Video Transcript

Hi. Welcome to our latest PropertyInvesting.com video blog. I’m Dean Parker from Your Style Homes and today we’re going to talk about design elements and how they can have a big impact on the finished product.

We’ll start by looking at this project behind me; one my friend has been working on and just finished. We’ll compare it to the project beside it.

You can see really easily just in the design elements alone how the two projects differ completely. One’s got a whole heap of detailing on the outside. It dresses it up, makes it look more appealing. The one next door, it’s really just a box. It’s got some render on the outside, and glass that’s even mismatched between the blue and the white. It’s not appealing at all. That’s just the first thing we can see that’s really simple that will make this project a whole lot more appealing and a whole lot easier to sell.

Now we’ll go inside this property and have a look around. Keep in mind, these are high-end townhouses, valued at around $3 million each. We’ll see the level of finish that’s gone into these and we can have a look at some of those design elements I’m talking about that will make this project stand out.

I’ve walked in the front gate and the first thing I’ve noticed is we’ve got paving instead of concrete, which is entry level, or exposed aggregate, which might be mid-level. These here are actual pavers so that dresses it up a lot more. We’ve got established plants that are layered nicely. We’ve also got some garden lighting. The first impression you get when you walk through the gate is everything’s dressed up that little bit more.

The first thing I notice inside, we’ve got floor-to-ceiling windows, which obviously lets in a lot more light and makes the space feel a lot bigger. This is a big entry. You obviously can’t afford this amount of space in every single home, especially in an apartment. The other upgrade that I notice here is the floating timber stairs. Rather than a standard staircase, this dresses the place up just that little bit more. Let’s go check out the upstairs.

All right. Bathrooms sell properties. The main features in here again from an upgrade point of view are the double vanities. It’s always nice to have a double vanity in your en suite. We’ve got plenty of cupboard space underneath. There are also lights over the vanity, which is always a nice thing. I think one of the main features in here is this herringbone pattern tile. I think that really dresses this bathroom up. It could be quite plain, but that’s a real feature. It wouldn’t be overly expensive to do that either. There’s plenty of room in here. This is again another luxury feature to have this much room, as well as to have a freestanding bath. All of these elements are definitely important.

All right. Here we are in the kitchen. The first thing I noticed here is the timber floor. This is a real timber floor. That obviously gives warmth to the environment and is definitely an upgrade. I think timber is probably the nicest feel out there at the moment.

We’ve got this kitchen behind us. It’s reasonably standard. You can see the laminate board and standard handles. There’s a nice tile in the background there. I think the key upgrade feature here is a 900 mm wide appliance pack with the cooktop and the oven. Also, you can see this nice chunk of timber here. This dresses the whole kitchen up and brings a wow factor to the entire kitchen.

I hope this has been a helpful update. I think it’s always important to try and bring as many elements into your design features as you possibly can. All these little things do add up. If you get it right, that’s when your project becomes really easy to sell and you can make a whole lot more money.

The post Tips and Tricks for Developers: How Design Elements Impact the Finished Product appeared first on PropertyInvesting.com.

In this latest installment of Tips and Tricks for Developers, Dean Parker interviews Marty Ayles to gain his insights on how to get the best possible price when selling luxury townhouses.

Video Transcript:

The post Tips and Tricks for Developers: How to Market High-End Properties appeared first on PropertyInvesting.com.

Having coached hundreds of students in Steve McKnight’s training programs, I’ve had the privilege of learning from both the successes and the failures of other investors.

Early in our Property Apprenticeship course, Steve lays out some of the most dangerous pitfalls for first-time investors. One of the most common responses I invariably hear is, “I wish I would have done this course before buying that last property.”

Let’s face it. Making mistakes in real estate is easy to do. There are plenty of sharks out there that are keen to take advantage of unsuspecting first-time investors.

Even for those who are smart enough to not be taken for a ride, the waters are still dangerous. Most investors enter the property market having bought into some commonly held myths like, “negative gearing is a wise strategy,” or “once you buy, you should never sell.”

If you have a property that you now regret buying, here are seven strategies that may help you turn that losing deal into a winner:

1. Build a Granny Flat To Boost Your

Cash Flow

Depending on where you invest, you may be able to add a secondary dwelling to increase the overall yield of your investment.

Last year I was mentoring someone who converted her existing detached garage into a second dwelling. She and her partner carried out much of the renovation work themselves on a bare bones budget, and then rented the “garage” out for $190 per week. This provided a massive boost to their income on this property.

Granny flat laws vary from state to state, so be sure to research the laws of your particular area. If you live in South Australia, Victoria, or most of Queensland, only family members can rent secondary dwellings. However, if you live in the Australian Capital Territory, Northern Territory, New South Wales, Tasmania or Western Australia, you can rent it out to virtually anyone who will pay you.

For more creative ideas, a step-by-step guide for how to get started with this strategy and the most common pitfalls, check out an article I wrote here.

2. Add Value for Your Tenant in Exchange For a Rental Increase

Tenants usually aren’t too happy about paying their landlord more money. But if you’re a landlord, you likewise should not be happy about receiving too little rent.

Many property investors grow complacent and fail to raise rents in fear of losing a tenant, but it’s actually wiser to train tenants to expect regular increases.

If you don’t raise rents regularly in line with the market, in the future you’ll find that you’ll need to increase by a large amount, just to catch back up with the market. Smaller regular increases are a much easier pill for tenants to swallow.

