set the long-term property strategy, and are happy with it, make sure you stick to it as the results will come over time, irrespective market fluctuations. Knowing that you have a sound strategy removes much of the stress and helps you avoid making hurried, emotional decisions. •Capital growth or rental yield? Decide which is more important to your investment strategy – capital growth, rental yield, or both? How will your first investment fund the next one and start producing the asset base that leads to real wealth? •Consult a professional. A professional buyer’s agent should be able to help you of temporary the the right right avoids the the deal. latest Many www.propertywizards.com.au

12. 12 formulate a property strategy that suits you achievable in the current market. •Consider your risk profile. People have different ‘risk profiles’. comfortable handling large amounts of risk; others will want to reduce risk to an absolute minimum. This will affect your strategy. •Become a property expert. Most of you reading this will not be property experts – but you can become one. Learn from colleagues or contacts in the industry network. experience investment is welcome. Read up and research yourself too. and is from your insider property Some are Any of online investment A FINAL TIP YOU MAY WANT TO CONSIDER Many like to have a financial ‘buffer’ in place to help them ride tough times property. This may mean keeping aside a sum of ready cash which may be stashed away in investors an offset account, for unexpected property events. Income protection insurance is also an extra layer of protection against losing your potential, should you lose your job or become sick for instance. the in income-earning www.propertywizards.com.au

13. 13 STEP 2: FINANCIAL ASSESSMENT & FINDING THE RIGHT LOAN You have your goals and property investment wealth plan outlined. Before you start searching for properties, get a comprehensive financial assessment by a trusted professional. This will give you an idea of what you can afford, how much you will need to save, and how you can go about achieving your goals. What can you afford? There is little point designing an investment strategy for twenty years in the future when you can afford it. property portfolio as soon as possible. You need to arrive at a budget for your first purchase before you start looking at properties and wasting time. If you don’t know your present financial state, it is likely that you will aim either too high or too low when you start searching for properties. You need a strategy that is actionable now – and to do that you will need a full financial assessment to detail where you are at with your finances, what you can afford, and how you can start building your www.propertywizards.com.au

14. 14 This means you need to select the right financial partners to work with... Selecting the right financial partners Many people enter the property investment market by buying their own home, but there are other options available. You can’t do it alone – and you don’t need to. Successful investors surround themselves with a good team of trusted professionals and build relationships with them. Seek advice from property investment or finance professionals to help you structure your finances optimally. A finance broker and accountant would be the starting point. www.propertywizards.com.au

15. 15 PROPERTY WIZARDS 7 KEY TIPS: 1.Consult before Finance brokers, buyer’s agents and accountants can all add value to your strategy and talking to them first is essential. 2.Get your buying structure right. Discuss with your accountant whether you should buy the property in your own name; in joint names with your partner; through a trust; or through a self-managed super fund. 3.Prepare the buying structure before you start looking. It may take time to prepare the documents and you can’t make an offer until they are ready or you may end up paying double transfer duty afterwards. 4.Beware of finance brokers who are not specialists in property investment as they can make simple financing errors. Any errors with property can be expensive. your you professionals start looking. 5.Choose a loan that is tailored for your circumstancesthat can help you achieve the goals that you have already defined; it must be flexible enough to cater for the long term as well as the short term. You may want to add properties to your portfolio. 6.The interest rate on your loan is not the only consideration. Offset accounts flexibility to access property equity is also important. 7.A small difference in quality of advice can difference to your future wealth so make a fully informed decision! and the to change make a big A good finance broker will explain your options in full, and conduct a review of your current financial circumstances. The broker will make recommendations based on your financial goals, wealth plan, and property investment strategy that you have already detailed. www.propertywizards.com.au

16. 16 The importance of loan structure If you choose your first property wisely, it will increase in value over time, and you will build equity. WHAT IS EQUITY? WHAT IS EQUITY? Equity is the difference between the value of the property and the money still owing on your home loan. If the property value is $600,000 and the loan remaining is $350,000, the equity is $250,000. For your longer term property investment strategy, you may need to release the equity in your first property. This means finding a lender willing to structure a loan to allow you to do that. KEY CONSIDERATIONS: KEY CONSIDERATIONS: •Should you opt for a Principal and Interest (P&I) loan or interest-only investors choose a P & I loan for their own home and interest only investments. •Discuss how you can use an offset account to reduce interest with savings while retaining the tax deductibility after redrawing from funds •Ask how you can minimise the impact of tax on your investment returns. •Discuss whether you need a line of credit (LOC) to use as needed but ensure the extra is worth it •Discuss how you can reduce non-deductible debt in your home by paying off the loan as quickly as possible, freeing up equity that can fund the purchase of future properties. •Discuss how your advisor can help you with planning to finance your add-value or development projects. loan? Often loan for www.propertywizards.com.au

