10 Reasons to Invest in Real Estate

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The property market has had its ups and downs in the last decade, but it’s still one of the most robust and safe investment classes, especially in the long term. In this blog post we will cover the reasons why.

  1. Safety: Research shows, Australian property has increased in value at a rate comparable to that of the share market since the mid 1920’s, at an average of 11.4% per annum. Of course, this is despite a succession of wars, natural disasters, recessions and crises. It has done so without the volatility of the share market, making it an all round safer investment.

    “Shares have a marginally higher capital growth, but the difference in risk is huge. The risk is measured in variation in returns and capital growth (or loss) on shares can range from +40% in a year to -40% in a week! You don’t get that sort of variation in property. Hence why it is considered to be a safer investment.” [Investor, university lecturer and author – Peter Koulizos]

  2. It’s Easy: Real estate doesn’t require specialist knowledge to start an investment. Most Australian property investors don’t start off intending to invest in property, instead, buying a property to live in. Only after seeing how the value of their property increases, do they realise how much wealth can be generated from property.

    Not only is it easier to begin investing in real estate, but it is also much easier to research than stocks or shares. Investing in the stock market requires a lot of specific education. You need to understand the workings of the system, the complex world of trading, as well as research brokers and fund managers. Once you’ve done this, then you have got to come to terms with the companies on the market. This involves trawling the financial press, annual reports, other company releases and so on.

    Real estate however, is much simpler, at its most basic you can quite simply go online and start looking at properties. Admittedly, there’s more to getting property investment right, and being successful, than just picking a property. A significant amount of research can be done online, or by visiting suburbs, open homes, and auctions.

  3. Finance: Sometimes it can feel to be to the contrary, but lenders like property. Home loans are a major part of any bank’s business model. This means that lenders are much more likely to lend on residential property than any other asset class.

    Leverage is also a very big determining factor when lenders are deciding whether or not to approve your finance. “You can borrow more when using property as security compared to using a share portfolio,” explains Peter Koulizos.

    Lenders will usually lend up to 95% of the value of the property, whereas they may only lend up to 50 or 60% of the value of a share portfolio. This greater borrowing power allows you to benefit from the capital growth of a larger asset.

  4. Different Approaches: Real estate is a remarkable flexible investment. No matter what your financial arms are, you should be able to find a strategy that suits you. Common real estate investment strategies include:
    1. Long-term Capital Growth – Looking for to build a retirement nest egg? Long- term increase in value is the most effective way to do this.
    2. Positive cash flow – Need more money in your pocket now? Find a property where rent outweighs holding and maintenance costs.
    3. Adding Value – have you found a run down property with potential? You can renovate, subdivide, or develop and create value out of thin air. Even a simple paint job can score you a welcome profit.
  5. Control: When you invest in the share market, typically you need to hire a broker to handle your trades for you, and the value of any shareholding is reliant on market conditions, and the actions of the people running that company – introducing an element of uncertainty. This is much the opposite story in property; once you have settled, you directly own the asset and you have complete control over it. That’s a hugely powerful thing, because it means that you can influence both asset worth (by potentially adding value) and cash flow (raising the rent is a good example) directly – both of which are nigh on impossible to do so in shares.
  6. Negotiation: Purchase price in property is usually flexible to some degree. If you buy a share, you buy it at the market price at that time; there’s no scope to negotiate. In the property market, it is exactly opposite; buying and selling is all about negotiation (whether it be between yourself and a buyer, or agents, etc.). There’s also a huge scope to find undervalued properties, particularly deceased estates or mortgagee sales, or sales due to divorce.
  7. Tax:
    1. Negative Gearing – One of the most important benefits for investors is the fact that the tax office allows you to write off investment expenses against tax, therefore lowering your income and your tax bill and offsetting any shortfall between income and holding costs, either partially or completely.
    2. Depreciation – Investors also benefit from from depreciation. Depending on the age of the property and whether it has been renovated, this can run into thousands of dollars ever year, and can be the difference between being negatively gearing or paying for itself. Investors dismiss depreciation at their peril.
    3. Capital Gains Tax – If you sell your own home, you don’t pay any tax on the profit, meanwhile if you sell an investment property that you have owned for more than 12 months, you only pay capital gains tax (CGT) on half of the profit.

      All three of these tax benefits mean that Australia has a uniquely favourable taxation environment for investing in property.