Even if the market doesn’t demand that you raise rents, you can still find creative ways to do so. Find out what kind of improvement your tenant wants in the property and agree to add value to the place in exchange for an increase in rent.

I wrote here about one of Steve’s students who improved his annual cash flow by $2,340 just by raising rents. All he had to do in one of his properties was install an air conditioner in the master bedroom.

3. Negotiate Lower Interest Rates And Management Fees

The same investor also improved his cash flow by $2,184 per year after negotiating a lower interest rate with his lender and lower management fees with his property manager.

First he contacted his property manager to say he was speaking to other agents in the area. At the time he was paying a six percent management fee. After gaining several quotes for five percent, he took this back to his existing property manager who lowered his rate to match the competition.

The process was just the same with his bank. He spoke to a few mortgage brokers to find out what other rates were available. Then he simply went back to his bank to have a face-to-face conversation. The bank manager matched the best rate that he found in his research.

4. Renovate the Dwelling to Increase the Property’s Perceived Value

Renovation is all about adding more in perceived value than actual cost. You may be able boost your property’s value or increase your rental yield by improving the property. This may attract a more discriminate buyer or tenant willing to pay a premium.

There are certain improvements that will bring you more bang for your buck than others. As one renovator that I interviewed shares here, you should focus on street appeal, walls and floors, and kitchens and bathrooms.

5. Subdivide the Land

If your dud property is on a larger block, it may not be a dud after all. Subdivision can be a lucrative way to add value to your property if land in the area is in high demand.

You should proceed with caution, however. Subdivision can be a lengthy, complex and expensive process.

You should enlist the services of an experienced town planning consultant to research the local council’s requirements, such as minimum lot size, storm drain regulations and sewer placement. Costs can easily blow out, which can defeat the whole purpose.

6. Offer the Property on Vendor Finance Terms

Offering a property on vendor finance terms is another strategy to boost a property’s cash flow in the lead up to a final sale. For the right buyer, vendor finance can also be a huge win, enabling someone to secure a home for purchase rather than being a renter.

You can learn more about how vendor finance works here. Laws vary from state to state, so be sure to do your homework. You’ll also want to seek the advice of a qualified and experienced solicitor.

7. Sell the Property and Move On

Sometimes you must face the fact that a bad investment will always be a bad investment. If this is the case, perhaps it would be best to sell the property, and redeploy the equity into a more profitable strategy.

Deciding to sell can be difficult for investors because of the costs involved and the capital gains tax implications, but these are not reasons to remain in a losing deal.

If you’re struggling to decide whether or not to continue holding a property, ask yourself this question: “Would I buy this property today at its current price?” If the answer is “no,” then the obvious next question is, why would you want to continue holding it?

Conclusion

Once you have the courage to admit that you own a losing property, the most important thing is to be sure you never make the same mistake again.

Learn from the biggest lesson of many our Property Apprenticeship students: “I wish I would have done this course before buying that last property.” Before you buy another property, be sure to educate yourself.

Here are a few questions for you to ponder:

• What did I not know when I bought my last deal that I know now? How will this information keep me from making the same mistake in the future?

• What myth did I believe about investing that led me to buy my dud property?

• What kind of due diligence should I have done that I failed to do with this property?

• Who did I allow to convince me to buy this property? What was his or her motive? Did I get taken for a ride?

Answering these questions will give you some valuable insights for the next time you contemplate a property deal. By understanding your past mistakes, you can avoid making them again in the future.

The post How to Turn a Losing Deal Into a Profitable Money-Making Machine appeared first on PropertyInvesting.com.

We talk a lot in our Property Apprenticeship course about the importance of forming a strong team. Your goal should be to empower others to do the things that you don’t have the time or skill to do with excellence.

The job of your real estate agent is to attract and influence potential buyers. Through marketing and advertising campaigns, they work with their pre-existing database of interested buyers, as well as focus advertising toward your target in the general public.

Most investors are unable to accomplish this task as efficiently and effectively as an agent.

Of course you could try to save money by trying to market and advertise the property yourself, but whether you have the time and the skill to do it well is another question. Many investors who have tried to save a few thousand dollars in commissions have given it right back, due to a lower sales price or higher holding costs because of delays in finding a buyer.

Once you’re ready to add an agent to your team, it would be wise to interview several different agencies before making your final decision. You should visit their office first to form an opinion of the level of service they offer. If they pass your first test, then invite them to your property to have a look. Ask them to get back to you with a sales proposal before making your final decision.

Here are four of the most important questions to ask an agent during the interview process:

1. What Fees And Commissions Will You Charge For Selling My Investment Property?

Fees and commissions are standard practice in the business. Because the seller pays the commission, the agent, at least in theory, represents the interests of the seller.

The typical sales commission ranges from 2 to 3 percent, plus the goods and services tax (GST) on the sales price of your property. In addition, an agent will ask you to pay the marketing expenses, which can add up to several thousand dollars. But the commission structure is always negotiable.

Not long ago, I was chatting with an investor who negotiated a tiered commission structure with his agent. The agent valued his property at $430,000 but he wanted $450,000 for the property. His agent quoted him a 3 percent commission. Instead, he negotiated to pay 3 percent for a sales price over $440,000, but only 2 percent for any price below that.

Agents make money by gaining listings, so it’s important to remember that the agent needs you more than you need them. There are always other agents who will be happy to represent you.

