masterclass webinar for first time property investors

Master Class:Your first property investment

We help investors build and manage

their property portfolios

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Real Estate Investar’s tools

Portfolio Manager Membership

Managing, tracking and accounting

From $49 p.m.

Portfolio Builder Membership

Searching, researching, buying, managing, tracking and accounting

From $99 p.m.

1.75m Australians

1 Property

2-4 Properties

5+ Properties

• Pays shortfall for 5 years+.

• Eventually sells and pays down personal debt.

• No retirement income.

• Strategy & numbers.

• Self funding portfolio.

• $100-$250k+ passive income in retirement.

• Has high income or buys every few years.

• Freehold in retirement.

• Min. retirement income.

Source ATO/ABS

3 levels of Property Investment

1.75m Australians

1 Property1.266m

73%

2-4 Properties457,000

25%

5+ Properties28,3451.7%

• Pays shortfall for 5 years+.

• Eventually sells and pays down personal debt.

• No retirement income.

• Strategy & numbers.

• Self funding portfolio.

• End up freehold• $100-$250k+

passive income in retirement.

• Has high income or buys every few years.

• Freehold in retirement.

• Min. retirement income.

Source ATO/ABS

What level are you aiming for?

• Owns 5.54 properties,• At an average value of

$335,120 each,• And a total portfolio value

of $1.85m.

The average Real Estate Investar Member…

Time

Building a portfolio takes time

Portfolio Builder

Portfolio Manager

Portfolio Builder

Portfolio Manager

Membership options to match your needs

Treat property investment as a business….

Maximise your results

Todays 13 topics

1. How do you balance buying for cashflow and capital growth?

2. How to do a detailed investment property forecast in just 2 minutes.

3. Finance: Making sense of LVR’s and DSR’s – what do they mean?

4. 7 tips for increasing your borrowing ability.

5. How do you work out the maximum you should pay?

6. Why it's smart to buy at a $20k - $50k discount and create immediate equity.

7. 11 things you can do to boost your rental income by $1,000 to $10,000 per year.

Todays 13 topics

8. How to pick properties that generate both positive cashflow and tax refunds.

9. Negotiation tips – how to deal with agents and compete with other buyers and save thousands on every purchase.

10. Where do you invest first? It’s simpler than you realise to find great investment locations.

11. The truth and traps with most “hotspots”.

12. Setting up your team of experts and who to avoid.

13. How to find an A Grade property manager in an industry of full of average people.

Buying for cashflow and capital growth

Only property pays you up to 5 ways

1. Immediate equity – Buy below market value

2. Add value – Renovate, Develop, Subdivide

3. Positive cashflow – Get paid weekly

4. Tax credits – Reduce your tax to zero

5. Capital growth – as the property increases in value over time

When you’re getting paid 5 ways no one worries too much if one of the five ways is a little slow sometimes

x

Cashflow vs. capital growth

Cashflow

Capital Growth

CBD Inner City Suburbs Country

10%

+ g

row

th 10% yield

0%

The impact of capital growth1. Purchase a $575k property

2. After 10 years at;• 4% growth p.a. Value: $851k Equity: $276k

• 7% growth p.a. Value: $1.31m Equity: $735k

• 10% growth p.a. Value: $1.49m Equity: $915k

• 13%growth p.a. Value: $1.95m Equity: $1.37m

• Consider the impact of 3% extra growth p.a. over 10 years…

How do you compare apples with pears?

$575,000 $405,000

Calculating a property’s total return: Using Internal Rate of Return IRR

• We need to consider 5 factors;

• Funds employed (deposit)

• Initial purchase price

• Value at end of period (e.g. 10 years)

• Surplus pre-tax cashflow for period

• Tax refunds for period

• We then divide total gains for period by the initial deposit to calculate the IRR.

• In plain english: On average, how much do we make each year as a % of how much cash we have invested.

