Property Planning Case Study #5 – Announcing the Property Planning interactive software platform! Do I need a large portfolio to achieve my retirement rental income goal of $100k? (Ep.167)

In this week’s episode, Dave, Cate and Pete take you through:

  1. Educate yourself. A sure fire way to get started on the property journey is to take the time to educate yourself. The trio take our listeners through the wealth of resources that are available to build a solid foundation of property knowledge.
  2. Mix with like-minded people. Or should we say, avoid naysayers? Negative Nancy’s can quickly unravel a smart strategy and plant seeds of doubt, causing inaction, which can often be worse than taking half-good action. Mixing with like-minded people provides an environment where ideas are exchanged and much needed support is provided for what can be a stressful decision.   
  3. Set your goals. Dave shares with our listeners 10 tips on how to create goals and stick to them. For further insights, take a listen to episode 82, “Goal Setting fundamentals for property success”.  
  4. Select where and what to buy. The trio discuss the critical elements of selecting a location and property to purchase. But don’t forget to look ahead and think how the first property could impact future long-term plans.
  5. Visit your areas and do your research. The trio share the best data sources for doing research from the comfort of a laptop at home or in the office. However, that does not negate the need to get out and about and take a stroll through the area you’re interested in purchasing in, particularly if you haven’t lived there before. Yes, property investors, this applies to you too!  
  6. Find out how much you can borrow & if there is any assistance. A critical step here is sorting out a budget, taking into account existing cash flowdesired cash flow and available funds post-purchase. Dave shares with our listeners why the lowest interest rate is in fact not the key to success. Ask yourself – is the property or the rate more important?  
  7. Save money for a deposit, consider shared equity, joint ownership. Money management! It may seem easy to a first home buyer as often they don’t have children, and/or might not be partnered yet with mortgages and credit cards to juggle. But the sooner you can set up an effective money management system, (and get your partner on the same page) the better! The trio discuss the basics of shared equity schemes and joint ownership. 
  8. Crunch the numbers. The trio discuss the fundamentals to factor in when crunching the numbers and how our listeners can shape up to present themselves well to the bank when it’s time to apply for the mortgage. Hot tip – you may have to go without Uber Eats for a while.  
  9. Get professional advice. Why is professional advice so important? The trio discuss their strategies when looking for independent advice and who to trust. If the advice is free, get ready to ask some probing questions. 
  10. Just do it! Much easier said than done. However, procrastination and the search for perfection can derail the best laid plans. Cate shares with our listeners her hot tip on how to overcome inaction. 


