Why use the best investment property Mortgage Broker?

A mortgage broker is a professional who acts as an intermediary between loan customers and the lending institutions who offer their mortgage products. In some instances mortgage brokers specialise, for instance an investment mortgage broker specialises in appropriate lending finance for those buyers seeking to purchase an investment property whilst considering their long term portfolio goals. So the best mortgage broker for first home buyers or home buyers may not be the best mortgage broker for investment properties. You need to know what services you need first and then look for an experienced mortgage broker who can assist you. One thing many people think is that the mortgage broker needs to be in their suburb. The reality is that this is not the case. You can work remotely with your mortgage broker. In fact at Investors Choice Mortgages we work with clients from all over the world, some we have assisted with more than 5 purchases without ever meeting them. We often liaise remotely with their solicitors, buyers agents and real estate agents as well.

A specialist investment mortgage broker can add value to your investment property purchase because they continuously keep up to date with ever changing details of the vast and sometime complicated range of finance options currently available for investment property buyers. For instance borrowing in Trust structures, commercial property, buying within Self Managed Super Funds, building granny flats or even investing in the NRAS type investment. An investment mortgage broker will have a good understanding of the criteria on which lenders will assess investment property finance application and will have an understanding of possible future directions in the marketplace.

By using an investment mortgage broker for both your home and investment needs you should be confident that he or she knows and understands the range of finance options best suited for purchasing and getting the best value out of your situation now and giving you the flexibility for the future. Employing this specialist with up to the minute knowledge can save you not only time, but also help make the often difficult process of searching for and getting approved for the right loan a whole lot smoother.

Using an investment mortgage broker would also be a good option for first home buyers who may be on a limited budget and may benefit from viewing their first home purchase an initial step towards building an investment property portfolio, i.e. a first home will not necessarily be the home you end up in for the long term, it may be just a stepping stone towards future financial security through property investment.

Mortgage brokers are compensated by the lending institution in the form of an upfront and trail commission. Some specialist mortgage brokers like Investors Choice Mortgages charge an initial fee, like an engagement fee. The purpose of this fee is to ensure we can give the care and attention to those who are serious about their finance requirements. Unlike the majority of mortgage brokers we believe at Investors Choice Mortgages we have the skills experience and know how to offer additional services and educational products. Hence you will find a number of different service offerings. The decision is yours if you need these additional resources and services or not, the choice is yours.

Set up your board of directors

Having a good property manager is like having a board of directors for your property investing business.

A good rental manager is kind of like your custodian board of directors. You, as chairman, take a sabbatical, heading off to the next thing to take up your time, while leaving them with a book of rules.

The rules include:

• Obey the law

• Get $500 per week rent

• Take care of any issues less than $250 and don’t bother me with them

• Check on the property regularly

• Process the candidates for tenancy and tell me who you recommend

• If the tenants do anything wrong represent me at the tribunal

• Handle all those pesky bills for me – rates, strata fees, water bills etc

As you can see, the real estate agency has multiple roles and we can complain about them and give the profession a hard time, but really, choosing the right agent is really important and vital to the running of your property investment business to keep it on track and under control.

What you need from your rental manager is for them to act as your ‘board of directors’, to manage your business while you move on to the next thing. When you think of it that way they’re well worth having as a key member of your team.

However not all rental managers are the same and if you can’t get a direct referral, then you need to interview them to find a good one. Some just get it and think strategically and others… well, they’re aspiring to be one day selling property and they’re doing their time in the rental department. You need a professional property manager on your board.

I have recent personal experience in appointing a property manager. In 2011, I interviewed four property managers from different companies. The range of rents they quoted me was $750 per week to $1000 per week. From my research, the median rent for a three-bedroom house of the standard I was offering the market was $780 per week to $835 per week. All the agents wanted to start at the highest predicted price in the range and over weeks reduce the price if there were no takers – all except one. He asked “Do you want to rent this straight away or are you prepared to wait to get the highest rent?”

We wanted to rent straight away so he suggested putting the property on the market at $795 per week. This is where the strategic thinking comes into play. His thoughts were that most people search the internet with ranges that are specific and don’t include any negotiation – for example, they might look for properties between $700 per week and $800 per week, so if we list at $835 per week, even though we’re willing to be negotiated down to $795 per week, several potential tenants may have missed seeing the property and we wouldn’t even have a chance to negotiate.

