[On-Demand Webinar] First Time Property Investor Webinar

First Time Investors Masterclass

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Dennis Wong

• Product & Training Manager.

• Property investor for the past 10 years.

• Personal experience with renovations.

• Great amount of industry experience.

Material contained in this presentation is an overview only. It should notbe considered as a comprehensive statement on any matter nor reliedupon as such.

This presentation contains general information only and does not take intoaccount your personal objectives, financial situation or needs and youshould consider whether the information is appropriate to you beforeacting on it.

Before acting on any information you should consider seeking advice froma financial adviser and your accountant before making any financialdecision in relation to any matters discussed in this presentation.

General advice disclaimer

We help investors

build and manage

their property portfolios

• Guided and mentored thousands of clients to plan and purchase property since 2006

• Helped clients build wealth through properties

• Provides superior real estate information

• Assisted clients reduce debt and retire early

• Over 260,000 members

Real Estate Investar

In partnership with…

Poll: When are you looking to purchase?

Poll: What’s your biggest challenge with investing right now?

Why invest in property?

• Tax benefits

• Additional income

• Replace current income

• Building wealth

• Setting up for retirement


Source: www.qv.co.nz


• Superannuation at retirement -$600,000

• 20 years of retirement - $30,000 per year

• 1 holiday per year - $10,000

• $20,000 remaining or $416.67 per week to spend

Would you be happy with that?


• $600,000 in superannuation

• 1 investment property – annual net income of $19,580

• Superannuation $30,000 + Rental Income $19,580 = $49,580 per year


Portfolio of 7 properties worth $3.5M

$100,000 of rental income coming in

Setting achievable property investment goals

• What is your actual goal?

• Hint: If you are watching, it should involve buying a property!

• How do you plan to achieve this goal?

• Is it reasonable to expect you can complete that goal?

• Do you have the time?

• Do you have the know how?

Setting goals, some helpful tips

• Start at the end!

• Identify where you are now

• What are the steps you need to take to get to your goal

• Your goal should be comprised of several smaller goals

• What do you need to complete those smaller goals, write out those details

• Start!

• The number one reason most people fail is they don’t do that last step!

Common Terms

• Capital Gains – is the profit from the sale of a property.

• Capital Growth – the increase in value of a property.

• Cross Collateralisation – when the collateral for one loan is used as collateral for another loan.

• Average Days on Market – the average time it takes property to sell or rent.

• Depreciation – is the wear & tear on your investmentproperty where investors can claim the depreciation ontheir investment property against their taxable income.

• Equity – is the value of ownership built up in aproperty. Calculated by current market value – loanbalance.

Common Terms

• Listing Price – price listed for sale.

• Median Price - the middle price.

• Negative Gearing – form of financial leveragewhere investors can borrow money to purchasean investment property & the rental income can’tcover both the loan repayments & on-goingexpenses.

• Offset Account – is a transaction account thatis linked to a property loan & any money is usedto offset the amount you owe on the loan.

• Positive Gearing – rental income is greaterthan the loan repayments & on-going expenses.

• Redraw – allows you to borrow money you’vealready repaid into a loan.

Common Terms

• Rental Yield – rental income as a % of the property’s value.

• Gross Yield – calculated without expenses or loan payments

• Net Yield – calculated after expenses & loan repayments

• Settlement – the day ownership of a property is officially transferred.

• Vacancy Rate - % of available properties available for rent

• LMI – lenders mortgage insurance; for buyers without alarge enough deposit to protect the lender.

• LVR – loan to value ratio; amount of money borrowed for ahome loan compared to the value of the property.

• PPR – principal place of residence; the home you own &living in.

Property Acquisition Process• Finance Approval

• Select Property Investing Strategy

• Select an asset class of property

• Research suburb data & choose location

• Search for properties

• Analyse numbers

• Negotiate with Listing Agent / Auction

• Engage in Conveyancer / Lawyer

• Sign the Contract

• Building & Pest Inspection

• Property Settlement

• Find a Property Manager

• Track & optimize your portfolio’s performance

Finance: Loan Types

• Interest – only paying the interest or the cost toborrow money from the lender.

• Principal & Interest – paying both the cost toborrow as well as the loan itself.

• Variable Rate loans – the interest rate changesduring the life of the loan as the market interestrates change.

• Fixed Loans – the interest rate is fixed & doesn’tchange if the market interest rate changes.

• Split Loans – allows for a portion of the loan tobe on a variable interest rate and the otherportion on a fixed rate.

Finance: Loan Types

• Package Loans – link other bank accounts with your loan; lenders will offerdiscounted interest rates, credit cards, offset accounts, redraw facility & otherbenefits. Often attracts an annual package fee.

• Offset – help reduce the amount of interest you pay whilst having access tofunds in another account.

• Redraw – allows you to withdraw money that has already been paid into a loan.

Finance: Loan Types

• Offset – help reduce the amount of interest you pay whilst having access tofunds in another account.

Over $27,000 in interest savings!

• Redraw – allows you to withdraw money that has already been paid into a loan.

Loan Account Offset Account Pay Interest on Interest Paid over 5 Yrs

Property 1 $500,000 N/A $500,000 $125,000

Property 2 $500,000 $110,000 $390,000 $97,500

Loan Account Required Principal

Payments

Extra Principal

Repayments

Loan Account

Balance

Withdraw

Property $500,000 $3,000 $10,000 $487,000 $10,000

Finance: Mortgage Brokers Vs Banks

Bank – can easily speak to the loans managerto organise a loan. Most people will approachthe bank they have their savings with.

Mortgage Broker – acts as an intermediarybetween the borrower and the bank / lender tofind them best product.


