Would you drive a car blindfolded? So why invest without a strategy?

Boz and Cam ask the deep and meaningful questions to analyse what is required to create the a formula for investment success.

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Michael: Hey, guys, Michael Beresford here.

Cam: Cam McLellan.

Michael: Welcome to today’s Wealth WOD, our Workout Of the Day. What we’re gonna be going through today is the first part of our property selection process. Cam there’s nine and a half million properties.

Cam: It’s going to be about 10 million properties. Obviously the housing industry is pumping along fairly nicely. Has been for a number of years.
Michael: Take all of our listeners and viewers through how we select the right one.

Cam: Alright. When I started considering investing, I looked at the majority of people investing and how they select property, and to me it was literally like driving a car blindfolded. There was no rational behind it, there was throwing darts at a dartboard and hoping you picked the best property. As Michael said, nearly 10 million properties in Australia, how do you go through? You can’t physically go through and get property A and compare with property B, get the winner out of that, and then property C and compare that, and do that through the 10 million properties physically. There’s not enough time. I wanted a way that regardless of market cycle, I wanted to be able to quickly identify which is the best property investment me at that point in time.

Cam: The only way to do it that I could conceive was through a process of elimination. I came up and developed with Matt Lewison, some assistance with Michael, what we’ve fine tuned down to be calling the MAP process, which is Market, Area, Property. So it’s the exact opposite way the majority of people pick property. I’ll do a quick illustration for you so you can see it. There’s your investment property that you need to find. First we need to check out the areas, the product of that we indicate in the markets. So, hence, market, area, property.

Michael: So Sydney’s seeing some great growth, I’ve been thinking about investing for a while, and now I’m feeling confident to able to buy into a capital city. How do I work out whether or not Sydney makes the most sense?

Cam: Alright. We’ll consider the concept of knocking out capital city markets that are not good for investment at that point in time. Sydney has seen some great growth over the last five years. 10 years to that it was sitting flat wasn’t it?

Michael: Yeah.

Cam: So there was probably basically no growth in Sydney. If you asked five years ago, Sydney-siders how they feel about property they would say property investing sucks, because the market is that flat for so long. They had forgotten that growth was a thing, and then all of a sudden it’s taken off, and Sydney-siders are popping champaign and party poppers and enjoying wealth, and so they should. Why I consider one of the worth investing markets, the capital city markets, I invest in Sydney myself. That’s a strange thing and have Sydney clients who have more than half their clients from Sydney, love Sydney and can’t conceive, “How could you possibly not?”.

Cam: I use Sydney as a lead market indicator. The reason for that is we look at the different dynamics around each capital city market, and what drives those capital city markets. Sydney and Melbourne are driven by the same fundamentals, and that is the economy, business. The reality is Sydney is a stronger business hub, so it gets growth first historically if you look at historic charting, and then Melbourne tends to follow, which is exactly what we’re saying.
Cam: Once Sydney started to kick we started driving clients into Melbourne and still Brisbane’s looking favorable, but Brisbane and Perth work off very different drivers also. Can you tell us what they’re market

Michael: Brisbane’s getting a more end of it, [inaudible 00:03:28] in the proximity to Asia-Pacific, but still heavily tourism focused. Perth obviously heavily mining focused. There’s more to those capital cities than just tourism and mining, but they are the pre-dominate industries in those two capitals.
Cam: Cool. Want to cover this one?

Michael: In summary, one of the things that help us determine which capital city market is the best place at any point in time.

Cam: We’ve got an analytics team that go through and analyze each capital city market at the moment. We have a lot of different economic and governmental reports, which basically tell what’s going on in each capital city market, population growth. What we’re looking for in these capital city markets, and I’ve put the cheat sheet in the back the [inaudible 00:04:07] book for you. What we look at is the last number of years growth. If we’ve had multiple years with double digit growth, you should start to think that the market’s gonna cycle up and we’ll be getting to sort of a peak. We are gonna want to try to get the last couple of years growth in any capital city market. We want to get it to start and ride that wave up, and then take our money, and move it to another capital city, to another capital city, makes sense? You’re riding the perfect storm or the perfect wave of property investment. So market growth.

Cam: Constant population growth: I’ve got some stats in here, the Australian Bureau of Statistics, you can get the stats on population growth forecast and population growth. The abs.gov.au is a terrible website. It’s horrendous to find your way around. It’s got a really cool search function on there so you can actually send through a request and they’re really good at getting back to you. So, rather than search around the site yourself, flew through a note to them, and they’ll shoot you the detail back.

Cam: Unemployment rates: when people feel confident in their job, they buy houses. Pretty basic math. Then from that we look at the different markets and we try and work out whether it’s in a boom, it’s in a decline or a correction phase, stagnation, or the start of recovery. Then we examine whether that’s a market worthy of investment in point in time. So, tick, tick.