17. 17 STEP 3: RESEARCH THE MARKET & CREATE A SHORTLIST With the insight gathered from your investment plan, financial strategy and loan research, start investigating the market to highlight locations and property types that can help you achieve your property strategy goals; then create a shortlist to work from. DO IT YOURSELF OR HIRE A PROFESSIONAL? In the end, the choice is yours. You could put in the work and do it all yourself or you could hire a buyer’s agent to recommend your strategy and find your property. Just as a selling agent represents you when selling, a buyer’s agent will act interests to help you achieve your goals. in your A good buyers’ agent should take the time to fully understand your needs, budget and expectations and explain the property investment strategies for the current market. If your expectations are unrealistic, they should be able to set you on the right path. The buyer’s agent also takes away the daily grind of searching for properties as they scour through databases and their network of contacts and unlisted sales looking specifically for your property. Two key areas to look for when selecting a buyer’s agent include expertise and negotiation skills. First up, the buyer’s agent should possess the expertise and knowledge required to conduct specific research for your property investment strategy. For example, lifestyle trends, development potential, re-zoning and major infrastructure or planning projects in the property’s locality that may impact on value over time. www.propertywizards.com.au

18. 18 This kind of knowledge and market awareness that is only earned from years of practice can prove to be invaluable. Second, the buyers’ agent should be able to negotiate the best deal on your behalf with the seller, including the contract and settlement terms, as well as ensuring you don’t overpay for your property. Remember, sales agents can offer value and information but they are legally obliged to work in the sellers’ best interest and obtain the best deal for the seller. A buyer’s agent works to get the best for you, and can help you get you the kind of property you really want. EDUCATE YOURSELF While you will need professional advice, the research you do now will serve you well for the future. You can start to educate yourself in property investment by: •Read property articles and books •Enrol for paid courses by property experts. If the course is free, the presenter will either be promoting their properties or their services and would be looking after interests, not yours If you find all of this demands too much of you on top of your busy work or personal life, don’t let it delay your property investment plans. Worse still, don’t be tempted to skip the groundwork and just go out and buy because it could be the wrong property, setting your plans back, perhaps for years. •Studying accredited courses in property and development •Researching online using the endless resources available and particularly the independent real estate associations such as REIWA, who are not trying to sell you their products their own it yourself. You will also know a lot more so it will become easier. However much experience you have, though, every purchase needs all the groundwork minimisation. and risk A few words of warning about some of the advice out there: those acting on commissions may try to steer you one way or another. Ensure that the resources you are using are independent and well researched, and not just marketing tools. Rather spend the money on an independent buyer’s agent to help you get going and after your first one or two properties you may be in a position to put in the work and do www.propertywizards.com.au

19. 19 Are location and property type really that important? Yes, location and property type are key, whatever your investment strategy. This requires extensive research before you start looking for properties. KEY CONSIDERATIONS: •IF YOUR PLAN IS TO HOLD PROPERTY FOR THE MEDIUM TO LONG TERM: you need areas that growth drivers in place, such as development, scarcity and gentrification. •IF YOU PLAN TO DEVELOP: you either need properties that are zoned correctly for development, where there is already a good market for resales or tenanting of new properties; proposed for rezoning that you can hold on to, and which can increase in value down the line as the rezoning approaches increases. •IF YOU HAVE A YIELD STRATEGY: you need the right balance between land value, building value, and other factors that will deliver the yield you need. •YOUR FIRST PROPERTY IS KEY: the success of your first property will help determine the timeframe for purchasing future properties. have several infrastructure or properties and demand Often your strategy will be a combination of these factors. Your initial research will help you narrow down where you can find the right, high performing properties and what types of properties they are. www.propertywizards.com.au

