Five Tips for Investing in Today’s Real Estate Market
Today’s real estate environment offers some unique challenges to investors. In this article, DG Institute founder and CEO Dominique Grubisa looks at a case study to give you some tips on how to overcome them.
As a property investor, you likely already know about the general research that you need to conduct. You already know that you need to research the location, study demographics, and find properties that suit local demand.
However, there are many issues related to property investing that many people don’t really talk about.
DG Institute client Jock Wallace discovered that when he started to work with us. This article examines some of the key tips that he has to share. But first, let’s look at the success that Jock has enjoyed with our team.
Jock Wallace’s Success Story
Jock Wallace already understood the basics of property investing before he came to DG Institute.
In his mind, it’s the little things he learned that made a huge difference. In particular, he benefited from the peace of mind that came from working with such an experienced team.
We’ll get into the details below.
The important thing here is that Jock has already enjoyed two major successes using the things he learned.
The first successful deal was a unit that he purchased for $1.12 million in Manley, Sydney. Jock bought the property and undertook a number of cosmetic renovations that cost him $120,000.
Those renovations made a huge difference. He later managed to sell the property for $1.6 million, which made him a $235,000 profit.
His second success also came in Manly. Jock bought a property in the middle of Manly Beach for $920,000. Again, he put it on the market after completing some cosmetic renovations. That property generated a $97,000 profit on a $1.16 million sale.
That brings Jock’s total profit up to $332,000 – for those two projects alone.
The question now is how did we help him?
These are the five tips that Jock gleaned from our team that you may be able to use.
Tip #1 – Develop Your Soft Skills
In her book, The Hard Truth About Soft Skills, Peggy Klaus writes:
“Soft skills get little respect but will make or break your career. Master your soft skills and really get ahead at work!”
Jock realised that for himself when he started working with DG Institute. As he puts it:
“One of the most significant things that I’ve learned from <DG Institute> is about the soft skills in dealing with people. <This involves> Personality types, emotional intelligence, things of that nature, that significantly impact the environment I work in.”
The ability to communicate effectively can have an impact when you’re negotiating a deal. If you understand the seller’s position and emotions, you can leverage them to achieve better terms. Furthermore, your soft skills help you to build relationships with people. This proves beneficial when working with real estate agents who may be able to expose you to new opportunities.
Tip #2 – Start Marketing Before You Finish Working
Like many investors, Jock hadn’t considered marketing a property before he’d finished working on it.
Unfortunately, this strategy puts you on the back foot. It usually means you have to hold the property for longer, which adds cost.
With DG Institute, Jock changed his strategy. He explains:
“My technique now is to go to the market before I’ve even finished the projects, and use that as an appetizer for people who want to get in early.”
Jock now creates anticipation before the property goes onto the market. In some cases, this can create enough demand to raise the eventual sale price of the property. However, Jock’s main goal is to achieve a sale before completion of his renovation work. This means he spends less time holding the property while searching for a buyer.
Tip #3 – Find Great Accountants
Property investing is a business and you need to treat it as such. That means taking care of the administrative side, which includes accounting.
In an article for The Guardian, accountant Andrew Minsky explains some of the reasons this is so important:
“Many new businesses are not used to having to account for their transactions, and may therefore forget to record them. This can mean they miss out on valuable tax deductions on expenses or, worse still, understate their income, leading to potential fines and penalties.”
You need to work with accountants who understand the challenges involved with property investing. As Jock puts it:
“Because of the environment that we deal in, it’s important that the people that I’m dealing with in the accounting understand my structure and what it is that I’m doing.”
Your accountant needs to understand your investment strategy and help you work on relevant tax issues. They will need to understand issues like depreciation and help you to maintain all of the paperwork related to your work.
Tip #4 – Have a Talented Legal Team
Buying a property involves the creation and exchange of contracts.
That alone is enough of a reason to have a good legal team behind you. However, investors have more incentive as they’re aiming to make money from their work. As such, their contracts often contain conditions that will protect them if a deal goes south.
When speaking about the legal professional that DG Institute recommended, Jock says:
“The advice that can be obtained from these people offers comfort because the people are skilled in the area of property.”
That peace of mind is invaluable to you as a property investor. It allows you to focus on the task of making a profit from your property. Having a legal team that understands investing means you don’t have to worry about putting yourself at risk from a legal standpoint.
Tip #5 – Focus on Cosmetic over Structural Renovations
Jock used renovations to add value to both of his properties before selling them.
What’s key here is that he focused on cosmetic work instead of structural. As he puts it:
“The difference between a cosmetic and a structural renovation is significant. Because once you go to structural, you’re involving the council in the process, which adds time, money and complexity. Whereas cosmetic is a much quicker process.”
Taking the complexity out of the process is a massive benefit to you as an investor. It means that you can get the property to market much quicker. As a result, you’re spending less money on holding the property. Plus, structural renovations often come with complications that add time and money to the process.
Focusing solely on the cosmetic side of things allows you to add value while maintaining control of your budget.
Investing in Today’s Marketplace
Jock’s experiences show that it’s possible to invest in today’s marketplace. Even with so much uncertainty in the 2019 market, he’s created a substantial profit from both of his projects.
The tips in this article will help you to work on things that many seasoned investors don’t talk about:
- Develop your soft skills and make sure you’re working with the right people.
- Don’t wait until you’ve finished your work to market the property.
- And when it comes to the work that you do, focus on cosmetic renovation over structural renovation.
If you’re interested in learning more about property investment and profiting from distressed property, join the upcoming Real Estate Rescue webinar with Dominique Grubisa.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practising legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at firstname.lastname@example.org
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.