"If only'' is the mantra of the would-be property investor who never got off the blocks. What successful property investors have in common is that they've done it, says serial investor Olly Newland, who has bought and sold more than $2 billion of property during his investment career.
"By all means read and attend workshops, he says. "But don't believe everything you hear in a seminar because often the people behind them have something to sell and will paint a rosy picture.''
Commercial property, Newland says, produces a better return and is less subject to the whims of the market. What's more, commercial property values are easier to manipulate irrespective of what the market is doing. Typically, Newland alters the leases and makes improvements. In the past, he concentrated on buying commercial properties with structural, lease or other problems that could be solved, fixing them and increasing the value rapidly. ``Of late I have been concentrating on ones that require less management so I don't have to wake up in the morning and wonder what the next letter or fax will say.''
Newland, author of The Rascal's Guide to Real Estate and The Day the Bubble Bursts, buys a mixture of retail, office and industrial property as well as some residential. He has been very heavily into retail because "it has more knobs and switches to turn'' to improve the yield and capital gain, but is now turning his attention to "quieter'' industrial property and has just completed on a "goof proof'' industrial unit in Ellerslie that he says won't keep him up at night.
Newland also likes to have a sprinkling of residential properties in his portfolio because of the "zing'' they provide when the market goes hysterical.
Conversely, Hamilton-based Win Kerry is a residential investment only man. "Undoubtedly commercial properties make better returns. But if the market goes flat and no-one wants your commercial building, you can't sell it,'' Kerry says. "With a residential property you can always get a tenant in or sell it. It just depends how low you're willing to go.''
Kerry concentrates on buying and letting family homes. Typically he goes for new or newish houses because the maintenance costs for the first 10 to 15 years are relatively low.
His secrets for success, which he often shares with new investors are:
- Carefully selecting properties where the rent covers all of the expenses
- Setting aside 25 per cent of the gross rental for maintenance
- Managing his own properties so that he's aware of what's going on with them
- Leave properties vacant rather than take a less-than-satisfactory tenant
- Only buy properties with potential or real street appeal
- Avoid houses where the neighbouring properties are a mess
- Put yourself in the tenant's shoes when making decisions
Stories of investors buying hundreds of properties in the latest boom aren't unheard of. But Kerry isn't one of them. He believes in buying for the long term and avoids cross-subsidising one property with another. Like many seasoned residential property investors, Kerry isn't on the purchase trail. Instead he's waiting for bargain properties, which he expects to see if the market takes a turn for the worse.
Newbie investors, says Kerry, often find themselves buying property that doesn't pay for itself in the hope that capital gains will make up for the lack of income stream. "I take the attitude of hoping for the best, but planning for the worst,'' Kerry says. "Being under capitalised and over exposed is a recipe for disaster.''
North Shore-based Jeff Brill learned many of his property-investing techniques from a John R. Burley property boot camp in the United States, and subsequently from Australian-based investment guru Brad Sugars. Brill, who runs a Harcourts franchise in Glenfield, has built up 12 properties in his own name and has some very specific strategies for investment. They include:
- Buy properties in quick succession as soon as supply drops and tenants start competing for properties
- Attend auctions on a regular basis to spot when the market is at the right price point to buy
- Make low-ball offers with the hope of buying properties at 20 per cent below market value
- Buy "cashflow positive'' properties where the rent covers the outgoings
- Buy when the market is going down
- Subsidise less well yielding properties that are likely to have greater capital appreciation over time
- Revalue properties after three months in an upward market in order to borrow against them and buy more property
The father of four has taken a note out of Sugars' book and is pursuing business opportunities in order to increase his cashflow, allowing him to go shopping for property if bargains come up. Business success outside of property investment also helps in the lean times when interest rate rises leave investors with more going out than coming in.
Brill concentrates on 1-3 bedroom properties situated from Hamilton to the North Shore.