Using IRR as an example

Detail Property 1 Property 2

Dwelling type House Unit

Age 10 years New

Purchase price $575k $405k

Deposit $57,500 $80,000

Annual growth rate 4% 7%

Rental yield 5.67% 4.92%

Pre-tax cashflow year 1 -$709 $-5,137

After-tax cashflow $5,792 $1,426

Which investment will deliver the best IRR over 10 years?

IRR example

Property 1

IRR example

Property 2

Using IRR as an example

Detail Property 1 Property 2

Dwelling type House Unit

Age 10 years New

Purchase price $575k $405k

Deposit $57,500 $80,000

Annual growth rate 4% 7%

Rental yield 5.67% 4.92%

Pre-tax cashflow year 1 -$709 $-5,137

After-tax cashflow $5,792 $1,426

IRR 57.7% 49.8%

Average annual return on deposit

$33,177 $39,840

Property 1 will deliver the best IRR over 10 years. Why?

Sound complicated? We make it easy with Investar Search…

Making sense of LVR’s and DSR’s

1. The property

2. Equity (LVR)

3. Cash flow (DSR)

4. Credit record

5. Your character

5 barriers to finance

• Equity;

• Up to 80% LVR is easier to finance.

• Above 80% LVR requires Lenders Mortgage Insurance (LMI).

• *On $500k loan;• 85% LVR - Add 1% ($5k)• 90% LVR - Add 1.5% ($7.5k)• 95% LVR – Add 3% ($15k)

• LMI adds leverage and cost and risk.

*Source: Genworth Financial

Never run out of borrowing power again

• Income• Target a DSR (Debt Service

Ratio) of at least 1.3, e.g. $130 in rental income per $100 of mortgage payments for a self funding portfolio.

• Minimise consumer debt and credit card balances.

Never run out of borrowing power again

Balancing equity (LVR) with income (DSR)

+$3,200paCapital Growth

Positive Cash flow

Capital growth dealCost $500kRent $525 weekAfter tax -$5,600 p.a.

Cash flow deal summaryCost $430kRent $900 weekAfter tax +$8,800 p.a.

Cash flow deal #3Cost $220kRent $420 weekAfter tax +$3,800p.a.



Your portfolio KPI dashboard keeps track

1. Get yourself finance ready.

2. Find a broker who understands investors.

3. Structure your debt correctly.

4. Maximise cash flow, minimise interest and consumer debt.

5. Don’t over-gear, plan for a rainy day.

5 tips for investment finance

Tips for increasing your borrowing ability.

Increase your income

• Take in boarders or language students

• Get a part time job

• Start a part time business

• Teach a subject at night school

• Ask for a pay rise

• Change jobs to get a pay rise

• Buy a house with a self contained unit that produces income

• Convert a room to rental/B&B accommodation

• Convert property debt to interest only

• Annualise your household costs, are you getting value?

Eliminate consumer debt

Eliminate non income producing and high interest debt (credit cards, hire purchase, bank overdrafts, etc)

Credit Card$5000 / $120

Student Loan$3000 / $100

Fridge HP$300 / $25

Car HP$7000 / $180

Bank OD$1000 / $75

Charge card$700 / $80

Furniture$1200 / $40

Personal $900 / 50

Holiday Loan$2700 / $125

1. Complete a budget

2. Put extra $50 a week towards reducing your debts

3. Every time you eliminate a debt, add the surplus funds to the next debt

How do you work out the maximum you should pay?

Criteria for deciding purchase price

4 Options;

1. Minimum rental yield%

2. The net monthly cashflow you can afford

3. % below an estimated valuation

4. Analysing recent comparable suburb sales

Investar Search

Option 1: Minimum rental yield%

Take the 21 day free trial at www.realestateinvestar.com.au/promo

Yields are pre-calculated when you search

Investar Search

Option 2: The net cashflow you can afford


Pre-tax cashflow is pre-calculated too

Create your watchlist as you search

Watchlist integrates with Analyser


Analyse investment financials


One click to analyse in full

Analyser opens and loads listing data

Enter Rent, Purchase Price & Valuation

My Valuer

Option 3: % below estimated valuation


Locate property

Estimate value

Price and market history

Enter Rent, Purchase Price & Valuation

Back to analysing investment financials


1. Check mortgage & purchase costs


2. Check rent & expenses


3. Check depreciation & entity owner


4. Review investment forecast


Notes, documents and search data


Google Maps & Streetview integrated


Comprehensive 10-year analysis report



Long term performance graphs

My Research

Option 4: Analysing recent comparable suburb sales


Set a radius around the property


Check comparable sales


Build a suburb sales profile


Review comparable sales


Check property history and photo’s


Check sales and advertised history


Why it's smart to buy at a $20k - $50k discount and create immediate equity.