20. 20 PROPERTY WIZARD’S LOCATION TIPS: •Research cities. Try to find properties in cities with high population employment opportunities, and high average wage growth as these are good indicators of property growth. •Research suburbs. Find suburbs that have good history or potential or are due to be revitalised. Those with public transport links, lively retail and café environments, reputable schools and child care centres, as well as parks and recreational facilities, are always sought after. Suburbs close to city CBDs are also always in high demand as are those with a long history of strong capital growth – but these tend to require higher budgets. •Research to street level. Some streets within suburbs have more potential than others. There might restaurants along them, for instance, while others may border commercial areas. While add value potential may be higher, the suburb growth usually applies in the long whether it’s the best or worst location. growth, good •Consider demographics. Find suburbs where owner-occupiers want to live and where people can afford to pay a premium to live because they have higher disposable incomes. Affluent inner-city suburbs beyond your budget, but how about middle-ring suburbs of the capital cities? These are usually promising •Look for a range of growth drivers. Where infrastructure changes are underway and a range of other growth drivers are evident (not just one) these are good indicators for potential property growth. Speculation or building a strategy on one growth driver is high risk, but acting on good data and drivers that support growth over the long term is wise. may be locations. be popular www.propertywizards.com.au

21. 21 •Don’t focus on finding a bargain. It can be a mistake to spend too much time looking for bargains as it is usually time- consuming and the properties may not be in the best location. It’s better to focus on the right property in the right location to achieve your goals: be willing to pay the market price, get in quickly, and try to negotiate the price down. •If you are planning to refurbish, renovate or redevelop, you may have more people don’t want to put the work into fixing properties up, so they may be available in great locations at more reasonable prices. But make sure that structural issues don’t make a costly renovation. options. Many TIP: In the end the location you can buy in is highly dependent on your budget and the available properties on the market for your strategy, so don’t define your location too narrowly. www.propertywizards.com.au

22. 22 Draw up your shortlist Research may sound like a simple task but it will account for a large proportion of the hours you put in to finding a property. Without it, costly mistakes are made and you can end up with a property that performs only averagely or worse – shaving thousands of dollars or more off your future investment potential. It’s not a case of looking at a few random properties; to be thorough you will need to sift through hundreds of properties systematically. There are thousands of properties on the market at any one time, and narrowing them down into a workable list will take some patience and practice. You will need to consider not only budget and location, but property type too: •House? •Apartment? •A low-maintenance property? •A property to develop or renovate? www.propertywizards.com.au

23. 23 IF YOU PLAN TO REDEVELOP: Make sure that you research what type of property is in demand in a particular location. There is no point buying land to build a multi-unit complex if there’s no demand for this type of property in the area. Run a feasibility study to identify what’s possible: number and types of dwellings, expected costs and the profit you can expect to make from the development. If you have done your research – and found the type of property you need within your budget and located in the right suburbs – then the shortlist should come naturally. You then have the ideal starting point for considering individual properties more closely and selecting the one that best suits your needs. www.propertywizards.com.au

24. 24 STEP 4: RISK MINIMISATION & DUE DILIGENCE Selecting the best property from your list is only the first stage of research in buying a successful investment property. If your search strategy has been thorough and you have taken steps to minimise risk, due diligence will ensure that you buy the right property at the right price with comprehensive market analysis. Minimising risk Savvy property investors have done their homework on every property they buy to minimise the investment risk. Risk is increased by not having done the research to make a fully informed decision. Investing in property on ‘gut instinct’ or in the mistaken belief that you are qualified to make big business decisions because of your success elsewhere could land you in trouble. While uninformed investment is the greatest risk, the good news is that if you have followed the advice in Steps 1, 2, and 3, then you will be well informed and ready to go. If you are hiring a buyer’s agent their job is to do the risk minimisation, the due diligence, the price assessment and the negotiation on your behalf. But if you are doing it yourself you need to go through all the steps to protect yourself. There are some tried and trusted strategies for minimising property investment risk and increasing the chances of success. www.propertywizards.com.au

25. 25 PROPERTY WIZARD’S RISK MINIMISATION TIPS: •Buy a property that appeals to owner occupiers. Not because you want to sell it, but because other people buying in the area help increase demand and raise prices. •The right property in the right location at a well negotiated price is usually less risky than hunting for bargains and hot deals. •Focus on properties in areas with a range of growth drivers including a history of strong capital growth, good demographics, and good infrastructure (or where infrastructure changes are underway). •If you are keen to add value yourself, look for properties where you can be proactive. Refurbish or renovate to add value to your properties, to attract a better quality of tenant and help you add your own capital growth. •Try to add value through subdivision or development. This can increase your equity over and above market growth, provided you do thorough due diligence. •For your first property especially, seek professional help. Enlist the services of a professional buyer’s agent who can help you choose correctly and minimise your risks of making a costly mistake. •Never skip or cut corners with property inspections. Make sure you always know what you’re buying by enlisting the right professional help to assess your properties beforehand. www.propertywizards.com.au