Michael: So really, in summary, we’re looking for supply, demand, demands driven by population growth, which is [inaudible 00:05:32] in affordability, and median house prices to determine that we’re buying into a market that’s gonna move up.

Cam: Correct. So that’s the market phase. That’s stage one of Market, Area, Property. We haven’t even started considering what the house is we’re gonna buy in this stage. We haven’t considered the suburb or the growth corridor. All we’re doing is knocking out capital cities so the process of elimination is taking out large portions of those 10 million options. Yeah? Make sense? Next time we’re gonna get into that area. Happy days.

Michael: We’ll see you next time.

‘I didn’t have the time, energy or expertise to research investment properties.’

Priscilla wants the retirement we all dream of. But she knows she won’t achieve it unless they invest to build financial freedom.

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I was getting to a point where I was really struggling and I don’t have the time or the energy to work full time, do what’s required plus spend my whole weekends looking at where to invest, trying to work out the next big thing and how do you work out whether investing in a certain location in Australia is actually the right location.

Regions are great but they don’t have the same growth. Cities are great, but it costs a lot to get in to. So it was all that kind of stuff that I was trying to juggle and look at all these investment reports and trying to figure it out myself, and I just couldn’t do it. I really just couldn’t do it.

Along came James and James is fantastic. He just went, “You understand the business. You have your goals. We can help you achieve those goals.” That was where the light bulb moment really happened. It’s like, finally, someone gets me. Finally, someone understands what we’re trying to do and they understand that we want to do it fast and yes it’s a ten year plan, but during that ten years, we’re going to at least see one of us achieve the goal of being out of the workplace.

It’s about that realization that someone can see you dream and James was able to say, “You actually can do this, Priscilla and Matt. You can actually achieve this. You just need to plan it, and with a good solid plan, and you follow that plan, with the flows that go with property, you will achieve it.”

And we’ve been with Open Corp not even 12 months, less than 12 months. We’ve got our second property with them and that’s not even finished and we’re already on to our third. We’re already moving to our third and we know that the property that we’ve invested in Melbourne, it’s already got the growth that we need, and once we get the, we’ll be going again.

Every year, the Oxford Dictionary announces its  Word of the Year. ‘Post-Truth’ was last year’s winner, beating stiff competition from the likes of ‘hygge’, the Scandinavian feeling of cosiness, and ‘coulrophobia’, an extreme fear of clowns.

Now I know it’s only October but, if our office is anything to go by, ‘rentvesting’ is set to be a definite frontrunner for this year’s honours. It’s all the rage these days. But what is it and why is it becoming so popular with young, first-time investors?

What is Rentvesting?

An increasingly popular property investing strategy for first-home buyers keen to gain a foothold in the property market, rentvesting refers to investors who buy an investment property while continuing to rent. It shifts from the traditional ethos that people should buy their own homes before investing.

The rentvesting tactic offers an appealing way for young investors to purchase an investment property. It overcomes financial obstacles and property prices because you can buy in a location that fits your budget and then rent in a suburb that suits your lifestyle.

A Mortgage Choice survey has found that a third of investors were rentvestors in 2016, compared with 20% in 2014. This supports another study, which estimates that 13% of first home buyers now choose to rentvest and stay at their family home. And clearly, this upsurge illustrates the real benefits rentvesting has…

The benefits of rentvesting

Buying in a growth area & the flexibility to live where you want

Not being able to afford a house in an area that you want to live in has, historically, been a major barrier to buying your first property. But it’s not as black-and-white as a trade-off between a house in an unappealing part of town or not at all.

Rentvesting’s main benefit is the ability to purchase a house in a growth area (even if you have no emotional attachment to it) without having to change your lifestyle. You can keep renting in that hip inner-city suburb while you gain high yield returns on your investment property. The key is to research the areas where you can expect to receive the highest returns.

Other monetary benefits

Aside from the obvious monetary benefits like rising house prices and rental revenue, there are a few other financial aspects to consider…

One potential benefit is to claim negative gearing benefits from your investment property, to increase your return on borrowed funds. A negatively geared property can offer immediate tax benefits while also offering the prospect of capital appreciation over time.

Expenses such as repairs can be tax deductions. For example, the cost of restoring something to its original condition due to tenant wear-and-tear is tax-deductible. Depreciation can also be tax-deductible. Things like washing machines, curtains and carpet are all household assets you can claim.

Safety & Security

It’s a safer option to rentvest than to put all the money into a home to live in. For example, if interest rates go up, it’s possible to sell the property and remain renting where you are.

