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Are You A Property Investor
(Or Planning To Be One)?
One of the best ways to make money over time is through property investment. When it comes to wealth creation, there are really only three ways to make money:
1. Business - start a business / buy and
business, grow it and eventually sell it or
live off the profits.
2. Shares - buy to hold or buy to sell shares.
3. Property Investment (see below).
In truth, GRA focuses on items 1 and 3. If you are involved in small to medium sized businesses, and or have an interest in paying less tax and creating wealth through property investment, can help you.
Some Property Investment Strategies
Where do you start in property? There is so much opportunity with property for small investors and business people to get stuck into. Typical strategies that GRA can help with include:
Buy & hold property, for long term investment: Buy property under market value to hold for long term gains. Try to make the property 'zero cost ownership', being a situation where you pay nothing and get the capital gains for free.
How can you do this?
Lets say you find a property that last year was $330k, this year at mortgagee sale you can get it for $220K. You borrow 100% of the purchase price, using other property you own ( say your home) as security for the purchase. Or maybe you use a relatives property if you have no deposit, or get some vendor finance. Or maybe you borrow the deposit if you need to.
That is a $110k discount from what the previous owner paid, or 33% discount off the old value of the property.
Generally property values always recover to their former peak sale price, and continue to grow over time. It's just a waiting game.
Rented at $375 per week with interest at 7%, you are break even cashflow (before any tax refund) 100% financed. Wow! That means you get the capital growth for free, as the property recovers in value over time to the old value and eventually grows. While you wait for the recovery in value, the rents cover all outgoings including interest cost on 100% finance. This what is called 'zero cost ownership'.
Zero Cost Ownership
Zero cost ownership is a great recession strategy, very low risk in our view.
Talk to our Property Procurement team if you want to learn more - we can do this for you if you are time poor, or help you do it yourself by educating you and providing you with the tools you need.
Develop property: Small scale infill housing (one into two titles or one into three, etc, - small subdivisions) or larger development projects for commercial or residential projects.
Matthew Gilligan has developed over 220 sections and built many houses for resale. Matthew's experience in development, strong background in taxation and legal structures, and on the job experience in property makes him a great advisor to have in your team for planning and conducting property developments and putting your fundamentals in place.
Getting the structures right, getting the banking right, and planning the costing and project management are things GRA can start you off in the right direction with.
Key tools we use are:
Our 'Rental Analysis' tool. You can project/forecast your rental properties results, looking at cashflow, capital growth, yields and all outputs. An essential piece of equipment.
Our 'Property Development Analysis' tool. You can project/forecast your property developments through our projection tool, applying a simple approach 'filling in the blanks' to get a thumbnail overview of what your development will yield. Avoid costly mistakes by filling in 'all the blanks', and working out whether you will make money or not. Often Interest, GST and selling costs for example are not factored in. We have all the costs identified.
Trade property: Buy property cheap and sell it. Try to get it with a long settlement, sell it before you have to settle it. Line up the on sale with settlement and you pick up the margin.
Lease option property (one of GRA's favourite strategies): find a tenant - a buyer who wants to own their first home. Buy them a house they want, or let them rent one of your houses. Write a contract that says they pay you market value rent plus a second payment that is 'Option Consideration'. They live in the house and pay the rent and option consideration.
When they are ready or able to, they exercise their option to buy and you credit them with the option consideration paid. If you have a house that cost you $250k and they sign it up at $350k, their option consideration payment makes the property well and truly cashflow positive all the way through and you pick up the margin.
If they do not strike the option, you get to keep the option consideration and can do it again with a new tenant buyer. This strategy allows you to claim the GST on purchase.
Rent by the room: Buy a property with many rooms and convert it to a rental property where you rent it out on a room by room basis, effectively creating a boarding house.
Say the property is worth $550 per week as a 5 bedroom house, on a rent by the room basis, you may get $180 p/w 'renting by the room, and in return you put in internet, shared facilities and agree the tenant is only liable for their single room.
This way you get $900 p/w, vastly improving cashflow.
Contact us today to talk property portfolio development, how we can help you, and let us fire up your wealth creation programme through property now.
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