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.

The Number One Reason Why People Don’t Invest in Property

Do you suffer from the number one reason why people don’t invest in property?

I keep having a conversation with people lately about why they’re afraid of investing in property, so I thought it was worth looking at the main thing holding them back.

“Come to the Edge” by Guillaume Apollinaire
“Come to the edge.” he said.
“We can’t. We’re afraid.” they said.
“Come to the edge.” he said.
“We can’t. We will fall!” they said.
“Come to the edge.” he said.
And they came.
And he pushed them.
And they flew.

This quote has always been one of my favourites because it hits on three key points:

1. Firstly, with anything new there’s fear – accept that.

2. You need to recognise what the fear is and what it’s preventing you from doing before you can do anything about addressing it.

3. Finally without a push you remain stagnate and may never get the chance to fly.

Be it learning a new sport or property investing, sometimes the push you need is from inspirational words in a book, sometimes it’s the confidence you get when you learn the tools and master the techniques, or sometimes it may be a mentor, someone who coaches you.

Over the past five years I’ve taught thousands of property investors and in general there’s one main reason why people hesitate when it comes to investing. This one thing often manifests in ways I have found to be common.

Do any of these sound familiar?

1. My partner isn’t supportive and won’t discuss property investing.

2. We/I tried it once and it didn’t work out.

3. I keep trying to pick the market but every time I go to act I seem to have missed the boat.

4. I can’t afford it.

Each of these come down to a single thing – fear. The fear of losing money, essentially the fear of getting it wrong.
This is absolutely a legitimate concern because let’s face it, property will be the most expensive thing you will ever buy and if you get it wrong there goes all your hard earned savings and it could take years to recover.

Many of us are acutely aware that we can’t depend on our superannuation or government pension and hence we need to get involved and actively contribute to our financial security.

In my mind you need to do a few things to address this fear.

1. Start with the end in mind. Work through with your partner or by yourself where you ultimately want to be. In fact after you complete this simple conversation you might find out a few interesting things. Firstly what your partner’s concerns actually are and also that property investing may not be the way to achieve your goals. At least you know and you can assess other options.

2. Determine your strategy.

So how are you going to pull this off? Which property investing strategy suits your goals and timeframes? Maybe it’s negative gearing, positive cash flow, or both, off the plan, renovation and hold, renovation and flip, buy and hold, land banking etc. Then work out how much you need to make a start and get saving.

3. Be prepared. Successful property investing is hard work especially initially, so be prepared and understand it will require lots of time and work.

4. Consider your exit strategies – not just the long term one but also your emergency exit strategy and plan for that emergency situation. As the saying goes “an ounce of prevention is worth a pound of cure”. Create buffers for yourself so if things do go wrong you don’t have to sell immediately, you can wait until the market is where you want it to be when you sell.

5. Minimise your risk. For 15 years I was an explosives engineer. Everything was assessed by evaluating what the worst thing that could happen was and what measures could be put in place to minimise the risk of that happening. I apply that same criteria to every investing decision I make, because after all if you minimise your worst fear to an acceptable level then what’s preventing you from taking action?

In summary, get aligned with your significant other and determine why you’re putting in all the hard work, formalise how you’ll achieve your goals and where the funds will come from and finally work through all the ‘what-if’ scenarios.

Remember you have the opportunity to fly, you just need to overcome your fear and take the leap.

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.

Are you playing the game or watching from the sidelines?

Property investing can be likened to sport – it takes practice to perfect your skills and achieve winning results.

Recently I attended a rugby match. I was only there as my husband has the misconceived idea that one day the Kiwis will beat the Aussies – alas he was proven wrong again. I don’t understand the game but it doesn’t stop me cheering from the sidelines and I do appreciate the skill of those playing.

This is my take on rugby:

• There are 30 players, a few water boys, a couple of medics and the refs. In the stands are 30,000 cheering fans.
• Those 30 players are assigned a goal. Sometimes they make it, sometimes they get close, sometimes they don’t. Some get knocked out and only one is man of the match, however they all play as if they could be.
• Every player knows the rules of the game, and they know which is their goal and every move they make is to get them closer to the goal.
• Every player takes days, weeks and sometimes years to prepare themselves, physically and mentally for the 80-minute game.
• They have mentors, coaches, therapists and medics who are there to assist. These professionals help prepare their attitude and ability so every player can achieve their potential.

Then there are the 30,000 ‘fans’ yelling at the elite professionals, or for want of a better word giving them ‘advice’. These fans are more often then not former elite athletes, many have never played the game and in honesty, looking at the amount of beer and pies consumed, I doubt they ever would.

Property investing is very similar: there are those who play and repeatedly practice the craft and those who commentate from the sidelines. Through my business and workshops I speak to hundreds of property investors.

Without any doubt in my mind I know the successful ones are those with a clear goal, a mentor/coach, the right attitude and a quest to keep trying and perfecting their strategy.

I have a large property portfolio based around a low-risk buy and hold strategy. I spent years learning from practicing and using mentors.

Ten years on I’ve found that once you have the right game plan then the rest is perfecting and tinkering.

Property investing does require an investment in education, experience and practice. However, if you get it right you set yourself on a path to achieve your goals.

I hope that you find my regular blogs part of the education and coaching to get you on the field, playing and perfecting your game.

P.S. My favourite part of the game is watching the kids lining up to run on the field at the end of the match, dreaming that they too could one day be a player.

Jane Slack-Smith is the director of Investors Choice Mortgages, a mortgage broker, property educator and player of the game. Visit:www.investorschoice.com.au