26. 26 Due diligence Whatever type of property you plan to buy, you will need it inspected to ensure that there are no hidden problems. Mistakes here can cost thousands or even tens of thousands of dollars to rectify so this is a crucial step not to miss. Of course, the inspections you need will depend on your investment strategy. At the very least you need to check: •Is the dwelling structurally sound? •Has there been any termite activity in the house or surrounding property? •Are there signs of any hidden and costly repairs needed that don’t add much value, e.g. rewiring? •Are there any easements on the land? A comprehensive due diligence will require more enquiries to minimise your risks and it’s usually best to have professional help to know what to check for your specific property. www.propertywizards.com.au

27. 27 If you’re going to demolish immediately after buying then you will need to make at least the following checks (and maybe depending property): others, on the •Are there any restrictions or caveats on developing the land as you intend? Encumbrances on the site such as a drainage easement could reduce the land size available for development and therefore the number of dwellings that can be built on the site. This can severely reduce the profitability of a site, if it was purchased on the basis of building a certain number of homes to achieve a profit. •What is the zoning of the property and are there any specific planning policies that affect this? •What is the development potential of the site?A surveyor should be on your project team to confirm that you can achieve the number of lots you are aiming for and that the boundaries are in the correct position. Additional or reduced land area can change the nature and potential of a development dramatically. •Where are the services located? If the sewer line runs through the property check the building restrictions near the sewer and make certain it still suits your development. www.propertywizards.com.au

28. 28 Arriving at the right price Once you are convinced that the property is right for you, how do you ensure you arrive at the right price with the owner? Remember that you are looking for the right property at a good price – not hunting for bargains. Quite simply, good properties in the right locations are the best way to minimise risk and ensure high returns: this is because your property will be in continual strong demand by owner-occupiers, who push up property values, and tenants, who pay rent and help you pay your mortgage. If you are using a buyer’s agent, they should be analysing recent similar sales to work out what the property is worth and then plan a purchase strategy to give you the best chance of a successful buy at the best possible price. If you are doing it yourself, by now you should be more skilled at research – you can check market analysis research yourself to arrive at what the property is worth or get professional assistance. You will hopefully also have been to many home opens of similar properties and followed up the sales prices so that you can estimate what the property is likely to sell for. The skill is in not being afraid to walk away if the price is not right. Take the emotion out of the negotiation and never be swayed to buy by ‘gut instinct’ or because you feel a special attachment to the property. If it does not make investment sense, walk away. Then negotiate with the agent or owner until you arrive at a price that you are happy with. www.propertywizards.com.au

29. 29 STEP PERFORMING & PROTECTED 5: GET YOUR PROPERTY You’ve got the property you wanted. What next? It’s important to consolidate by choosing the right property manager to help you achieve the maximum returns. Take some time to ensure your investment is performing before moving to the next step. Managing your property It may be tempting, if you’ve done much of the research yourself and got a ‘feel’ for property investment, to think that you can manage your new property yourself; or to hire the cheapest property manager in town. The performance of your first property is one of the keys to your future wealth. A good property manager will help you maximize the value of your property and increase your cash flow to pay off your mortgage quicker, increasing your ability to investments. make future However, property management is a specialist area that requires professional know-how successful – not just the ability to handle a rent contract and to help you comply with regulations. to be It pays to select the right one the first time so that they are able to effectively manage properties for you in the future. multiple www.propertywizards.com.au

30. 30 KEY CONSIDERATIONS: •Does the property manager have extensive experience of the local property rental market? •Can they testimonials and checkable references? •Do they understand your short, mid, and long-term investment goals? •Do they have the resources to provide a personalised service rather than just collect rent? •Is your property manager overworked and liable to make errors or overlook issues? •Will they provide regular rent reviews? •Are they able to help you forecast changes in the market? •Will they help you protect your property and meet your investment goals? •Are they able to advise you how to add value to your property to maximise rental yields? •What is their plan to help you optimise rent? •Your buyer’s agent should be able to refer you to a good property manager who has achieved results for their other clients provide real With property managers you usually get what you pay for. The fees are tax deductible so don’t be tempted to skimp in this area. Your own time is best spent researching the next investment rather than trying to manage the day-to-day tasks involved with running a rental property. www.propertywizards.com.au