Clever property manager! He got the management contract and we rented in the first week. Not only that, one applicant offered $830 per week to get the property as it was superior to others in the price range. Thus we also got the higher rent.

If you intend to become a successful property investor owning a number of properties, it’s essential that you make the selection criteria for your property manager top priority. How you work with them and how they perform is integral to the success of your investments.

What has your experience with property managers been? Have you found a good one and have you got any tips for finding a good one?

Jane Slack-Smith is the Founder of Your Property Success, an online property investing education portal committed to affordable education.

How not to get stuck with the washing up

Family get-togethers at my grandparents’ place were always a big deal; lots of food, lots of laughter and lots of people… which meant lots of washing up. At the end of the meal my grandfather would throw into a hat the names of 15 birds and anyone who drew out the black crow had to wash up. The thing is, it seemed it was always me and my youngest cousins who got the black crow.

It took me a while to realise that every name in the hat said ‘black crow’ and those who knew the game would just call out kookaburra, lorikeet, cockatoo etc while those who were inexperienced at the game and didn’t understand ‘the rules’ were at a distinct disadvantage.

Property investing is the same: there are those who seem to know the rules of the game and those who don’t. Those who don’t are often the ones lumbered with ‘the dirty dishes’ or in this case, the underperforming property. If you want to be successful with your investments you require an understanding of the fundamentals. The keys are 1) get to know the rules of the game and 2) start playing! However, without someone to share the rules you might win now and then but you won’t know exactly how or why, so that you can do it again (and again) and be successful each time. I teach hundreds of property investors every year – first we discuss their goals, their strategy and their criteria, and only then do we consider actual properties.

I spoke with someone recently who was offered a ‘bargain’. The property was in regional northern New South Wales and he was given the option to buy it for $20,000 less than the asking price. However when I asked a few questions I discovered that it would cost him about $5000 per annum to keep the property, the area had no capital growth predictions and at the end of 10 years he would have ended up with a property that was not worth any more than the initial asking price. So how would this ‘bargain of the century’ help him achieve his financial and personal goals? What was his strategy? To be honest, he didn’t have one.

Those investors who are most successful understand the game and they start with the end in mind. They figure out where they want to be and in what time frame. Then they work out what strategy is going to allow them to reach their goal in that timeframe – eg. buy and hold, renovate and flip, add a granny flat, develop, buy off the plan or buy overseas. Once the strategy is defined they work out specific criteria by which any property under consideration can be measured – i.e. maximum purchase price; percentage of funds allowed for renovation, granny flat or development; desirable capital growth; rental return required – and only after these criteria are set will they work out where to start looking for the property.

In reality, the property purchase is the end point, not the starting point. As a mortgage broker, I’m regularly asked by new clients to source finance for purchasing a home or investment property.

So, my question to you is: Do you know the rules of successful property investment or will you be the one be stuck with the washing up?

Jane Slack-Smith is the director of Investment Property Finance with Investors Choice. She is a mortgage broker, market commentator and property educator who runs property investing courses on a range of topics. Visitwww.yourpropertysuccess.com.au for dates and topics.

The Pet Shop Boys got it wrong

I confess I’m a child of the 80s and the Pet Shop Boys – despite what we think now – were musical gods. One of their songs stated “You’ve got the brains, I’ve got the looks, let’s make lots of money”.

I cringe whenever I attend a course where the organiser says: “In this room there are those of you with no time, but a good income and savings, and others who have time on their hands and lots of creative flair – why not get together and start a joint venture?”

To be honest, I work with people who have set up joint ventures with friends, siblings, parents etc and all I can say is, if you are even considering going into a joint venture arrangement, go in with your eyes wide open and a very thorough letter of agreement in place. Even those who know each other extremely well can start feeling the relationship is wearing a little thin after a while.

Let’s face it, at the end of the day most often one person is slaving away in an 80 hour a week job a bit miffed that the other is out wandering around selecting paint colours, while the person on the ‘renovation front line’ is fighting with tradespeople, balancing project management demands and selecting colour schemes, all the while imagining the other guy is sitting in a comfy air conditioned office sipping lattes.