2. How Many Buyers Do You Currently Have In Your Database Who Are Looking For New Dwellings?

Every agent will tell you that they have buyers looking for properties like yours. To be sure that it’s not just a sales pitch to attract your business, ask them for an exact number from their database. A good agent is always networking; not only looking for vendors to list properties with them, but also nurturing relationships with potential buyers.

3. How Many Similar Properties Have You Sold In The Last Six Months?

How your agent answers this question will give you an idea of the size of their agency, the volume of sales they are facilitating, what kind of market currently exists for your property, and if they are well-suited to reach your target market.

Size, big or small, does not always equate to quality. What you want is an agent with solid systems in place and sufficient exposure in the area, while not being so big that they lose that personal touch.

This question relates to how well your property fits within the target market that the agency attracts. If you’re selling a property toward the more exclusive end of the price range, you want an agent who has a track record selling high end properties, and vice versa.

Ask the agent for addresses and sale prices of similar properties they’ve sold. This should be part of their sales proposal. This information will also help you determine how active your particular target market has been. You’ll also get a picture of the sales price that you can realistically achieve.

4. What Do You Think I Should Do To Get A Higher Price For My Property?

A good agent will know exactly what it is about your property that will attract or repel your target market. You want to look for team members whose experience and expertise you can leverage. An agent with fresh ideas can not only enhance your sales price, they can also help you sell your property faster.

Buyers are attracted by appearance and influenced by atmosphere when they visit your home. You shouldn’t need to spend thousands of dollars doing renovations to make your home attractive. If your agent suggests costly enhancements to the property, be sure that the payoff is worth the investment. Sometimes it can be more cost effective to simply lower your asking price.

Conclusion

While choosing the right agent is crucial to gaining top dollar for your property in the shortest possible time, interviewing agents is only scratching the surface of the sales process.

In Steve McKnight’s Property Apprenticeship course, we offer an entire module of seven sessions covering the nuances of evaluating and selling investment properties. The topics include:

• Assessing Your Investment’s Value
• Selling Versus Refinancing
• Working With Real Estate Agents
• Sales Methods
• Advertising And Marketing
• Timing And Legal Preparation
• Accounting And Taxation Consequences Of Selling

With the right agent, you can get top dollar for your property. Not only that, a good agent can help make the process simpler and faster, too. Make sure to take your time when choosing an agent, and ask all the right questions first.

The post 4 Questions to Ask an Agent Before Selling an Investment Property appeared first on PropertyInvesting.com.

What is Property Conveyancing?

Once you’ve found a property to buy and the seller has accepted your offer, it’s time to put a legal professional to work to make the change of ownership a reality.

Conveyancing is the legal process of transferring ownership of a property title from one person or entity to another. The process begins after you’ve exchanged the contracts and comes to a finish once a settlement has taken place.

Whether you’re buying or selling a property, there are legal procedures to adhere to, so both parties in the transaction need representation in this transfer process.

Who is Qualified to Handle Conveyancing?

While you can save some money and purchase a do-it-yourself conveyancing kit, you’re carrying some additional risks by trying to manage the process yourself. If you screw it up, you could end up costing yourself a lot more in the end to fix it. For this reason, most people pay a professional to make sure it’s done right.

Your real estate agent will ask you for the contact information of you conveyancer once the buyer has accepted your offer, so it’s important to find someone you trust before you get to this stage.

Most people use a solicitor to handle their conveyancing, but a qualified settlement agent can also get the job done. People prefer solicitors because they’re not only qualified to handle the conveyancing, but if other legal issues arise, they can advise on these matters, as well.

What Does a Conveyancer Do?

Both the buyer and the seller each need separate representation, so that the conveyancer is not found to be in a conflict of interest.

The two primary roles of the conveyancer are to:

1. Confirm that the property transaction meets all of the legal requirements.
2. Represent one party in the transfer to ensure that the other party meets their legal responsibilities.

 More specifically, the responsibilities of a conveyancer are to:

 Check for claims against the title, ensuring there is no dispute on the proper ownership.

• Ensure mortgages get paid off upon settlement.
• Prepare and lodge the appropriate legal documents.
• Hold the deposit money in a trust account.
• Calculate the amount of rates, taxes or body corporate fees owed.
• Settle the property.
• Represent the buyer or seller in their particular interests.

How Do You Find a Reputable Property Conveyancer?

In Steve McKnight’s Property Apprenticeship course, we repeatedly teach the importance of building a strong team. The more you can delegate tasks to other people who are more qualified than you, the more time and energy you can devote to activities that lead to profits.

As such, having a good conveyancer on your team is crucial. Just as you would interview an agent or broker to ensure that they are qualified to be on your team, you’ll want to select a conveyancer with the same level of prudence. So, how do you find someone you can trust?

The best way to build your team of advisors is through referrals from trusted friends or colleagues. Alternatively, if you’re a member of an investor network, you’ll likely find plenty of experienced investors with unbiased recommendations in that group.

If these sources offer no leads, your selling agent will probably also be able to connect you with a solicitor they recommend. Don’t take them at their word. It’s wise to ask any potential new team member for references from other clients that they’ve served.

If all else fails, turn to Google or a local business directory to find someone in your area. The Australian Institute of Conveyancers also provides an online directory to assist consumers who are searching for a conveyancer.

Conclusion

While you can legally handle the conveyancing yourself, the savings are minimal once you consider the time you waste, the aggravation, and the risk of making a serious mistake. It’s a process that’s best left to the experienced professionals.