31. 31 What does a good tenant look like? Finding good tenants paying the market rate will get your investment strategy off to a flying start. A good property manager will help but you will need to make the final decision about who moves in to your property. PROPERTY WIZARD’S TIPS FOR FINDING GOOD TENANTS: •Most property owners want long-term tenants who are professional couples with no pets. Finding them is difficult as they are often owner occupiers. •Focus on finding tenants who will not damage your property and pay the rent on time. Make sure their references from previous rental properties are checked. •A good property manager should vet the tenants well for youso choose your property manager before you choose your tenants. •Keeping your property well maintained helps you minimise vacancy time. Tenants are less likely to move if the place is well looked after. How can you protect your property? A good property manager is the first step in protecting your property. However, you should also add an additional layer of protection through property insurance. This protects rental income and covers tenant damage and your property manager or buyer’s agent may be able to point you towards an insurance company specialising in investment property. www.propertywizards.com.au

32. 32 STEP 6: ADD VALUE TO INCREASE RETURNS Many investors set and forget the properties they purchase, and purely focus on steady cash flow and rental yields. This can be a mistake, as adding value to your property in the right areas can accelerate capital growth, increase rental yields and help you progress along the path to wealth. What are the add-value options? Adding value to your property should not be an afterthought; it should be an integral part of your plan when you set out your investment strategy, start researching, and buy your property using the first four steps described in this book. TIMING AND AFFORDABILITY It can be a lucrative strategy to buy, develop and hold on to properties, because while you are earning rental income you can also benefit from the depreciation schedules and increased capital on your balance sheet for further borrowings and development in other projects or investment options. Further down the track you can always sell off or borrow against a property if you require cash to fund other projects or your lifestyle. It’s important to understand what you can afford to do and plan for it. Some buyers may purchase a property and have the financial capacity to redevelop it immediately; others may max out their borrowings to buy the property and work with a savings plan to fund the development down the track in, say, six months to a year, or even several years. A good idea is to look at investment properties that either have the zoning currently for immediate redevelopment if you plan to develop straight away; if you need two or three years to raise the capital to redevelop, buy where the zonings set to change in the future. That way you can get a better deal. www.propertywizards.com.au

33. 33 DEVELOP AND SUB-DIVIDE OR RENOVATE? Once you have purchased the right property, you have two main choices for adding value (again these should be considered before you buy): 1.SUB-DIVIDE AND/OR DEVELOP: If your property is large enough and strategically located you may be able to subdivide it to create two or more dwellings. Alternatively, you can obtain approval for the development and then revalue the property with subdivision or development approved. 2.RENOVATE AND/OR REFURBISH: Make sure that the cost of the project will be offset by increased rental income and/or growth in value and calculate the expected payback period (it may take some time). Increasing rental value and capital growth has the immediate and long-term benefits of generating more cash flow and building up equity to refinance your loan and purchase another property: this is when you start to leverage your investments and accelerate wealth creation. The key is to ensure that you are not just beautifying a property for the sake of it: the returns must outweigh the outlay. If you are using a buyer’s agent who specialises in add-value properties, they should have the knowledge about what kind of add-value property you should aim for to meet your strategy and goals and what your best add value choices will be with that property. If they know their stuff they should be able to sift through the many development properties that are inferior (the majority) and identify the best options. www.propertywizards.com.au

34. 34 Development Adding extra homes to your property and renting them out separately can increase rental yield for property owners, helping you to pay off the mortgage quicker and develop valuable equity. During the research phase (Step 3) you will already have formed a strategy based on the type of development in demand in the location in which you have bought. PROPERTY WIZARD’S TIPS FOR DEVELOPING PROPERTY: •Use the development feasibility studyyou ran while researching your investment and carry out the planned work according to its findings: but first assess whether anything has changed – the market, finances, regulations, or your objectives? •Make sure that you have structured your finances properly to minimise interest repayments. •Don’t be fooled by false economies. Doing the work yourself may save costs initially but often ends up costing more. Demolishing a property and only working on it on weekends can severely delay completion. It can also be very expensive to take trailer loads of rubble to the local tip. Hiring professionals will reduce project completion times and get tenants moving in faster, as well as helping eliminate surprise costs. •If you don’t have the time or experience, consult with a buyer’s agent with local zoning and development expertise. Property development can accelerate your wealth creation substantially, but it can set you back if you make the wrong decision, such as buy the wrong property, not check the right due diligence or pay too much, eating up your profits. www.propertywizards.com.au

