Add More Zeros To Your Property Investing

Posted on Tuesday, July 16 2013

How To Successfully Add More Zeros To Your Bottom Line

 

Last year I attended the New Zealand Property Investors Federation Annual Conference in Hamilton. The main speaker there was Brad Sugars who is an Action International coach, a successful businessman and property investor.

One of the topics that Brad covered which left me thinking was the subject of setting goals and making an action plan for achieving them. After all, most property investors often think “how can I grow my portfolio or make it more profitable,” – or as Brad Sugars put it “add more zeros to your bottom line”.

So with that in mind over the New Year holiday season, I went off on my holiday to India.

After four weeks thinking about which skills are the most important I came to the following conclusion.

Being a successful property hunter requires the following basic skills:

1. Persistence and Patience (the two P’s)
2. Local Market Knowledge
3. Networking
4. People and Negotiation skills
5. Creative thinking and Flexibility
6. Understanding how to operate in different phases of the property cycle

Bottom line Property Investing Productivity

The Skills explained:

1 Persistence and Patience are key factors for successfully finding a great property deal. A great deal doesn’t come along every day. An astute property hunter should know that it’s all about the numbers and if the numbers don’t stack up they should be willing to walk away from the deal until the deal can be re-negotiated so the numbers work; or move on and be ready for the next deal which could be just around the corner.

There are many property investors who often feel frustrated by not been able to find a deal that ticks all boxes. The successful property hunters, however are most likely full-time property investors dedicating many hours a week searching the market and networking with Real Estate Agents (Realtors) who will hopefully call them when a bargain or a deal with a great upside is available.

So, to summarise this point; a. as a successful property hunter you should always buy a property based on the numbers NOT emotion. Remember property investing should be treated like a business. b. be willing to walk away. c. there is always another deal just around the corner.

 

“Never ever give up” – Donald Trump

 

2 Local Market Knowledge is key as a property investor, to enable you to evaluate a deal when you find it, or when a Real Estate Agent brings one to you. Become an area expert by monitoring sales in your target area. Follow up local sales with Real Estate Agents who work in your area and use the services of a registered Property Valuer (appraiser). Having a good knowledge of your target area will enable you to act quickly when the golden deal comes across your desk. With hot deals, as the saying goes “you snooze you loose”.

 

3. Networking with like minded people, in this case those who have an interest in property investing can be very beneficial. Time and time again I find myself in discussions with fellow investors that lead to an “aha! moment” where I learn something new, perhaps a simple piece of information that brings a different angle for dealing with a certain situation, an adjustment to a strategy or some new local knowledge. Networking with Real Estate agents is a great way to make sure you keep yourself at the front of the line when a good deal becomes available. Regularly keeping in contact with 3-5 agents is a must for any property investor who is actively looking to buy. Professionals who service the industry like lawyers, accountants, planners, mentors etc can also be a great source of information.

 

4. People and negotiation skills are important not just in the context of your networking skills above, but also for successfully purchasing properties privately when a Realtor is not involved. It is important to be able to engage people in any level of conversation, to be able to read people’s body language and to try to understand their motivation for selling or buying a property.

 

5. Creative thinking and Flexibility is required when a negotiation has reached a dead end or if the sellers situation is not straight forward. In some situations, as a buyer you can offer a seller a solution to a “problem” they have by thinking outside the square.
For example an elderly seller may require longer settlement to allow them some time to move into a new home or retirement village. Offering longer settlement may help the vendor with feeling more relaxed by having more time to arrange the move.

I have experienced a situation when the seller was too frightened to visit their rental property after a tenant vacated it without paying rent. The vendor was desperate to sell but was terrified to visit the property and be met with an angry tenant. Knowing that, I arranged that viewing would take place by meeting the vendor around the corner firest and then we all walked together to the property so the vendor felt safe. We also assisted the vendor with resolving the issue of outstanding rent by educating them about the law and the steps required to resolve the issue legally.

I came across another seller who wanted to “save face” and did not want any of the neighbors to know that they actually had to sell the property due to financial difficulties. We agreed with the sellers that they would stay in their home and rent the property from us at market rent.

Creative thinking can also be applied when an investor is on the lookout for a new property. There are many ways one can hunt for a new deal. Placing ads in the papers, having signs reading “We Buy Property” placed in your targeted area, distributing flyers or talking to the local barber or hair dresser.

 

6. Understanding how to operate in different phases of the property cycle is fundamentally important for successfully property investing. Smart investors understand what is driving the property cycle and which strategy should be applied in the boom, slump or the recovery phases.

While the property cycle topic is a very deep topic and it is out of the scope of this article, in short…

there are 3 phases to the property cycle: boom, slump and recovery. The property market in New Zealand, Australia, USA and UK typically run in cycles of 8-15 years. An astute investor knows how to use the different phases of the property cycle to their financial advantage.

The Boom Phase, is when the market is experiencing capital growth. Property investing is the flavor of the month. It is the topic of conversation at any cocktail party and is hyped up by the media. Everyone wants to get into property investing including the “Mum and Dad investors” who usually own one or two investment properties at the most.

This is a dangerous time of the property cycle, as one cannot predict when the market will turn. As Warren Buffet says “Be fearful when others are greedy”.

In this phase it is best to offload under performing investments and prepare a “Vulture Fund” which will come in handy for picking up bargains during the slump phase of the property cycle.

The Slump Phase is the stage where property investing is out of favor, with mortgagee sales at peak levels together with negative media coverage and falling prices.

In the slump properties take longer to sell and usually vendors are more motivated to sell. That’s why the late slump phase of the property cycle, at the bottom of the cycle, just before the recovery is the optimum time to buy an investment property as a long term buy and hold or medium term development or renovation project.

 

As the saying goes “Be greedy when others are fearful” - Warren Edward Buffett.

Actively buying in the slump phase is counter cyclic and can be very rewarding. There are usually opportunities everywhere.

The Recovery Phase of the property cycle is a very exciting phase as it is the time of opportunity when property values are just starting to rise. Usually starting in the centre of the main cities, activity then increases in the surrounding suburbs and then, over time ripples out over the rest of the country.

 

Timing the start of the recovery is very difficult and it is usually only visible to those active investors who are in the market every day. The recovery phase, like the two other phases is divided to 3 sub-phases. The early recovery, mid recovery and the late recovery.

Traditionally the early and mid recovery stages are good stages to buy investment properties as there is still residual fear and negativity in the air remaining from the end of the slump phase. It is only in the late recovery when media starts with the hype again and the cycle moves on towards the boom that this situation changes. In general, the recovery phase is great for purchasing buy and hold properties and also doing trades, quick flips, renovation projects/”rehab” for adding value or profit.

For more strategies that could be applied in different phases of the property cycle refer to my article: How to Buy Great Property Investment Deals in Every Market

 

 

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Expert's Bio

Hadar Orkibi

Hadar is a full time Property Investor and Trader, Specialising in Do-ups & Add value, Multiple income properties, High Yielding, Commercial, Equity and "Move Forward" Properties. Hadar is co-owner and Sales & Marketing Mangers at www.PropertyGenie.co.nz. Owner of the Private House Buyers companies www.WeBuyProperty.co.nz & www.PropertyBuyersAuckland.co.nz/ Find Hadar on Google+

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