In our Property Apprenticeship course, Steve has created an entire session on conveyancing where he delves much deeper into the specifics of the topic. He also lists seven crucial action steps every investor should work through between the purchase and settlement.

If you have any questions about conveyancing, feel free to ask about it in the comments section below.

The post Property Conveyancing 101 appeared first on PropertyInvesting.com.

I have interviewed professional renovator, Caroline Vass, over the past few weeks in order to learn the basics of finding, buying  and renovating an investment property.
One of her recent deals in the Geelong area serves as an object lesson as to exactly how she applies her ideas in the real world.

This week, we’ll continue with the next logical topic, which is how to sell a renovated property quickly. Every step of the process has this end in mind. The goal of all renovation is to increase the value of a property.

Although your bank will most likely be happy to re-value your property in order to estimate your unrealized gain, so you can you borrow against it, you won’t really know for sure what your property is worth in the market until you find a buyer.

Caroline has plenty of experience selling and presenting properties. In addition to selling her own deals, she consults other investors on how to renovate their properties, including the best ways to prepare them for sale to minimize the number of days they are on the market.

1. Caroline, Before We Get Into The Details Of Selling, I’ve Heard Some Debate Amongst Investors About Whether To Sell Or Refinance After Completing A Renovation. How Do You Decide Whether To Cash Out Of A Deal Or Tap Into The Equity You’ve Created?

Generally speaking, the equity we have created in our property deals has come through manufactured profit, rather than generic growth in the entire market.

Once we complete a subdivision or renovation, there is lending in place that has supported the purchase and completion of the project. This lending is incurring interest that is not being offset by any rental income.

Finding tenants and holding the property is one exit strategy if we can’t sell the property at our desired price. There are, however, some disadvantages to holding a newly renovated property.

The major problem is that once tenants live in the home, it’s no longer newly-renovated. The best time to sell is when it’s been freshly updated. I don’t really want tenants damaging what I’ve worked so hard to make beautiful.

Whether I sell or hold really comes down to what my strategy was from the beginning. If the property is cash flow positive, and there is enough equity to pull out to allow me to do the next deal, then I might hold onto it. But, I usually go into the deal planning to sell and reinvest the profit into a higher return on another project.

2. I’m Gathering From Our Previous Discussions That People Can Avoid Many Of The Common Problems When Selling A Property. Can You Summarize The Most Important Factors In Finding, Buying And Renovating A Property That Make It Easier To Sell When The Time Comes?

The key to success is being clear on my deal profile and target market. It is especially important to know which suburbs will allow me to achieve the highest profit in the shortest amount of time.

When I know there is a large, hungry market for what I’m renovating, it gives me confidence that I can sell quickly.

My purchase price, of course, has a huge impact on my final profit and where I must price my property to achieve my goal. Buying at a premium to secure the property will result in reduced profitablilty at the other end of the project.

It will also make it harder for me to accept a lower offer. If I am turning down offers, it means the property stays on the market longer.

3. Do You Always Use An Agent To Sell Your Property, Or Would You Consider Selling It Yourself To Save Some Money?

I have not sold a property privately yet; however, there are obvious cost savings associated with commission and advertising campaigns. The challenge is having a strategy to market the property that doesn’t consume too much of my time and attention.

I’m currently developing referral networks to help me sell properties myself in the future before the renovation is even completed.

That said, the benefits of using an agent are hard to replace. As long as there’s enough profit in the deal, I’m happy to leverage off an agent’s time and expertise, as well as pay them to get the job done.

For me, the cost of my time and the hassle of self-marketing has always led me to list my properties with an experienced agent.

4. Do You Step Away From The Deal At This Point And Give All Responsibility For Selling Over To The Agent, Or Do You Still Have A Part To Play?

I never step away from the deal. I expect my agent to provide regular updates after inspections and interactions with any potential buyers. I have multiple tactical discussions with the agent during the campaign. I talk to them about the timing of the opens, the writing of additional advertising for newspapers, the maintenance of the property during the campaign, and the staging and presentation of the property.

There are only three things you can influence during the campaign: price,  presentation and promotion. You should also monitor the level of interest on the internet and at opens, adjusting your “3 P’s” as required.

Before any of my properties go to market, I stage them with furniture. Anyone can outsource this service to a property staging company. I choose to stage my own properties because it saves me money, and also because I love it. I have a passion for furniture staging and interior design.

Staging a property is crucial, because it allows me to convey the emotion of what it will feel like to live there. When a house is empty, people often spend time thinking about where their furniture will go or fit. When you stage a property, people focus more on the feeling and presence of the house. They start imagining themselves living there.

In some houses, the room shape makes it difficult for people to imagine what they could use the space for. When I stage the property, I’m removing this mental hurdle.

5. Essentially, You Compete With All Other Sellers Of Similar Properties In Your Area. What Do You Do To Set Your Property Apart From The Rest?

If you can’t attract potential buyers and retain their interest, then you will be at a disadvantage from day one. I put a lot of effort into presenting my properties, giving me a distinct advantage.

This also improves my marketing photographs, which will maximise the number of visitors I can get through the home. I make sure the outside of the property has a modern feel and compliments the street scape, too.

As I’ve mentioned previously, I make the interior look modern and use the property footprint to create a second bathroom where possible.

I keep my colour pallet neutral, which allows me to create a point of difference with furniture and soft furnishings. This is how I set my properties apart.