35. 35 Renovation or refurbishment Renovation can be a very smart way to quickly add value to your property. PROPERTY WIZARD’S TIPS FOR RENOVATING PROPERTY: •If your intention was to renovate then in your research you would have already looked for properties with renovation potential. That’s why the research step is key to every aspect of property investment. •Sometimes you can add value to a property with some simple refurbishments (like painting) or relatively cheap purchases (a new carpet). •Don’t make the mistake of over-spending on frills such as the latest appliances if the rental yield does not increase enough to justify it. •Be careful to match the property renovation to the area. Don’t overcapitalise in a cheaper area or under-spec in a more expensive area. Granite vanity tops and high-end kitchen appliances may be a waste of money for properties in areas below median value, but almost certainly required in more well-heeled suburbs. www.propertywizards.com.au

36. 36 STEP 7: REVIEW AND REPEAT Your plans may need periodic adjustments due to changes in your circumstances. Take some time to sit down and review your objectives. With a renewed plan and a fresh financial assessment, you are ready to repeat the success of your first investment and progress towards your goals. The next investment With your first property investment safely under your belt and rapidly helping you to improve your financial position, it is time to start thinking about expanding your portfolio. This is what separates the serious, knowledgeable investor, with long-terms wealth goals, from the novice investor who just dips into the market because they have been told they should. www.propertywizards.com.au

37. 37 Following are a few Questions and Answers to consider when you are pondering your next move. “IS IT EVER RIGHT TO DO NOTHING?” Warren Buffett did say “The trick is, when there is nothing to do – do nothing.” It’s true that you should not be tempted to act when the time is not right, but there is nearly always something to be doing with property investment strategy. More research, more market analysis, more hunting, more shortlist additions. You don’t always have to be buying and you certainly don’t want to buy impetuously; but be sure to keep your eyes peeled and your nose to the ground in the locations you have identified and in the property market in general. Usually, when the market is down and nobody else has the confidence to buy, that is the best time to buy. There are more properties available at better prices and with less competition. Don’t be afraid to go against the market trend and don’t try to pick the top or bottom of the market as nobody, not even the wisest professional, can do that. The best time to buy property is almost always “now”, using the right strategy and plan. www.propertywizards.com.au

38. 38 “SHOULD I CHANGE MY PLAN?” One of the characteristics that distinguishes the strategic property investor from the one-off investor is that they regularly review the performance of their investment portfolio. Many one-off investors have no idea if their property is performing optimally or not. Hoping for the best is not the stuff of serious investors. You need to review strategy and performance at least annually and then adjust to ensure you are hitting expectations. This is not to be confused with changing your long-term objectives: they will remain the same, but how you get there may need tweaking according to your circumstances and the performance of your properties. Ask yourself the following types of questions: •Am I getting the maximum rental yield from this property? •Can I add more value? •If this property was on the market today would I buy it again? •Is this property contributing positively to my wealth plan? •Would I be better off without this property? •Why is this property performing better than that one? •What would happen if interest rates rise by 1% •What’s my Loan to Value ratio? •Should I be looking to add another property to my portfolio? •What would that take? •Would I benefit from refinancing? www.propertywizards.com.au

39. 39 Remember! If the long-term plan is right, then stick to it - don’t cave in to short-term concerns. AND The cost of re-evaluating finances is small compared to the potential value that can be gained by adding the right property at the right time to your portfolio. “HOW CAN I BECOME A SAVVIER INVESTOR?” It’s a good idea to surround yourself with professional advisors but at the same time it’s important to educate yourself and learn more about how to make wise investments. Even to be able to spot the best advisors you need a sense of good decision- making when it comes to property: spruikers can lead even experienced business professionals to make disastrous property investment decisions. You will never regret investing hundreds of hours of your time into researching properties and developing your own knowledge of the market by studying and reading up on strategy from thought leaders in the field, and checking market updates from reliable sources. At the same time trusted professionals can save you much of the legwork and help prevent the costly mistakes often made while you are learning: a trusted buyer’s agent is a great idea for instance, as well as a finance broker and property manager. www.propertywizards.com.au