Of course, to ensure maximum safety and security as well as overall success, there are a lot of factors to consider. What determines a smart location? How do you find a high-growth investment property that’s right for your needs? And what steps are required for you to enter the rentvestment game?

In a nutshell, we recommend buying where you can get the best growth and living where you want. But if you’re struggling to answer these questions, it might be worth seeking the advice of professional property investment advisors like the friendly team at OpenCorp. Get in touch with our friendly team. We’d love to hear from you.

CONTINUAL EDUCATION, MOTIVATION, AND ONGOING INSIGHT ARE CRUCIAL FOR ANY INVESTOR LOOKING TO BUILD A SUCCESSFUL PROPERTY PORTFOLIO. AS A SENIOR INVESTMENT CONSULTANT, JAMES MCCOY KNOWS THIS BETTER THAN ANYONE. SO HOW DOES HE HELP HIS CLIENTS ACHIEVE THIS? WE SAT DOWN WITH HIM TO FIND OUT…

So James, can you tell me a little bit about what you do at OpenCorp?

I’m one of three Senior Investment Consultants within the business – I don’t write books or anything we leave that for Cam. I guide investors through the process of executing our Property Investment Strategy. Educating, empowering and motivating our clients is a large part of what we do and our aim is to make them feel comfortable and informed throughout the process.

Do you have any strategies you use to help clients achieve this?

Well, the interesting thing is, is that almost all the staff here are property investors as well. So we all use the same process that we are helping and assisting our clients with. We know just how a client feels at any point throughout the process. We’re all in this together, which I think is really important. But my goal is to take the client on a journey, this is based on looking at the client’s unique situation from a financial and goals point of view and determine what they want to get out of the process. Once we understand this, we’ll then go away and spend a good 120 hours working with the different departments within the business to source the right property for them. At that point, our job is to make sure the client really understands the strategy for success moving forward.

In regards to the strategy you use, is this ever hard to communicate?

Not really, because it all comes down to educating them on several main pillars. Once we’ve found the right solution for the client, we come back and present the research to them; why are we looking at this location? How does this fit into the M.A.P process? (Market, Area, Property). Then we will look at the numbers and really concentrate on every dollar going in and every dollar going out, breaking it down to a weekly hold cost.
The last thing we will focus on is the property itself, one of the things I really stress to our clients is the need to push emotion to the side. A lot of people can be emotional about the property but whether the property has a blue roof or a pink roof doesn’t really matter to a certain extent. As long as the numbers get us to where we want to be.
So I take clients on this journey, right through to introducing them to our Relationship Management Team who assist during the build process and even past the point where our Property Management Team find them tenants for their property.

On that point, once you’ve found a tenant and things are ticking along, is the client still on the journey with you?

Absolutely, even after we have sourced a quality tenant we will keep them updated on sales in the area, information on if the market has moved, and suggesting if we should we get another bank valuation, or is it time to duplicate. It really is a long-term relationship that we have with our clients.

Can you tell me a bit about one of your success stories you’ve had at OpenCorp?

Absolutely, I remember one particular couple who were first-time investors. They were super nervous. They actually wanted to pull out at the start of the process. But we were able to sit down with them, hold their hand and nurture them throughout the nervous times. 12 months later they are now in a position to buy property number two. They are over the moon with the results. That was definitely a fantastic moment, seeing a young couple transform and have that light-bulb moment realising that this strategy was going to change their future significantly for the better.

I can imagine your job comes with significant challenges as well. Can you explain some of those?

Fear, which is one of the biggest challenges we face. I mean, its human nature and completely understandable when you’re entering something new that you experience these feelings. And no matter how much I explain something, we can’t control their neighbor or Uncle Tom putting fear and doubt in their minds based on emotion. At that point, I tell my clients to call me, text me, email me; my phone is always on. I can talk through their fears, doubts and always bring it back to the numbers. If you want something you’ve never had… You must be willing to do something you have never done! Fear is natural, but it can also inhibit you from taking action on something special.

Source: Your Investment Property Magazine

House and land packages remain a firm favourite among many investors, including OpenCorp’s Michael Beresford, who has helped thousands of Australians build sustainable wealth by investing in these packages.

“The reason house and land packages are a good opportunity for investors, and the reason I invest in them myself, is because they provide the best balance between capital growth and cash flow,” says Beresford, director of investment services at OpenCorp.

OpenCorp pools the resources of over 80 property experts to offer advisory services to clients across Australia. In just over a decade, the company has facilitated more than $7bn worth of property transactions, many of which are in the house and land category.

While they’re a firm favourite with the OpenCorp team, Beresford is quick to acknowledge the risks associated with house and land packages. However, he also says it’s possible to avoid these risks.