Using my collection of furniture, I stage my own properties at a fraction of the cost that a company would charge. I show up at the property to supervise the photo shoot, andto  make sure we get twilight photographs, which leads to the most attractive images.

6. Who Are The Other Members Of Your Team You Rely On During The Sales Phase?

As I just mentioned, my agent has a major role to play. My legal team is also important in ensuring contracts of sale and the “Section 32” are ready in a timely manner.

There have been cases where we’ve sold property when the title was not yet issued. A good land surveyor and a lawyer/conveyancer is crucial to lodging documents correctly. They also make sure that to use the proper wording of clauses in the contracts with respect to settlement.

I also recommend having someone handle the garden maintenance while the property is on the market. We’d all love for our properties to sell in the first week, but sometimes it just doesn’t happen. I have the view that every week my property is on the market, it should look as good as it did on day one. It’s amazing how fast the grass and weeds can grow, and they will negatively impact the presentation of the property.

7. How Did You Go Selling The Geelong Renovation Properties We’ve Been Discussing? What Were Your Take-Away Lessons From That Deal?

Selling these properties took longer than we had originally planned – about seven weeks. While some may see this as a good result, we can see now why it didn’t sell sooner.

First of all, we listed the property straight after the New Year when the market was still slow from the holiday season. In hindsight, we should have planned the timing of the sale better.

Second, the property backed onto a railway line, which was a primary buyer objection. Other prospects complained that one of the units had small bedrooms and no built in robes. We’ve learned some valuable lessons on this deal.

When searching for a renovation property, it’s crucial that you purchase based on facts, not emotions or assumptions. Whenever I’m doing a project now, I think of Steve’s comment about property purchase due diligence, “You don’t know what you don’t know.” This always helps me to keep asking questions of myself and others. When selling a property, the most important question I ask is, “What are the potential buyer objections that could be a big factor for this property not selling?

8. If You Could Boil Down All That You Know, What Is The One Secret To Selling A Renovated Property Fast?

It all comes down to presentation. This includes not only the styling and staging of the property, but also choosing the right agent who will represent you and your property. You should also have a marketing campaign aimed directly at your target market.

Whenever I am renovating, I base all of my decisions on what will appeal to the majority of my target market. The more people I can get through my property during my first inspections, the greater the opportunity I will have to choose between multiple buyer offers.

Conclusion

Once you’ve made it to the selling phase of your renovation deal, you should have already done a number of key things to lead to a smoother exit. Your purchase price, your renovating budget and your sale price all impact your profit, which is the goal of the sale.

But your potential buyer cares nothing about these figures. They simply want a nice environment to call home. Therefore, you must put yourself in the place of your target market. You should be proactive in provoking positive emotion when people visit your property.

In our final interview next week with Caroline, we’ll crunch the numbers on her Geelong deal, and find out how this one stacked up in the end.

You can learn more about Caroline and request some free training videos at her website: http://www.smartchoicepropertydevelopment.com.au.

The post The Secret to Selling Your Renovated Property Fast appeared first on PropertyInvesting.com.

Fast-forward a few years to 2008. I listed a second investment property for sale, but this time, we were just about to experience a global financial collapse. This home sat on the market for 12 months.

At the eleventh hour, just when I was about to put a tenant in the property, a hungry buyer snatched it up. Thankfully, I broke even on this deal, even though my holding costs and a price reduction put a serious dent in my projected profit.

Had I known then what I know now, I probably would have sold that second property much sooner by being far more proactive in the process. To save you the same fate, here are five things I wish I knew then that I know now – actions that would have provided me with a much better outcome:

1. Assess The Realistic Value Of Your Property

Step one is to assess what your property is truly worth. We all think we know what someone should be willing to pay, but sometimes there’s a difference between our wishful thinking and reality.

The market was telling me that I had overpriced my property, but I wasn’t listening. I thought all the potential buyers were the ones with the issue, not me.

We don’t actually know what a property is worth until someone pays for it in the open market. However, we can arrive at an estimated theoretical price of what someone will likely be willing to pay.

Unless you’re an area expert and have access to recent comparable sales data, you’ll need to use the services of a third-party professional to help you arrive at an estimated value. The simplest option is to contact a real estate agent to carry out an informal valuation on your property. Alternatively, you could pay an independent accredited valuer to suggest a more precise figure.

My experience has been that independent valuers are not always ideal for this purpose because they tend to undervalue. They can be held legally liable for negligent valuations, but they most often represent bankers who prefer them to be conservative. If you do choose this route, it’s wise to supply your valuer with as much relevant information and data as possible to help direct their outcome.

2. Interview At Least Three Different Agents

The greatest need of any real estate agent is to gain new listings. In Australia, they can’t sell what they don’t have listed, so your agent needs you more than you need them. This will help you to remain discerning. You can take your time to find a quality agent.

You might choose to wait to assess the value of your property until this phase, as potential selling agents will gladly offer their valuations.

First, visit a few agency offices to get a feel for the type of services they offer. Ask other investors in your area who they’ve worked with and who they prefer, too.

After you’ve chosen a few agents to interview, invite them to visit your property at different times for a home inspection. They will likely provide you with a sales proposal within a few days that includes the important details of the following:

• Expected Sales Prices
• Comparative Sales
• A Sales and Marketing Plan
• Sales Costs and Fees.