40. 40 CASE STUDY: MEET DAVID My wife and I knew from our twenties that we wanted to retire early and would only be able to achieve this goal if we were to take charge of the process ourselves and find a way to create the wealth required to achieve our goal. THE HARD YARDS: PLANNING AND RESEARCH It wasn’t until our early 30s that we actually started getting quite serious with the array of wealth creation concepts around. It was at this stage that we set an incentive and goal of retiring by the time we turned 45. In order to achieve this goal we had to make a few sacrifices for the next few years. We chose to live moderately, minimizing the purchase of unnecessary items, expensive dinners and those coffees that seem to add up to a lot of money. We were financially conscious about where our money went rather than frittering it away and we bought what was needed and minimized the waste. We threw ourselves into this mission and read a lot about different wealth creation strategies. Through this process we found that property was predominantly the strategy used by people who had successfully created a lot of wealth, enough to be able to do as they choose. This is the freedom that we desired; to do as we choose, retire early and live a luxurious life. We decided to capitalize on the opportunities in the Perth market. When we began looking for properties, we were unsure what and where to buy. It was important for us to buy a property in an area that was likely to give us good capital growth to help us along the way with our goal of retiring by the age of www.propertywizards.com.au

41. 41 45. I picked up a magazine and saw an ad for Property Wizards and three other like companies. I called them all. The first never called me back and the second one I didn’t care for. Property Wizards followed right up and called back the next day to make sure that we had everything we needed, they were very comforting and reassuring. Their professionalism came through in every interaction. BUYING THE PROPERTY In the heated market it did take us a little longer to find a home under the parameters we wanted but Property Wizards communicated right up-front all of these details. We had clear expectations and we were happy with this as it was important that we bought the right property, at the right price, to ensure that it would be a wealth creating asset in the years to come. Property Wizards moulded their search around our criteria of a buy-and-hold in a high growth area and bought us a fabulous property in a great area at just the right time. We bought in an area that is armed with an array of equity building economic drivers which almost 100% guaranteed the future growth of a property bought in this area. We bought this property minutes away from beautiful beaches, a foreshore which was being upgraded with lots of new shops, cafes and restaurants; the main shopping centre was also being given a complete makeover. CREATING WEALTH We had the property valued a year after we purchased it and that value had gone up over $100,000 in a year. That is like getting a third really good annual salary without actually doing any extra work! In just over 10 years my wife and I have achieved our primary goal – I retired at 43 and my wife retired at 42. We travel every year, including trips to London, Paris and Spain as well as taking smaller trips around Australia, but more than anything we have lots of time on our hands and no real obligations. We are able to live our lives as planned, we are able to take time to enjoy ourselves and do as we please. Our portfolio of soon to be 10 properties as well as shares and cash allow us to live totally off the income they generate. www.propertywizards.com.au

42. 42 GETTING STARTED There is always a reason not to start. Serious investors work to overcome barriers – not actively raise them. It’s relatively simple to become one of the few who approach property investment strategically, increasing the chances of developing wealth and a more certain financial future. Overcoming obstacles Most of the common obstacles to getting started are in the mind. That means that they can be overcome simply by a little education and a change of thinking. Below are some typical examples: FEAR This is generally fear of the unknown or of making a mistake. It can be conquered by learning more about property investment – as you are doing by reading this eBook. This helps you take measures to minimise the risks involved, increase the chances of success, and become a confident investor. LACK OF FUNDS You may need less than you imagine to get started. Okay, you need an income to qualify and pay off loans, but this doesn’t have to be a top executive salary. Careful planning, good advice and good financial practice which may include a savings plan helps you achieve a lot with a little. BAD TIMING This is one of the lamest excuses we hear. There is always something else happening but until you place wealth creation high on your list of priorities then property investment will always be shoved aside by a more pressing need. www.propertywizards.com.au

43. 43 IT’S TOO COMPLICATED Thinking that property investment is easy is a mistake, but so is holding off because it is too complicated. The fact that it is not easy helps you: it means that most people make mistakes. By learning a professional investment strategy or using an experienced buyer’s agent you have a clear advantage in the market. PEER PRESSURE Family, friends or colleagues may try to talk you out of property investment. However, if you have done your research and aligned yourself with the right advisors then you have the tools you need to explain to them. If they won’t listen, don’t hold back your wealth plans because of others who are standing still. www.propertywizards.com.au