  8. It’s a usable asset: Whether your property is an investment or not, it is still just that – a property. This means, that if events should take a turn and you need to move into that property, you can (pending rental agreements obviously), and then if circumstances change again, you can move back out, returning the property to an investment. This is quite a difficult thing to do with a share certificate or a bar of gold!
  9. Demand/Supply: Due to the growth of the Australian population, the demand for homes heavily outweighs the supply, both rental properties and properties to buy. This demand provides another floor under the market which makes it less likely that prices will crash. Although the demand for properties is higher than the supply amount, you want to be careful where you are looking to invest, as some areas do suffer from oversupply.
  10. You can Pass it on: When thinking long-term for your investment, you don’t just have to think of your own lifetime, you can also consider your children too. Depending on the legal structure in which you own your properties, you can pass your investment properties onto your children, either before or after you pass away. Obviously, you can do this with shares as well, but how many top companies 30 years ago are still at the stop of the stock market today? Whereas a well-positioned property should continue to grow in value over the long term.

Are you waiting to buy real estate? You should buy real estate and wait! Hopefully these ten reasons have provided you with some information to help you make the decision to purchase a property for yourself or as an investment. If you need any further assistance, whether it be suburb knowledge, or how to take the next step; please don’t hesitate to contact any of the team at Eastside Property Centre for assistance!

Growth strategies from an award winning BDM and Leasing Specialist

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What does it take to become a successful BDM? If you had asked me two years ago, when I was a complete rookie to the industry and role, I would have told you to send out bulk flyers and letters and hope like crazy that someone called…

I hate to admit it, but my first three or four months as BDM of our family owned and operated boutique agency did (sadly) consist of just this. The BDM position didn’t exist before I started at the agency so I was figuring the process out as I went; I would spend hours preparing letters and DL flyers, chopping them, folding them and sending them out to prospective clients.

I learnt hard and fast that this passive method of prospecting wasn’t going to get me the results I made a career change for. There was very little growth occurring in our department and I knew I had to focus my energy on something more productive if I wanted to be a great BDM, so I decided to focus on four key things:

1.   Professional development

2.   The health of our current rent roll

3.   Create your own strategic and unique selling point so that you can outperform your competition

4.   Build relationships with industry affiliates

Professional development Immerse yourself in Real Estate SALES training; be it conferences, podcasts, books, Facebook pages, newsletters – anything that is going to help you develop as a sales agent, because a great BDM is a highly skilled sales agent for the Property Management department. Envision the type of agent you want to be and practice being that killer agent – every.single.day.

The health of our current rent roll Focus on nurturing the clients you have. There is absolutely no point in growing the rent roll if the one you have is being neglected. Give your current owners a call just to say ‘hey’, find out what their personal and professional goals are, ask how their kids or pets are going, or chat about their favourite sporting team. Building strong lines of communication builds trust, and trust builds business. You can’t expect your current clients to want to give you more business if you aren’t interacting with them and staying front of mind. Be their friend, take them out to coffee, send them flowers when they have a new baby or get promoted at work and I assure you, they will very willingly list their 2nd, 3rd and 4th investment with you and your team. If you are building a rent roll from scratch or working with a small rent roll initially, this strategy is crucial to your success.

Creating your own strategic and unique selling point (USP) so that you can outperform your competition while mystery shopping your market might seem daunting, it is 100% necessary. More than likely, your prospective landlord is going to interview at least one other agent before making a decision. When going into any listing appointment, be as confident and prepared as possible by knowing exactly what that other agent is going to offer the client, and then beat it, NOT by reducing your management fee. Beat them by having a unique selling point that is so good, your prospective clients don’t even question your fee. Our agency management fee is 1-3% higher than all of our local competition, yet we are organically growing fast than any of them. How? By focusing on our unique selling point. Be confident in it, sell it and review it often.

Build relationships with industry affiliates As mentioned, my rent roll was relatively small when I started. I also had just two sales agents (our Directors) to gain inside sales referrals from so I knew I needed to find another referral stream. I became affiliated with an extremely active Investor Buyers Advocate who fast became my best friend. We both realised that what we had to offer each other was essential to the success of our businesses. He referred me to his clients because he trusted the service I was going to provide and I over-delivered on service, which was a great reflection on him. I have replicated this relationship with a number of other industry affiliates and it has without doubt, been the key source of our growth over the past 2 years.

By focusing on these key areas of business, I have organically grown our department by 69% in just over two years and there is no sign of it slowing down. My presence and reputation in our key areas of business is consistently growing and on February 17th I was awarded the Real Estate Training Group’s award for QLD Property Manager and BDM of the year at the Celebrate Success Conference in Brisbane.

Becoming a successful BDM takes time, patience, practice and persistence. It doesn’t happen overnight, but when it does, it is worth every late night, early morning and Sunday appointment. If you would like further advice or assistance, feel free to drop me an email at rachael@eastsidepropertycentre.com.au