The sales proposal should give you plenty to work with to make a well thought-out decision about who will represent you. I wish I had done this in 2008. I literally went with the first agent that someone recommended. After six months he proved to be slack, so I ended up changing agents, going with another recommendation without interviewing them first.

3. Know Your Target Market

A target market is a group of people that have shown a demand for properties that are comparable to yours.

These are the people you and your agent will be directing the bulk of your marketing and advertising efforts towards. In order to determine who your target market is, just ask yourself the following key questions:

• What type of people will want my property, and why?
• Am I marketing to owner-occupiers or investors?
• How old are they, and what are the needs of their age group?
• Are they young families, single professionals or retirees?
• Where do these people currently live?
• How much money do they earn?
• What do they care about most?

I never thought about precisely who I should direct my advertising efforts toward, not even once. I suppose I was just hoping for the best. If I knew who my target market was, I could have worked with my agent to build a plan that would provoke emotion and desire in potential buyers. A few hours of intelligent thought could have saved me thousands of dollars in holding costs.

4. Create An Advertising And Marketing Plan

My biggest mistake in 2008 was that I gave complete control and responsibility for selling my property over to my agent. I thought since he was the expert, he had it all under control.

I made the mistake of believing that my agent was more capable and as passionate as I was about the sale of my property. How wrong I was.

No agent should ever know your property better than you do. While most agents tend to be experts in working a proven sales system, few agencies have an expert whose forte is creative marketing.

What this means is that most real estate marketing is generic, and few campaigns offer that personal touch.

As the property owner, it’s your job to help the agent see the unique selling points of your property, in light of your target market. If I did this, and helped my agent craft a marketing strategy, I could have shaved months off the time it took to finally sell.

5. Prepare Your Investment Property For Sale

To use a fishing illustration, if advertising and marketing is like the bait that attracts the fish to bite, the presentation of your property is the hook that lands them.

While your first goal is to entice people to walk through your property, that alone will not get the sale. Your most important concern is to provoke emotion and desire in the hearts of every visitor.

Again, I completely dropped the ball on this one in 2008. I literally did nothing to stage the interior of the property. In fact, I didn’t even properly landscape the exterior. It’s no wonder the property sat empty for 12 months.

Preparing your property for sale is not rocket science. At the very least, you must keep your property clean and tidy. Weeds in the garden beds or grime in the shower impresses no one. Add a fresh coat of paint, and perhaps some new floor coverings

If someone is already living in the property, a good presentation can be even more challenging. Try to keep the appearance as uncluttered and minimal as possible. Make sure all the little things, like holes in walls and broken tiles are fixed.

Finally, if you want to go the extra mile, stage your property with furniture to give your home a warmer and more inviting feel. I recently interviewed  my friend and professional renovator, Caroline Vass, who is a staging expert. Here’s three points she makes about preparing your property for sale:

1. Convey Emotion: “Before any of my properties go to market, I stage them with furniture. Staging a property is crucial because it allows me to convey the emotion of what it will feel like to live there.”

2. Spark Imagination. “When a house is empty, people often spend time thinking about where their furniture will go or fit. When a property is staged, people focus more on the feeling and presence of the house, and they start imagining themselves living there.”

3. Remove Mental Hurdles. “In some houses, the room shape makes it difficult for people to imagine what they could use the space for. When I stage the property, I’m removing this mental hurdle.”

Some Key Takeaways For You

Your job as project manager of the sales process is not finished until you’ve exchanged all of the contracts. You must remain involved in the process, even after delegating to your agent.

You should receive regular updates from your agent after property inspections and interactions with any potential buyers. Strategize with the agent about the timing of your open houses, as well as the creation of advertising.

Talk to them about the maintenance of the property during the campaign, and the staging and presentation of the property. Ask for regular feedback from your agent about what prospects like and dislike. This way you can make adjustments along the way, if necessary.

We have only begun to scratch the surface on how to oversee the sale of your investment property. Steve McKnight devotes an entire module to this topic, Investment Evaluation and Selling, in his Property Apprenticeship course. If you’ve made some of the same mistakes that I’ve made, do yourself a favor and enquire further into how Steve can educate you to be a better property investor.

Summary

In this article, Jason shares his biggest property sales mistakes and the five things he could have done to ensure a better outcome.

The post 5 Things to Do Before Listing Your Investment Property for Sale appeared first on PropertyInvesting.com.

Imagine what you could accomplish toward your investing goals if you could buy and sell real estate in Australia without any concern for paying taxes. Imagine that there was no stamp duty upon settlement, no state land tax, and most essentially, no capital gains tax.

Okay, so that was a nice thought. Now bring your head back down out of the clouds and let’s get down to the real business.

What Is Capital Gains Tax?

The capital gains tax (CGT) is a tax you pay on any profit you make from the sale of assets, like real estate and shares. Your net capital gain for your property is the difference between the selling price and any costs associated with acquiring, holding and disposing of the property.

In Australia, the CGT is not a separate tax. Capital gains are simply added to your overall assessable income and tax is calculated at your marginal tax rate for the year.

While profit from the sale of your personal residence is generally exempt, any other realized gain from real estate will attract the CGT. Feel free to head over to the always exciting and entertaining ato.gov.au website, where you can learn more.

The Capital Gains Tax Discount

In addition to offering some CGT concessions to small businesses, the ATO has instituted a CGT discount of 50 percent for individuals and trusts that hold a particular asset for at least twelve months.

So, a net capital gain of $200,000 would be reduced to $100,000. It is then added to your taxable income for the year.

