Last year you could buy almost any property, go away on holidays (even though you really couldn’t because of Covid) and when you came back you would have been richer than when you went away.
But that was a once-in-a-generation property boom that made almost anyone who bought a property look like a smart investor.
If history repeats itself, and most likely will, many investors will come to regret the hasty purchases they made last year.
On the other hand, at Metropole, we were very selective in the type of properties we bought to ensure our clients' investments would outperform the markets in the short-term and the long term.
So in today’s podcast, I chat with Brett Warren about the type of property his team of buyer’s agents bought for our clients, and hopefully, these case studies will give you some insight into how to choose an investment-grade property.
Investment-grade properties with Brett Warren
While any property can be an investment, just kick the owner out and put a tenant in; not every property is an investment-grade property – one that outperforms the averages over the long term.
Most investors buy their investments close to where they live, close to where they want to holiday or retire, but in my mind, that’s the wrong way around.
Property investment is a process, not an event and the property you eventually buy should be the physical manifestation of a wide range of decisions that you make even before you start looking at property.
To help you understand what we think makes an investment-grade property, we going to give you a peek behind the curtain at a number of case studies of properties we purchased for clients over the last few months and I’m going to this today with one of the national directors of Metropole and my business partner Brett Warren.
It all starts with a strategic plan.
While most buyer’s agents will take an order and either look for a property for you or in many cases just give you one of their stock lists, at Metropole we believe you need to start with a strategic property plan, but that’s much more than just about which property you should buy.
How you plan will help you define your financial goals, and tell you whether they’re realistic, especially for your timeline, but the plan has various parts which will help us measure your progress toward your calls, find ways of maximizing your wealth creation through property and identify risks that you never thought of.
The real benefit to our clients is there able to grow their wealth through property faster and safer than the average investors.
Your Strategic Property Plan should contain the following components:
- An asset accumulation strategy
- A manufacturing capital growth strategy
- A rental growth strategy
- An asset protection and tax minimization strategy
- A finance strategy including long-term debt reduction and…
- A living off your property portfolio strategy
All property investors have three balls to juggle:
- Their budget is determined by the banks. We help beginning investors with small budgets, experienced investors with large budgets, and high net worth clients with very significant budgets, but they all have a financial limit
- Location – and we are not prepared to compromise on that and finally.
- The right property in that location
Regarding choosing the right location, a lot has to do with budget, but our research department spends a lot of time looking for areas that will outperform the averages in the long term.
Once we find the right locations our buyer’s agents use our seven-stranded strategic approach to choose the right property.
7 Stranded Strategic Approach
- Buy a property below its intrinsic value
- Choose an area that has a long history of strong capital growth and that will continue to outperform the averages because of the demographics in the area.
- Buy the type of property that would appeal to owner-occupiers because they’re the ones that drive up property values.
- Look for properties with an element of scarcity.
- Look for properties with a high Land to Asset Ratio – that doesn’t necessarily mean a large amount of land, – it means more valuable land because of its location.
- Look for a property with a twist – something unique, special, different, or scarce about it.
- Buy a property where you can “manufacture” capital growth through refurbishment, renovations, or redevelopment.
Can You Really Buy Off Market Properties?
Last month the team at Metropole bought six separate properties off-market (no one else knew about them) and currently a significant portion of the properties we buy for clients are still bought this way.
Why do pre-market opportunities occur?
It works a bit this way…
A selling agent lists a new property and then there are about two weeks before it hits the Internet.
During this time photographs are taken, floor plans are drawn, the seller must approve the marketing and all this must be loaded on the Internet.
Selling agents ring their “A grade” clients and offer them this great new property they have just listed for sale.
And then they call their “B” clients and then they ring anyone else they think may be interested.
A few days later they have to tell the other selling agents in their office about the property and these agents do the same - they call their top clients.
And if it doesn’t sell, eventually the property gets listed on the Internet and you find out about it.
How do you get on the speed dial of these estate agents?
This is tough when you are a "normal" property investor or home buyer.
You're probably only going to deal with selling agents a few times in your life on the other hand the team at Metropole was involved in close to a quarter of a billion dollars worth of property transactions last financial year alone.
So while it may be difficult for you to get the call, you can still benefit from this special treatment by having the team at Metropole on your side.
Why do some vendors request an off-market sale?
Of course, at times there are genuine reasons why some sellers request an "off-market" sale.
Some of the reasons include:
- To save on marketing and advertising cost - while it might do this, the lack of open competition often lowers the selling price
- The need for privacy includes not wanting the neighbours or family to know until the move happens
- Financial pressure and the need for a quick sale
- Divorce, death, or change in personal circumstances and the need for a quick but private sale
- Nervous about auctions or lots of potential buyers tramping through their property.
Most pre-market and off-market opportunities aren’t great deals
You see, many agents entice the seller with an inflated price to get the listing and then slowly condition them to the real market price.
This means that many of these opportunities we’re offered are not suitable for us, but that's the way the property market works.
Links and Resources:
Get a bundle of eBooks and reports = at www.PodcastBonus.com.au
Some of our favourite quotes from the show:
“Abundance of supply is the enemy of capital growth.” – Michael Yardney
“People who rent these sorts of townhouses basically stay there for a long time.” – Michael Yardney
“Any small victory I made along the way made me feel successful.” Michael Yardney
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