Discounted Property

• Buying at a discount creates additional profit at purchase.

• You can use this as equity later to buy additional property.

• 3% of all properties for sale are by motivated vendors with deadlines.

• You can easily find property $10k-$50k under market value.

Why buy at a discount?

Finding discounted property

• Goal: negotiate the deal 10-20% under market value.

• Find motivated sellers with deadlines.

• Look for poorly presented properties that need tidy up.

• You need access to sales and valuation data.

• Be careful of slow moving suburbs and declining populations.

Look for poor street appeal

A closer look at the same property

• Chainsaw

• Spade

• Paint

• Fence

• Pavers

• Plants

7 days to create this

Investar Search

Finding motivated vendors


• 900,000+ sales listings from 40+ Australian property sites.

• 34 filters.• Advanced data and analytics.• Watchlists, saved searches and

email alerts.• Analyse 8,000 suburbs.• Globally unique.

Investar Search


Combine postcodes, suburbs, regions & states


Automatic strategy & key word selection


Members focus on 8 key strategies

1. Capital growth

2. Discount

3. Renovation

4. Positive cash flow

5. Vendor finance

6. Strata titling

7. Subdividing

8. Development

38 extensive investment filters

Review investment KPI’s

Extensive property & suburb data


Boost your rental income by $1,000 to $10,000 p.a.

Boost your rental income

1. Burglar alarms & other security features.

2. Heating & cooling: relative to climate.

3. Fully fenced for children & pets. If you allow pets, charge a premium.

4. Car parking: especially in cities.

5. Low maintenance: exterior, gardens & lawns.

Boost your rental income

6. Outdoor living areas.

7. Handy to schools, transport, shops.

8. Handy to highways, employment, higher education & hospitals.

9. Sleep outs, granny flats, dual income, studios and bungalows.

10. Quiet private locations / something unique and desirable.

11. TV aerial, telephone and network points.

How to pick properties that generate both positive cashflow and tax refunds

Finding positive cashflow property

• Look in high yielding suburbs.

• Buy 20-40% under median.

• Multiple income properties.

• Regional areas.

• Reno to increase rents.

• Fix on low interest rates.

1. Buy newer dwellings.

2. Avoid pools/spas.

3. Avoid dampness.

4. Avoid gully’s.

5. Brick vs. timber.

6. Tiles vs. decking.

7. Tiles & drains in wet areas

8. Avoid large trees over gutters that drop leaves.

9. Avoid animals.

10. Stone fences & retaining walls last.

11. Avoid older units and apartments with deferred maintenance.

12. Thoroughly inspect older houses.

13. Select tenants carefully.

Buy to minimise ongoing repairs expenses

Buying rules

• Buy houses with 7%+ yields, to generate positive cashflow pre-tax

• Buy houses less than 10 years old, to maximise depreciation

• The higher the marginal tax rate, the better the after tax cashflow

Investar Search results: 7%+ suburb yields

Fine tune income & expenses

Year 1 results; Pre-tax cashflow positive:

$7,856 Depreciation:

$14,000 Negatively geared after-tax: -

$6144 Tax refund:

$2,135 Total cashflow after-tax:

$9,991

10 year forecast

Lessons• You make money

buying well, plus;• You don’t have to

buy negative cashflow to get tax benefits.

• You don’t have to subsidise your investments.

• You can get both capital growth and cashflow.

Agent negotiation tips

x

Three crucial negotiation variables

In negotiating anything there are 3 key variables.