It sounds generous enough. But even after this discount, the sale of a property can push you into a much higher bracket and reap devastating consequences on your total tax bill.

Nonetheless, the CGT discount was well received by investors and has done a lot to prop up real estate values in Australia. In the four years following the introduction of the discount in 1999, house prices have literally doubled.

But, even better than a discount is the complete avoidance of the CGT – or is it? Here’s seven, including some not so attractive ways to avoid a CGT bill.

Seven Legal Ways to Avoid Investment Property Tax on Capital Gains

1. Sell Your Property For A Loss.

You’re probably thinking, “Wow, that is really bad advice,” but, at least you’ve avoided the CGT. The point is this: If you sell your Aussie investment property for a profit, you will most likely pay the CGT. There’s practically no way to avoid it.

So, rather than stress out about paying tax, as long as there’s an after-tax profit, rejoice that you’re moving in the right direction. I remember Steve McKnight once saying, “If you’re not paying tax, you’re not making money.” Taxes are an inevitable, although often unwelcomed result of being a successful and profitable investor.

2. Sell The Property You’ve Been Holding For The Past 30 Years.

If you’re under 50, there’s probably little chance this applies to you. If you’re over 50 and this does apply to you, well, you may have mistaken your rental properties for your children.

It wasn’t until September 20, 1985, that the CGT laws were enacted in Australia. So, the tax applies only to assets acquired on, or after that date.

If you have a property that you acquired prior to that date, you’re holding a “Get Out of CGT Free” card. Just be sure that you enjoy this free ride, because it will likely be your last one – at least in Australia, that is.

3. Decide To Never Sell Your Property.

Contrary to the previous suggestion, this is how most people avoid the dreaded CGT. They plan to hold their property forever. It’s definitely one way to avoid, or at least defer, the investment property tax, but it may not always be the most profitable decision for the long term. Before you choose this option, ask yourself two key questions:

• Have You Confused Unrealised Gains For Profit?

Because CGT is payable only upon selling your property, which is realizing your gain, as long as you hold your property, assuming it continues to appreciate in value, you have a never-ending tax-sheltered growth of equity.

The problem is that real estate doesn’t go up in value forever. Most of us have never experienced a long-term bear market in property, so we’ve been conditioned to believe this is one investment that can defy the laws of gravity.

Rather than selling, many investors borrow against their growth in equity to finance other deals. This may keep you moving forward for a while, but what if your highly-leveraged property decreases in value? You could end up owing the bank more than it’s worth.

Sooner or later, the bank will stop offering you mortgages, as your limited income brings you to the end of your serviceability. Then you’ll have little choice but to free up your equity by selling. That is, as long as you’re not so cross-collateralized, that it’s impossible to sell.

• Are You Holding A Low-yield Property Just To Avoid Paying Tax?

One of the first “ah-ha!” moments for many of Steve’s Property Apprentices is the realization that the equity locked up in their long-term buy and hold properties has become lazy.

The property that once cost them $200,000 that was earning $300 per week rent, which is a 7.8 percent gross yield, is now worth $450,000 and bringing a $400 per week rent, which is only a 4.6 percent yield.

Their equity was working really hard for them, but now it’s sitting on the couch eating a bag of potato chips. Sometimes, the only way to keep moving forward toward your goals and keep your money working hard is to sell your property and just pay those taxes.

4. Move Overseas To A Tax Haven.

If you’re really determined to stick it to the ATO, you could move to a tax-friendly nation like Belgium, Malaysia, Belize and Hong Kong or, wait for it: New Zealand.

I’ve coached some Kiwi investors, and they have a huge leg up over us Aussies. New Zealand has no capital gains tax, no land tax and they pay no stamp duty. Technically, if you purchase land for the purpose of resale, you may be taxed on the profits. However, those I’ve spoken to across the Tasman tell me that this tax is, for the most part, ignored. The NZ Inland Revenue Department finds it very difficult to establish the intent at the time of purchase.

So, enjoy your free ride Kiwis!

Oh, and if you’re wondering if you can still live here in Australia and avoid CGT by investing across the Tasman, I’m sorry to say the answer is no. According to the ATO, “As an Australian resident, you are generally taxed on any capital gains you make on an overseas asset and must report the gain in your tax return.”

5. Rent Out Your Personal Residence Temporarily.

As I already mentioned, your principal place of residence (PPOR) is not subject to CGT upon sale. Is there a way to earn rent from your PPOR while maintaining its tax-sheltered status?

The answer is yes. The ATO understands that sometimes Aussies may need to live elsewhere temporarily.

As long as you’ve already lived in your home for a reasonable period, perhaps six months or more, you will have up to six years before this property will become subject to the CGT. The primary caveat is that you must not live in another home that you own during this period.

Just keep in mind, technically, your PPOR was never an investment asset, even if you had a tenant living in it. Your home is a lifestyle asset and you should consider it as such.

6. Renovate Or Add An Extension To Your PPOR Before You Sell.

Again, your PPOR is not an investment property, but I thought this was worth mentioning. If you add value to your PPOR before selling it, that profit is not subject to the CGT.

7. You Could Buy A Property Through A Self Managed Super Fund (SMSF)

There’s one last strategy worth mentioning. There are some CGT benefits for assets you purchase within your SMSF, but be sure to read Steve’s warning here.

Here’s the bottom line: If you sell your property once you’ve retired and are in the “pension phase,” you don’t have to pay any capital gains on your profits.