Benefits

• Has access to a wider range of lending products

• Negotiates with mortgage lenders based on your position

• Presents a shortlist of best deals for you to choose from

• Translates any mystifying financial jargon

• Advise the best product for you

• Help & support you through the whole loan application process

• Save you time & stress

• Their service is generally free

Cons

• Brokers receive commissionsfrom lenders for bringing thembusiness, so they may havefavourites

• Non-commission paying lendersmay be ignored even if theyhave the best deals

Mortgage Brokers


Benefits

• A loan officer can match you withthe best internal product available

• Established relationship with yourlender

• Experience working with bank,policies and loans

• Lower interest rates (not always)

• Linked accounts with existingprofile for automation and ease ofaccess

Cons

• Limited product range – onlyhave access to your bank’sproduct offering

• Potential for being overcharged(not transparent withcommission)

• Having all your eggs in onebasket

Bank

Poll: What is your property investing strategy?

Strategy

Identify what you want to achieve out of purchasing an investment property:

• Cash flow / passive income

• Building equity

• Manufacture growth

• Replace salary by a certain date

• Assist with retirement

Strategy

• Positive Cash Flow – the rent from an investment property covers allyour expenses and loan repayments, leaving you with surplus cash inyour pocket.

• Renovations – purchase an old, run down or outdated property with theintention to renovate / refresh to increase the value of the property in linewith newer or renovated properties in the suburb. Also gives you ability toincrease rents.

• Discount – purchase a property below asking price but more importantly,below market value.

• Sub-divisions – when developers or land owners create new allotmentswith a block of land. Most common subdivision is splitting 1 lot into 2sections with 2 titles.

Strategy

• Strata-Titling – great to manufacture equity where you purchase a set orblock of units that are all on one title & splitting the title so each unit nowhas its own individual title.

• Dual Income – purchasing a property where investors can earn two incomes.

• Capital Growth – purchasing property in a growing area where the valueof your property is expected to increase over a long period of time.

• Development – buying land or existing buildings and then makingimprovements to them or creating new buildings to then sell.

Strategy

Strategy

Strategy – Buy & HoldAssumptions• Purchase Price - $500,000 (20% Deposit)• Capital Growth Rate – 5%• Inflation – 1.8%

Strategy – Manufacture EquityAssumptions• Renovation Costs – 10% of purchase price

Strategy – Equity GrowthBuy & Hold

Manufacture Growth

Strategy – Cash FlowNegatively Geared

Positively Geared

Build a Team of Experts

• Mortgage Broker / Lender

• Accountant

• Solicitor / Conveyancer

• Quantity Surveyor

• Property & Suburb Data Company

• Buyer’s Agent

• Property Manager

• Contractors – plumbers, electricians, painters, pest controllers,building inspectors or handymen

Insurance

• Landlord – covers loss of rent & damages from tenant.

• Building – covers unexpected events that damage your building.

• Contents – covers items inside the property.

• Holiday Rental – specialises in insurance for short term stay properties

• Income Protection – covers you if you are unable to work for a period of time due to illness or injury.

• Life – cover mortgage repayments in case of death.

Negotiation Tips

• Real Estate Agent isn’t your friend

• Don’t make or be pushed into a rushed decision

• Be information rich

• Ask lots of questions

• Understand the seller’s motivation for selling

• Know your price limit

• Start lower with your first offer so you have room to negotiate

• Not always just about price, also use the terms ofyour offer to negotiate (settlement time, deposit,conditions, furniture, unconditional).

Research – Love the numbers, not the property

• Average Days on Market – Sales & Rental

• Vacancy Rates

• Median Price – Listing & Sold

• No. of Auctions

• Clearance Rates

• Level of Discounting

• Comparable Sales

• Low, median & high price ranges

• Sales History

• Listing History





What type of investor are you?

Pros• Save you money

• It can be a huge amount of fun

• You have access to every property in New Zealand

• It can become a passion for you

• Learning experience

Cons• You can make mistakes

• Each mistake can cost you time & money

• It can be time consuming

• It can be mentally & emotionally draining

• More likely to buy in boom & bust areas

• More likely to invest with your heart than your head

DIY Investing

What type of investor are you?

Hands Off Investing

Pros• Save you time

• Develop a property investment strategy

• Experts look out for your best interests

• Research & experience can save you money

• Work inside the industry every day

• Make buying property simple & stress free

• Deal with real estate agents, developers & builders on your behalf

• Access to off market opportunities

Cons• Fees (buyers agents

generally charge 2-3% of purchase price) + engagement fee

• Can be expensive, charge you for every property you purchase

• Some buyers agents won’t let you have a say in what you purchase

• Some buyers agents are actually property marketers

Are you ready to take action?

Option 1: For Hands Off Investors

Premium Membership

• Complete end to end solution to help you purchase profitable investment property

• Team of industry experts working for you

• Achieve the outcome without the stress or hassle

Option 2: For DIY Investors

Pro Membership

Access to Corelogic RPNZ included

100% tax deductible

Unlimited phone & email support

Xero non-GST Cashbook included

www.realestateinvestar.co.nz

http://www.realestateinvestar.co.nz/

Poll: Would you like…

Premium Membership: Strategy Session

OR

Pro Membership: 1-on-1 Demo

Questions?

Register for a personalised 1-on-1 demo –

https://info.realestateinvestar.co.nz/pro-membership

Book a free strategy session –

https://info.realestateinvestar.co.nz/premium-membership

https://info.realestateinvestar.co.nz/pro-membership

https://info.realestateinvestar.com.au/premium-membership