44. 44 What’s the secret? The secret to successful property investment is that there is no secret! There is only strategy, research and relationships. Setting yourself apart from the rest is simple: most people don’t do the things outlined in this eBook. They have no strategy. They may read a few articles and jump head first into property, or believe that one property is enough to fund their retirement. They emotion, or in the wrong location without researching well enough; or they will fail to act and leave it too late to build the equity that leads to wealth creation. will buy on impulse, Treat property investment like your own small business: focus on developing and implementing a well-considered strategy; forming relationships with the right advisors; and educating yourself about the system so that you also become an expert in the field. The best investors use professionals to help them get there. They find a winning formula and stick to it. Rather than having to keep ripping the plan up and starting again, they make sure they get it right, and follow through with it again and again. Start working on your property investment strategy... Call Property Wizards on 08 9381 7450 www.propertywizards.com.au

45. 45 Testimonials “We are very grateful to David, Trevor, Hayley and the team at Property Wizards. From our first meeting to discuss investment property purchase through to purchase and assistance with finding an excellent property manager, the whole process was seamless. Whilst we were reasonably educated and informed about this new venture, we also realised that we were not sufficiently and appropriately informed. This is where the Property Wizards team stepped in and where we realised how inexperienced we really were! We can’t recommend them highly enough – even though we utilised their services for an investment property, we believe anyone seeking their own house would do well to ask their help.” Geoff & Monique F. Mt Claremont, WA “I had been thinking about building an investment portfolio for some time, but my FIFO job meant that the time I had available to scour the market was limited. Properties were moving too quickly for me to find the right one, so when I found Property Wizards, my prayers were answered. Property Wizards were able to conduct a thorough search for the property that suited my plans, which were to subdivide and develop straight away. In the end they were able to find an off-market property, enabling them to negotiate directly with the Seller to get the best deal, and as an added bonus, the property can now be developed into three new street-front homes! Without Property Wizards’ assistance, I would not have been able to find such a promising development site in this fast moving market. I have no hesitation in recommending their services. Ryan H. Clarkson, WA www.propertywizards.com.au

46. 46 About Property Wizards Here at Property Wizards, we believe everyone has the right to the knowledge to help you accumulate wealth, no matter your background, education or income. We can help you unlock the potential of the real estate market for your family through savvy property selection, negotiation on price and conditions, and development expertise. Regardless of market conditions, our research, local knowledge, and access to silent sales means we find the ‘hidden gems’ that can outperform the market in capital growth and rental returns for long term wealth creation. Importantly, we’re able to provide property investors and homebuyers with the same level of representation that property sellers have benefited from for years. Your property portfolio is your path to financial freedom and the lifestyle you’ve been longing for. Property Wizards takes away the stress of buying a property and saves you money at the same time. We can show you how, or you can sit back and let us do all the hard work for you. It really depends on the amount of time you’d like to put in. If you have an interest in building your wealth through property, then call us on (08) 9381-7450 to book a complimentary appointment with one of our Property Wealth Strategists. Or request a FREE Starter Pack at www.propertywizards.com.au/free-starter-pack/ Disclaimer: The information herein is not intended as investment, financial, legal, taxation, building, development or any other advice and must not be relied upon as such. You should obtain independent professional advice and make further independent enquiries before making financial, legal, taxation, building, development or investment decisions. Past performance is not an indicator of future performance. Property Wizards does not predict or warrant capital growth, rental or investment returns or profits and expressly disclaims any responsibility for any direct or indirect harm, loss, claims, costs, or expenses, from of relying on any capital growth, rental, development estimates or investment returns based on information given or omitted by Property Wizards or any of its associates, directors or employees. www.propertywizards.com.au

47. Whether you are a first-time investor, a seasoned pro or a home buyer, please contact us for information or a free strategy session to help you build a property portfolio for financial independence. Tel (08) 9381-7450 Fax (08) 9381-7490 info@propertywizards.com.au www.propertywizards.com.au Subscribe for hot property tips and special offers only for our members. Property Wealth Strategists • • Licensed Property Buyer’s Agents • • Property Developments • • Property Selling Agents • Renovations • Subdivisions • • Licensed Real Estate Agents • • Member REIWA 121 Churchill Avenue, Subiaco Perth WA 6008 P O Box 256 Subiaco, WA 6904 Australia International Tel +618 9381-7450 • Fax +618 9381-7490 Licensed Real Estate Agent, Licensee T/C 50550 Property Wizards Pty Ltd atf The Streets Ahead Unit Trust ABN 61 772 441 085 www.propertywizards.com.au