1. Power

2. Time

3. Information

Whether it’s property, politics or poker, if you understand how to apply these, you can set yourself up to win each time

Power in Negotiation

• Power of competition• When there is

competition for a product, and limited supply the power shifts to the seller.

• No competition and power shifts to the purchaser

• Avoid overheated markets.


• Power of legitimacy• When you are well

informed and quote official numbers or use official looking forms you are not often challenged

• After all who can argue with the facts

• Use Real Estate Investar data to support your case.

x

Power in Negotiation• Power of knowledge of needs

• The ability to research and understand the other parties needs, and structure a deal that meets theirs and your own is a valuable skill

• The more you see the world as shades of grey instead of black and white, the more creative you’ll become


• Power of persistence• Most people are not

persistent enough when negotiating and give up at the first sign of resisitance

• No means no “today”• It could become “yes”

tomorrow or next week if you just stick around to find out

• Remember the power of competition or “lack of”

Time in Negotiation

• Time is your greatest asset in a negotiation if the other party has a deadline

• The biggest concessions on terms, and discounts on price usually occur close to or after a deadline has passed.

• Be patient

• Never reveal your deadline, and always find out the other parties.

• Be slow and persistent with your negotiating, to ensure the other party feels the pressure of the clock ticking, if you rush, you’ll apply no time pressure

x

Information in negotiation

• Information is the heart of the negotiation

• Find out as much as you can from the agent, if he declines your questions, ask them again and again

• Ask the vendor directly if you get the chance, often they will open up to you

• Empathise with them always

• Look for the visual and verbal clues, body language, unkept property, bills piling up

Negotiating the deal

• Don’t get emotional. Stick to your rules and be prepared to walk away

• Don’t be afraid to start low, you can always come up and you never know how far a vendor will drop

Negotiating the deal

Ignore Agent Comments like:

“I sold 2 up the road last week for xyz price”

“Sales are booming we can’t get enough listings”

“This one won’t last long”

“I cannot present this offer to the vendor, you will have to increase it”

“I have another offer coming in today”

Negotiating to Win

• First offer: Double the discount. E.g. If the vendor is asking $240k and you want to pay $210k, offer $180k to start with.

• Move up as the vendor moves down

• NEVER make 2 offers in a row

• Always make sure the agent gets you a counter offer

• Use deposit amount, contract conditions and settlement date as extra levers.

• If the negotiation takes 3 weeks and you save 30k, it’s worth it – be patient, you are under no pressure at all.

Where do you invest first?

Where do you invest first?

1. Closer to capital city is better for land appreciation

2. Population & income growth

3. Buy in established suburbs, not greenfields

4. Ability to add value

5. Appeal to biggest rental audience

6. Least amount of rental competition

7. Do your research and buy on the numbers

The truth and traps with most “hotspots”.

• Some data published about future hotspots is flawed.

• Check the source to avoid getting burned.

• Build a picture, don’t just use 1 source of data.

• Greenfields with unlimited land: developers control supply and suppress price growth.

• Boom & bust – Avoid 1 industry towns

• Speculation drives prices beyond sensibility – e.g. Moranbah

• Blue chip real estate always wins long term

Not all hotspots are hotspots

• Be careful with boomtown predictions;• Top 100 growth predictions. • Boom town data driven by

property developers.• Land bankers selling on future

growth without control of land or re-zoning in place.

• Get legal advice.

Reports: what are they really selling?

• Real Estate Investar

• APM

• RP Data

• Bis Shrapnel

• CBRE

• Major banks

• RBA

Use trusted data and research providers

National & State Top 50 suburb performance reports

• Find out trends as they emerge.

• Predict the growth areas before they occur.

• By the time the results are in the newspaper – it’s too late.


• 33 top suburb performance reports now available.

• Monthly top suburb reports retail for $99 each.

Top Suburb Reports are included FREE for

Portfolio Builder members.

Setting up your team of experts and who to avoid.