Even if you sold the property during “accumulation phase,” this profit is taxed at a rate of only 15 percent, or 10 percent if you have held the property for more than a year.

Buying a property within your SMSF comes with some risks. It’s quite complex, so be sure to first seek professional advice before heading down this path. Besides, if you’re young and you have big goals, why would you want to wait until you’re 60 to enjoy the fruits of your labour?

Perhaps it’s best to just accept life’s two great certainties:

• You will die.
• You will pay taxes.

The post How to Avoid Investment Property Tax on Capital Gains – Legally of Course appeared first on PropertyInvesting.com.

Now… down to investing business.

Quick Poll:

A lot has been written in the news press about the prospects for Aussie property. I’d like to know what you think though…

Signage

Very little has ever been written about the importance of good signage when seeking to lease or sell a property.

As you’d expect, the words are critical, but so too is the layout. On a recent trip to the US I came across a really bad example, and I was able to record a short video about it using my digital camera.

For your convenience, here’s a transcript of the video (and there’s more below the transcript!):

Steve McKnight here. Now I don’t know about you but I’m always after a saving, but sometimes there can be too much saving to be had. We have an example of that right now with this sign.


Look at the phone numbering. No expense spared!

Now I reckon my nine year old daughter could do a better job with her eyes closed!

Please, don’t shoot yourself in the head when you’re trying to sell or lease a piece of real estate by trying to recycle or go super cheap with the layout and presentation of the signage because cheap attracts cheap. Consider the positioning too. In this case, not only is the sign poorly displayed, it’s also abutting the property when it needs to be fronting the roadside.

Couple of classic rookie errors here, made by a rookie realtor selling this property; Smacks of a bargain.

I’d be making a phone call and saying, “Hey, how much do you want for the property” and I’d be wondering ‘How much can I make on this?’.

One final time, remember, do not go budget to the detriment of your bottom line.

My conclusion:

Don’t go budget on signage as desperate looking signs attract desperate looking offers.

Speaking of real estate agent’s here’s a joke submitted by Megan:

An agent was dismayed when a brand new real estate office much like his own opened up next door and erected a huge sign which read “BEST AGENTS”.

He was horrified when another competitor opened up on his right, and announced its arrival with an even larger sign, reading “LOWEST COMMISSIONS”.

The real estate agent panicked, until he got an idea. He put the biggest sign of all over his own real estate office. It read: “MAIN ENTRANCE.”

The post A Sure Sign It’s A Deal appeared first on PropertyInvesting.com.

However there is another way to sell property called “vendor’s terms” or an “instalment sales contract” (Wrap investments). This is where instead of having the balance due in 60 days it is split into a series of periodic payments that the purchaser must repay over a specified period of time.

When the purchaser makes his/her final repayment the title transfers into his/her name.

Wrapping is a great low or no-money-down strategy that enables an investor to earn significant returns for a relatively small and managable risk.

Wrap investments are legal everywhere in Australia except South Australia.

A Wraps example…

Alister is a property investor. He has sourced a property for $80,000 in Goulburn, New South Wales.

He has also found Judy who was previously renting the property but is very interested in buying it from him.

However Judy only has $3,500 saved up and she would not qualify for normal bank finance which is why she was excited to learn about the possibility of vendor terms. She is eligible for the First Home Owner’s Grant and can comfortably afford repayments of $170 per week.

Alister offers his “vendor terms” on the basis that the sale price is $100,000 and that interest would accrue on the repayments at the rate of his finance plus one and a half percent. The term would be twenty-five years although Judy can pay out the balance owing at any time.

Alister organises 90% finance on a variable interest rate of 6.9%.

The numbers would be something like this:

What are the critical success factors?

The critical success factors in wrap investments are:

1. It’s all about people

The essence of a wrap is that the investor becomes more like a financier and less like a traditional landlord.

In fact, all the property expenses in a wrap (such as rates, maintenance etc.) become the responsibility of the person accepting the vendor’s terms (in the example above that would be Judy).

This really highlights the need to focus on the person rather than the property because if you have an unreliable purchaser then your cashflow will suffer and your investing headaches will increase dramatically.

2. Build win-win outcomes

The are lots of people who don’t qualify for traditional finance and will be interested in your wrap services, your job is to pre-qualify your clients to ensure that you create win-win outcomes.

A large component in prequalifying a potential purchaser is to ensure that s/he can afford the repayments. If s/he can’t meet the repayments then you won’t be doing anyone, most of all yourself, any favours as the eviction process is stressful for all.

3. Play by the rules

The wrap laws in each State are slightly different which means that you are going to have to complete some research before launching into your wrapping career.

In particular, some rules to be aware of are:

1. Privacy Laws

   You need to be careful about privacy laws when seeking information about potential wrap clients, particularly when doing a formal credit check.

2. Consumer Credit Laws

   Whether wrapping falls under consumer credit laws is open to debate, but why risk being caught in an argument that’s easily avoidable?

   In most States it’s a matter of procedure (which means form filling) to comply with the consumer protection laws. Be sure to complete your due diligence before launching in.

Where to next?

• Have you considered other positive cashflow strategies? These include Buy & Hold, Lease-Options, Flips and Renovations…
• Return to Property Investment Strategies introduction.

The post Wrap Investments (a.k.a. Vendor Finance/Installment Sales Contracts) appeared first on PropertyInvesting.com.