The two things which make up total returns in property

The two things which make up total returns in property

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.


Today we’re going to talk about the two things which make up total returns in property.

When you invest in pretty much any asset class, there are usually two ways you can make money.

This is the same in property.

The first is through cash flow or income.

In property this is called rental returns.

In business this is usually called revenue, income or sales.

It’s pretty much all the same.

When you build a portfolio you can treat it like a business and your revenue is your rent received from your tenant.

The scarcer and more desirable the property you own in the rental market, will generally increase your returns.

The second is called capital growth.

In business this is the appreciation of the company as determined by the start of the years valuation and end of the years valuation.

Once again all pretty much the same outcome.

To understand how much the asset is worth.

Changes in a properties value is the result of changes in demand and supply.

To much demand and too little supply, prices increase, and vice versa.

Re-zoning, renovation, subdivision, extensions etc…can increase capital growth in property.

So too can increased population, more jobs, more amenities such as new cafes, shops and high demand schools to name a few.

Like in business you want to increase your income and valuation of your asset.

In turn increasing your total returns which is rental income + capital growth.

If you experience a 4% rental yield and 5% capital growth.

You will have experienced 9% total returns for that particular year of ownership.

The reason why property has been so successful for investors is the compounding affect caused by the leveraged asset.

Hopefully you can see there’s more than just one way you generate returns with property.”

Is it better to buy one expensive property or two cheaper properties when investing

Is it better to buy one expensive property or two cheaper properties when investing

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to talk about whether it’s better to buy one expensive property or two cheaper properties when investing.

Isn’t more of something better?

More food, more time, more money!

Therefore, wouldn’t more property be better?

Well, this really depends on what you are trying to do in my opinion.

Someone with a keen architectural eye, who wants to invest in a prime inner city suburb and oversee the renovation themselves.

Is very different to someone looking to build a property portfolio, through buy and hold and potential value adding strategies into the future.

The inner city renovator isn’t just an investor, they have an emotional connection to their property.

They get satisfaction from the process and any money made is a bonus.

Whereas the person wanting to build a portfolio, is purely interested in the numbers and return on investment.

I would argue it would make more sense to diversify on two cheaper ones, than one large purchase.

My argument is based on markets growing at different rates.

Therefore if you can pick the best markets, it makes sense to have more properties in these markets.

More property means multiple things when investing.

It means you can liquidate or sell a property in your portfolio in the best performing market when required.

It means your portfolio will take advantage of differing growth cycles.

It means your rental returns or yields will often be higher than the expensive property.

One important point is I wouldn’t recommend just buying any cheap property for the sack of it being cheap.

The property needs to make sense for the local market, and meet the demand of the local community.

For example a 1 bedroom unit in an area with 80% families, will probably not make too much sense.

All in all, more properties are generally better for investors portfolios in my opinion.”

Where should you buy your first home

Where should you buy your first home

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to talk about where you should buy your first home.

In short, this topic is totally individual i.e. it’s really up to you.

But if I was buying my first home, this is what I would do.

Decide if you are buying property because it will make your lifestyle easier or more enjoyable.

This means living near your everyday activities such as work, schools, shops and transport.

Would it make sense for your situation if you took.

The i.e. $500 per week rent your currently paying and purchase something that will cost similar to hold?

At the end of the day you will have an asset.

Which is generally a good thing.

Also, currently various state governments are offering first home buyers grants and stamp duty exemptions.

Some cover established property, some are only applicable to new property.

The second option you have is whether you simply want to make some money.

If money is the option.

Decide if you would be comfortable purchasing in an area you may not want to live in.

The area may not even be in the same state, but may give you better returns.

You should also understand there are areas all around Australia for pretty much any budget and any investment strategy.

This means you can invest for under $400k or above $1m+.

Another key point to note, is before you invest, try and really understand which strategy you will be implementing.

There are over 40 options if you get really finicky.

But really about 10 main ones.

As a first home buyer who is investing, I would likely focus on either renovation, knock-down rebuild, positive cash flow and buy and hold.

Therefore the areas you buy in will need to be conducive to whichever strategy you use.

This means staying within budget and generating the potential return you are after.

My last bit of advice would be to try and not stress during the process.

Try make the process fun!”

Why the cost to build varies around the country

Why the cost to build varies around the country

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to talk about why the cost to build a house varies around the country.

This is from a buyers agents perspective, not a builders.

You would think to build the same house would cost the same.

But no!

Even different regions within the same state can vary in pricing.

As a buyer, it’s good to understand this information as it will help you when deciding on what to physically purchase, particularly if you intend on building.

Depending on where you build around Australia, there are a number of factors you should be aware of:

– Sloped sites are generally more expensive to build on.
– A more detailed house such as double brick will cost more than a lightweight material like weatherboard.
– Double storeys will usually cost more because of the additional work involved such as extra stairs, extra level of flooring.
– In a capital city it may be easier to source certain materials and labour i.e. whilst in a regional area it maybe really hard, making remote locations usually more expensive.
– A prime CBD location, can sometimes make for additional expenses in road closure permits and storage
– Overly complicated houses or overly dense developments can get objected by neighbours and halt the approval progress.

Demand and supply ultimately affect the cost to build.

A few demand side factors:

– A growing local GDP or economy, creates greater disposable income, enabling more households to renovate and re-build.
– Increasing property prices makes building more viable, i.e. if a project costs $500,000 and it’s worth $600,000 at the end, then more projects will get built.
– Government grants can make buying land and building houses more affordable.

A few supply side factors:

– Re-zoning changes and new land releases will put massive upward pressure on supplying houses.
– Competing industries or jobs for labourers will enable trades to charge maximum prices.
– State taxes, fees and insurances vary between states and can affect the final construction price.
– A project home builder, constructing hundreds/thousands of homes per year will generally have greater cost efficiencies than a custom builder.
– That same project home builders pricing can vary if they don’t build as much volume in another state, as they won’t experience the same cost efficiencies as in there dominant state.

According to recent figures, custom build single storey and double storey dwellings can vary around Sydney, Melbourne and Brisbane from the low end of around $1,700-$1,800/m2 to over $3,000-$5,000/m2.

If your looking to build a house make sure, you understand why you’re building it.

Is it for yourself, or for investment?

If it’s for investment, make sure you don’t overcapitalise.”

What makes a great investment property for you

What makes a great investment property for you

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today we’re going to discuss what makes a great investment property for you.

This is quit a subjective topic.

Meaning, investing is purely individual, like your favourite flavour of candy.

For a high income earner, reducing tax might be extremely important.

For a lower income earner, increasing income through positive cash flow.

Or for someone looking to simply build wealth, a knock down rebuild may be best.

There are so many ideas and options to determine if the investment will give you the returns you want.

The most common questions to ask about a great investment property.

Are you looking to buy property for wealth, income or something else?
Is capital growth or strong rental returns more important to you?
Does the property need to be built from a certain type of material such as brick or would weatherboard be fine? This can effect the price you pay
Is the aspect important? i.e. north or east
Will changing interest rates affect your ability to hold the property?
Are you looking for a wow factor such as views, cbd or water location?
Does the property need a certain land or internal size?
Is there public transport, shops, schools and places to get food or drinks?
Is there flooding or socioeconomic issues locally?
Are incomes rising or falling?
What do people do for work?
Are vacancy rates high or low?
Is the population growing quickly? Sometimes this is good, sometimes not so good in my opinion

One of the most important questions to ask.

Will my tenants enjoy living here?”