“One of the criticisms we often hear about house and land packages is the assumption that they’re in outskirt areas, which they often are,” Beresford tells Your Investment Property.

“The issue with that is that price growth is driven by supply and demand, so if there’s abundant land supply in the area, it’s going to be several years before you can actually get the capital growth.”

For this reason, Beresford says investors should only consider a house and land product if it’s within an existing suburb, around established housing, so there won’t be an oversupply of land or property.

“They can be hard to find, but we have an entire research and acquisitions team that spends endless hours scouring Australia trying to identify these locations,” says Beresford.

The second common criticism is that investors pay a premium for house and land packages compared to other properties in the area.

“They can be hard to find, but we have an entire research and acquisitions team … scouring Australia trying to identify these locations”

“That is definitely the case if you buy them complete, because the builder is cash-flowing the construction while they’re building the house so the interest incurred by them is then built into the final price,” Beresford explains.

Source: Your Investment Property Magazine

One of Australia’s most experienced property investors says it’s surprisingly easy to let sentiment stand in the way of success. Here, he offers his advice on overcoming emotional barriers and achieving greater personal wealth. Nicola Middlemiss reports

Most people considering investing in property would claim they’re driven by solid reason, rather than emotion.

But according to Allister Lewison, co-founder of OpenCorp, sentiment can creep in and influence the most rational of would-be investors – and even those who have invested before.

“It’s really hard to prevent emotion from clouding your judgment,” he says.

“The reason people let emotion get involved is because their initial motivation for doing something can have an emotional factor behind it, so when they’re making decisions it can get quite easy to jump in and make it for emotional reasons.”

Whether it’s a desire to provide a better future for their family or to semi-retire at an early age, Lewison says the majority of property investors aren’t driven by the need for a bigger bank balance, but rather by the personal opportunities investing allows.

Lewison – who has helped everyday Australians amass over $200m in property – says one of the most common emotional mistakes he sees is investors taking advice from unreliable sources.

“They go to the family barbecue and their uncle who has never invested in his life is giving them advice. You’ve got to be really careful about where you’re taking your guidance from, because that can absolutely lead you down the wrong path,” he says.

Another major emotional barrier arises when investors have an attachment to their local area.

“People think. ‘I know the local area, I like where I live; I’ll be able to drive past and make sure the lawn’s being mowed’. That’s being emotional about your decision,” says Lewison.

“It’s about people wanting to look at it and touch it, but these aren’t the right reasons for buying a property. The chances of the best investment for you being three doors down from your own house are like finding a needle in a haystack.”

Are emotional hang-ups holding you back?
Educating everyday Australians about the right way to invest is one of the main reasons Lewison, together with his brother Matthew and friend Cam McLellan, established OpenCorp. With a wealth of experience and an expert knowledge of Australia’s property market, they saw a gap in the market when it came to providing valuable guidance to investors, while minimising their potential risks.

“We’re a team of property experts. We’ve been doing it a long time now, and the key thing for us is making sure that people are going into all of their decisions with their eyes wide open, understanding the risks and understanding the strategies to overcome those risks,” he says.

With a personal fortune sitting somewhere around the $45m mark, Lewison has enjoyed significant success and has come a long way from his first investment property on the outskirts of Melbourne – but he’s the first one to admit the industry is riddled with risks.

“There are so many risks involved; it really is like a minefield out there. But we’ve done it for a long time and our track record and client testimonials speak for themselves,” he says.

The company is so confident in its ability to find low-risk, high-return real estate that it offers a rent guarantee to investors.

“The types of properties we’re in are in demand from tenants, so we back our service by saying that if you can’t find a tenant who’s paying you rent within a certain time frame, we’ll step in and cover the cost to give you peace of mind,” Lewison says.

“Typically, we don’t need to step in and do that, but it puts our money where our mouth is that we’re choosing the right properties for people and it’s providing a safety net for investors.”

The unwavering certainty comes as a result of the firm’s tried-and-tested MAP (market, area, property) approach, which leverages the expertise of 80 property experts to identify ideal opportunities for investors.

“We work from a MAP principle, so we look at which markets are right, which area is best inside those markets and then which properties are right inside those areas,” Lewison explains.

“About 180 hours of research goes into finding the right property per person, and we’ve got a research team scouring Australia”

“About 180 hours of research goes into finding the right property per person, and we’ve got a research team scouring Australia for the right properties.”

It’s a methodology that Lewison says would be near enough impossible to execute without a dedicated team of industry professionals on hand.

“If you just walk past the local real estate agent, there’s very limited chance of finding the right property,” he says.

“Even if you understand the right market to be in and the right area to be in, you might end up choosing the wrong property, and instantly nothing else matters because you’ve thrown all of the hard work out.”