Experts you may have on your Team

• Lawyer/conveyancer

• Accountant

• Valuer

• Property Manager

• Mortgage Broker

• Quantity Surveyor

• Property Mentors

• Property Maintenance Team

• Taxation Planner

• Architect

• Registered Surveyor

• Insurance Broker

• Research, data and tools providers

x

Fire any one on your team that:

A. Is not an expert in the field of property investing

B. Does not meet deadlines or keep appointments

C. Is ethically questionable

D. Gives you bad advice that causes you to lose money

E. Is not moving forwards with their own investments

An accountant giving bad advice can be costing you thousands of dollars a year

How to find an A Grade property manager

How to find a professional manager

• Local Agent Finder is a unique partnership for Real Estate Investar.

• Local Agent Finder provides a simple and free service that helps our clients find the best agent or property manager.

• Local Agent Finder is not a property management company.

Exclusive portfolio submission option

Agents submit proposals

You receive a comparison report

The benefits of Local Agent Finder

Local Agent Finder helps you:

• Understand what agents and property managers charge, and why

• Gets multiple agencies competing for your business

• Enables you to easily compare the costs and services of each

Portfolio solutions – Start your team here

Always treat your investinglike a business

Treat your investments like a business

• Have a plan

• Have goals

• Businesses have costs

• Businesses manage risks

• Businesses are profitable

Create a business plan!

Use portfolio tracker


• Manages;– Entities– Properties– Owners

• You can track and review any combination.

• Monitors property and suburb growth.

• Integrates with Xero.

Portfolio Tracker

Set Targets & Goals

Measure results

Make changes as needed

• Review your goals and targets.

• Make adjustments to your plan as needed.

• Don’t be afraid to make changes to rents, management, the property or method of renting it out.

• Monitor your investments closely, no matter what your property management strategy is.

• Don’t just wait for tax time to see how much tax you made or lost.


Track property and suburb performance

See cashflow in real time

10 year growth & equity forecasts


Your portfolio KPI dashboard

Automate your accounting


• Simplify accounting • Reduces accounting fees for users.• Track your investment entity cashflow.• Better understand performance.• Biggest reason investors fail:

cashflow management. Monitor your bank balance daily in real time.

• Collaborate online with your accountant.

• Your financial accounts are always ‘market ready’.

How Xero helps you



Bank account feeds

XeroPortfolio Tracker

How does it work?


• Xero have bank level security. • Your first entity or organisation is included.• We will set it up for you.• We will integrate it with Portfolio Tracker.• 1 x non-GST cashbook included free in membership.• Can upgrade or add additional organisations for $20 p.m.

We provide our members with Xero

Xero has 15,000 bookkeepers & 9,500 accountants

in Australia alone!


What if your accountant is ‘old school?’


Your accountant is going to love it

Next steps

• If you have existing property, consider how it is managed. Could you do better?

• Take control of your investing and know your numbers. Use tools like Property Analyser & Portfolio Tracker to stay on top of your business. Things change.

• Build a team. Whether you are a new or experienced investor, you need a team behind you to maximise your results.

• Get finance ready.

What can I do next?

Join Real Estate Investar today….

• Use the most advanced management tools in real estate.

• Dramatically increase your results and save hours every week.

• Build a profitable portfolio quickly and easily.

• Plan & succeed.


Plenty of resources available


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Suburb Performance Reports

Investar Search

Development Search

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My Research

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Portfolio Manager Membership

Managing, tracking and accounting

From $49 p.m.

You save 12%-46% with contract monthly and upfront membership

options


2 Membership Types

Tools & resources Portfolio Manager

Portfolio Builder

Suburb Performance Reports

Investar Search

Development Search

My Valuer

My Research

Property Analyser

Portfolio Tracker

Xero


Portfolio Builder Membership

Searching, researching, buying, managing, tracking and accounting

From $99 p.m.

You save 40%-67% with contract monthly and upfront membership options


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Questions?

masterclass webinar for first time property investors

Real Estate

retirement income

property portfolios

total portfolio value

levels of property investment

detailed investment

high income

passive income

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