Melbourne February 2012 Somersoft Meeting - Mitcham (Again!?)
- Thread starter The Y-man
- Start date
Your wish is my command.
Somersoft Meeting 28 Feb 2012 – Mitcham Hotel
Nathan Birch
General approach
· Have goals and business plans - People plan more for their holidays than making money.
· Knowledge / education
· Work out plan
· Take action
· Repeat
Detailed how started at age 18. Had saved up $35k by working at that age. Bought first property.
Now uses 20% deposit but used less earlier.
3 tips
· Buying below market value (so has exit strategy – so can get money back)
· Have strong cashflow (so property supports itself)
· Release equity through revaluing (use comparable sales) then buy second IP
8% or above is good starting point for yield. Good to buy under-rented properties.
Look for socio economic change – eg from housing commission to owner occupiers. Insure everything.
Looking for future growth:
* Research markets
* Strong yield
* Future growth
* Manufacture growth
* Sweat equity
* Foundation Porfolio
* Passive vs Active
Prefer not to go to council eg subdivisions. Higher risk and takes time. Can make more money from a renovation. Did stuff himself in early years.
When aged 13 saw how much cheaper Mt Druitt was compared to Paramatta. But since Mt Druitt had risen more as a %. So cheaper properties have more to move as still affordable.
Concept of having foundation portfolio of cheaper properties. Buying, adding granny flat, selling is high risk. Also requires a lot of work and don’t have investment after as you’ve sold it. Better to hold CF+ properties.
IF rents increase $10pw then that’s $100pw across 10 properties. Or $52k more pa without selling a single property (but doesn’t include what the PM takes). Personally is more aggressive – aims for 10% pa increase in rents.
Not Get Rich Quick – but could work in 5 to 10 years.
Typical Nathan Birch property costs $200k and rents for $300 – 350pw. Around 8% yield. Older houses and units in ‘blue collar’ or housing commission areas.
Relationships with banks / brokers essential to getting loans.
Has couple of trusts (discretional family trusts). Must be structured correctly.
Looks at individual deal more than area. Does not buy - sell - buy - sell. Just buys renovates and holds. Prefers to recycle equity instead of selling. Will only sell dud properties.
NAB have switched from using in-house to Valex (outsiders). Latter are more conservative. Bank managers have lost ability to influence valuations. Broker can order a valuation on it with some banks (ANZ, CBA).
Musts
* Purchase in line with goals
* Buy right properties
* Buy below market value
* Capital growth prospects
* Know your numbers
* Ensure strong cashflow
Avoid high risk properties – eg holiday letting or mining towns. Just bread and butter homes in outer suburbs or large regional centres.
How do find right deals
* Network with agents
* Find key target areas and become an expert of the area to know the diference between ‘cheap’ and ‘bargain’ properties
* Subscribe to RP data
* Understand new infrastructure and where local market is heading
* Knowledge on how many agents operate
People go in with lots of subject tos and offer low price. Better to make unconditional low offer. Agent may reject but call later. Increase initial offer slightly and add some clauses (but not too onerous). Make use of building report to renegotiate before cooling off period.
Real estate agents work for themselves – not vendor – you offer them solution to make the deal happen. Thank agent after it happens – maybe ask for something else like it – to cement relationship.
Bookings taken for strategy session - though disclaimer not financial adviser.