Show notes

  1. Educate yourself
  • Webinars that you can join in on, listening to podcasts, seminars. Plenty of articles on property – but you want to know who is writing it and check out their credibility. Are they spruiking, is it a marketing tool or are they really trying to educate people. Books. More time and money, there are simple courses that can be done or go to your local Tafe. 
  • Get a community facebook group – sometimes the tips are not that fantastic, you can glean a lot from that.  
  • Good relationship with a firm that do put out some good information – newsletter, feed. Great free education. Trusted advisors – it allows you to become informed so you’re able to make decisions that are right for you 
  1. Mix with like-minded people
  • Avoiding property discussion with non-likeminded people. They can unravel your strategy or plant seeds of doubt. But someone who is a friend looking from the outside in could have some really good questions for you. 
  • Exchange ideas and get confirmation that what you’re thinking and doing is correct.  
  • Mindset in life drives most of the outcomes in life. If you’re with likeminded people you’re spending time with people who have a similar mindset, more likely to make decisions that are aligned with your mindset. Don’t want to be around people who can drag you down or make you delay decisions. Inaction could be worse than taking action that is half-good in property.  
  • Taking what people say with a grain of salt if they’re potentially steering you in the wrong direction with their own personal biases.  
  1. Set your goals
  • Tip 1. Visualise your goals 
  • Tip 2. Ruthlessly eliminate your goals / keep it simple 
  • Tip 3. Set your goals for the now – short to middle term, otherwise it will seem too hard to achieve. Set long-term goals, but figure out what you can do in the short to middle term to work towardsthem.  
  • Tip 4. Create SMART Goals 
    • Specific (simple, sensible, significant). 
    • Measurable (meaningful, motivating). 
    • Achievable (agreed, attainable). Breaking your goals down into achievable steps are critical, or you may be overwhelmed and give up. 
    • Relevant (reasonable, realistic and resourced, results-based). 
    • Time bound (time-based, time limited, time/cost limited, timely, time-sensitive). 
  • Tip 5. Write your goals down 
  • Tip 6. Share your goals 
  • Tip 7. Create an action plan (or property plan) and timeline 
  • Tip 8. Take action – more powerful than just about anything else.  
  • Tip 9. Re-evaluate and assess your progress 
  • Tip 10. Set for goals for different parts and time of life 
  1. Select where and what to buy
  • First home buyers – it’s really important. If you don’t buy in the right location and type of property, it may be your forever home because it hasn’t kept up with the market and you’re not able to get ahead.  
  • Investors – you need to get the location right. Proximity to the CBD, amenities or bodies of water.  
  • What to buy – buying houses or units and buying character or period property.  
  • Think how this first property will impact your longer-term plans – first property can set you up financially and create equity needed to leap frog into future homes or investments, so really thinking about this is critical.  
  • Will it be an investment or lifestyle purchase – get clarity around that.  
  • If you have reasonable confidence where you might live in the longer term, try and buy in and around that location so you can keep pace with the location.  
  1. Visit your areas and do your research
  • If you’re going to buy a property, you should visit the area – drive around, ride a bike or even walk around.  
  • Here what’s happening in the neighbourhood, talk to the locals. What’s happening in the area and what’s planned to happen.  
  • ABS, CoreLogic, SQM and Crime statistics.  
  1. Find out how much you can borrow & if there is any assistance
  • What’s most important is figuring out your own budget, your existing cash flow and what you would like after the purchase for a cash flow buffer and surplus cash flow.  
  • People often compromise on their property strategy to go with a lender that has a lower interest rate.  
  • What’s more important – the property you buy or the lender? 
  • If there is a mainstream lender that won’t lend you what you can afford, then ask if there are other lenders that may lend you more.  
  • If it’s going to cost you getting into a home that is suitable for longer, you might end up getting a big bill because you have to sell that home sooner.  
  • Arguing over interest rates is not the most important factor.  
  • It would be unusual for someone in a bank to talk to you about the various government assistance schemes available A good mortgage broker will know where the opportunities are and what lenders and the wait lists and the eligibility criteria.  
  1. Save money for a deposit, consider shared equity, joint ownership
  • Labor government home owner assistance scheme – you only need a 2% deposit, it doesn’t have to be a new home – which forces people out on the perimeter or really small apartments in the city.  
  • Joint ownership – that’s one way that parents can help out their kids – go as tenants in common, rather than joint tenants.  
  • The earlier you set up an effective money management system, that interacts with your mortgage through the use of offset accounts, the better.  
  • A lot of first time buyers think it’s not that difficult to manage their money well – yet to have kids, not married yet, don’t have a mortgage or multiple mortgages yet. It is a bit simpler because there are less moving pieces.  
  • When you get a partner, make sure it’s working together smoothly prior to having kids.  
  1. Crunch the numbers
  • Investment – rental yields and outgoings 
  • First home – what are the outgoings associated with the property – particularly if it’s a strata group, owners corp or body corporate.  
  • The bank or lenders will look at the last 3 months of saving and spending activity – cancel netflix, gym membership, uber eats and everything.  
  • For investment purposes – income, rental income, tax depreciation, property management fees, property maintenance.  
  • Find out what’s going to make you look good from your strategic mortgage broker to the banks. 
  1. Get professional advice
  • Chat to a strategic mortgage broker and getting a good legal representative.  
  • Seek independent advice, specialists, work out what it is that you want support and guidance around.  
  • Big believer in being really good at what it is you do for a living and getting help at the things that you’re not an expert at.  
  • If it’s free, you have to ask some questions.  
  • QPIA – look for someone who is a qualified investment advisor.  
  • You’re spending a lot of money on property, if you have to spend a few hundred on a lawyer or accountant, then so be it. You need to get it right.  
  1. Just do it!
  • Easy to say, but hard to do.  
  • Procrastination and looking for perfection, there is no perfect time or perfect property. Focus on your criteria of must haves and nice to haves and just do it. 

Gold Nuggets

David Johnston – The Property Planner’s Golden nugget: Great speaker at a conference, action is more important than knowledge. It was powerful for me. In many regards, it’s true. If you invest over the course of your lifetime, there will be ups and downs. But we know that investments perform better than inflation and you learn through your mistakes and others mistakes. We learn much more through taking action, rather than sitting on the sidelines and spectating. You’ll be in a much stronger position, even if you have some small stumbles across the way.

Peter Koulizos – The Property Professor’s Golden nugget: Set your goals, tell someone about them and just do it. Far too many people who suffer from analysis paralysis and think they will find the perfect property for the perfect price. Good luck with that.

Market Updates

  1. RBA lifts the cash rate. Breaking news! The cash rate was lifted last week by 0.25%, taking the cash rate to 0.35%. This is a change of tune for the RBA governor, who was predicting that rates wouldn’t rise until 2024. The move came as a result of rising inflation pressures, but the inflation Genie might not be that easy to put back in the bottle. Stay tuned to next week’s market update episode for more on inflation.   
  2. Riding the market cycle wave. Property prices are certainly slowing and may well start to decline, but this is no cause for panic. Pete shares his research on the property downturns over the last 25 years and in the end, you need to be prepared to take the good with the bad. If you’re in it for the long-term, just sit tight and ride out the wave.   
  3. Late bids and auction rules. Cate shares a recent auction experience that had hearts stopping and blood pressure rising. It was bad luck for a bidder that jumped in too late, because when the hammer falls, the game is over.

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