Even if you make money out of the deal it can still end in tears and recrimination. So who really put in the most effort, the guy with the ‘brains’ in the office or the person with the ‘looks’ (read creative flair) out there?

To complicate things even further, if you do this with a large group of people – family or friends – then be prepared. A common theme is to buy a block of units and strata them.

However timeframes usually blow out, getting agreement on all the finer points is challenging to say the least, and deciding whether the unit on the top floor has more value than the one with the garden can cause more than a few disagreements.

And if that’s not enough, invariably something then goes wrong and someone has to sell up quickly. What do you do? Well the agreement (you all signed at the beginning – you do have one don’t you?) should state clearly what happens if someone needs to sell. Is it offered to the others first or does it go on the open market? Does that person get any recognition (compensation) for where the project is currently up to or do they only recoup their initial investment?

Joint ventures can be complicated and I am nothing if not an adroit risk manager. So regardless of whether you’ve got ‘the looks’ or ‘the brains’ (or both), my best advice is to go in with your eyes open and despite how close you are with your friends try to keep friendship and business separate – or it may end in tears.

Jane Slack-Smith is the director of Investment Property Finance with Investors Choice. She is a mortgage broker, market commentator and property educator who runs property investing courses on a range of topics. Visitwww.yourpropertysuccess.com.au for dates and topics.

First Homebuyers Equals First Time Investors

Whether you’re buying your first home or your first property is an investment, the fundamentals are the same.

Twelve years ago I decided it was time to start taking control of my financial future and I put together a savings plan and a set of long-term goals. Ten years ago I bought my first home; now I have many investment properties. The property portfolio I have today will be worth double what it’s worth now in another seven to 10 years because I’ve bought all my properties with the same fundamentals.

I speak to hundreds of people each year through seminars, workshops and as clients who are looking at buying property and creating a portfolio that allows them to essentially make money while they sleep. Let’s face it, who can even think far enough ahead to imagine retirement? But the reality is that with a few fundamental rules applied to your first property purchase you won’t have to be hanging out until you’re 70 to put your feet up.

Unlike in our parents’ time, first homebuyers today aren’t buying a property that’s going to fit them for many years to come. Your first property is essentially a stepping stone that’s going to be the key to how fast you reach your financial and personal goals.

Although I usually speak about how to locate and buy an investment property I consider the lessons just as relevant to first homeowners, as in reality their first property is even more so an investment in their future. Getting the fundamentals of that property purchase right could mean the difference between retiring at 50 or 70.

3 fundamentals of your first property purchase:

1. Start with the end in mind

So what is the end goal? Okay, 30 to 40 years down the track is a long way away so let’s bring it in a bit – what is your goal for the next five years? How does a property purchase now fit into that goal? What type of property is going to assist you in getting to that goal sooner?

Until you can answer these questions don’t waste your time every Saturday looking at 10 properties because you’re running around without purpose.

2. Locate the right property, not necessarily the right home for you

When our grandparents and even some parents bought their homes they were planning for that property to be the family home for years to come. Let’s be honest, with the median priced property these days, you’re only going to be able to afford a two-bedroom unit. This property isn’t where you’re going to plan to bring the grandkids back to in 30 or 40 years – this is a stepping stone only. So buy it with the fundamentals of buying a property investment, not a home. In other words, leave the emotion out.

3. Be flexible

Life throws curve balls at us. So it’s not only important to consider any purchase with the long-term plans for that property in mind but be aware things can change. The property has to be flexible enough to cater for that. Research shows that the rise of single person households is going to be a potential driver of the future property market but these people want to live in two-bedroom properties. So if you have to sell or rent the property out then cater to what the majority of the market wants.

In summary first homebuyers have so much opportunity to set themselves up for a comfortable future and, thanks to the government, they also get a helping hand. Thinking strategically and with the end in mind will bring you a lot closer to what you want to achieve. It’s just about getting started the right way.

Jane Slack-Smith is the director of Investors Choice Mortgages. She’s a mortgage broker and runs property investing courses throughout Australia. Visit:www.stepbysteppropertysuccess.com.au for details.