The Secret to Successful Property Portfolio Management
Investing in Melbourne’s real estate rental market is a grand opportunity for you to create capital growth through real investments to work towards funding your retirement. Sourcing the right property managers in Melbourne to manage your property is just as key as finding the right property. The secret to successful investing is to treat your portfolio like a business, a business you back with the right professionals, the right financials and the right local knowledge.
The Right Property
With property prices in Melbourne rising over 35% over the past 3 years, Melbournians are being pushed out of the property market into the rental market, knowing that their only housing solution is long term renting. Reading the market – knowing which suburbs are demanding good prices, knowing which suburbs have room for growth, and knowing which types of properties are of high demand is essential to making your purchasing decision. Choose two or three suburbs where you want to focus your energy, and check out the properties for sale, the properties for lease and record the changes happening in the marketplace. CoreLogic reports or the REIV reports are great tools to do your research. Ensure the properties you consider to purchase have a good walk-score – a vital requirement for maximising your renter interest and your weekly rental. Understand what’s important to you – paying off your investment quickly with a good rental yield, or capital growth for the long term? Once you’ve worked out what’s best for you, go ahead and make your purchase!
If you are new to property investing in Melbourne, develop relationships with key people who can make your property investment journey a success. Local real estate agents, property mentors, conveyancers, buyer’s advocates, building and pest inspectors, and mortgage brokers will be your best friends during the journey.
Getting the Money
There are so many investment loan options for investors, and most starting out will go for a Home Equity Loan, to borrow against their principal place of residence for their new investment property. If you don’t have a principal place of residence, then you may need to come up with a 20-percent deposit plus stamp duty and other costs to secure an investment loan. If money may be a hurdle for you to invest, maybe look into investing with a business partner or a friend. Remember, you’re not married, it’s a business partnership, so if someone wants out, it’s a financial break, not a break-up.
Organising Your Property Management Team
Once you’ve made your purchase, but prior to settlement, interview three-four property managers to ensure you find one who is like-minded, understands your level of willingness to maintain the property beyond the necessary regulations, as well as your rental requirements. Are you going to rely on your property manager to take care of any electrical, plumbing or handyman issues, or do you have a staple of mates who can help you? Initially, you’ll want to help your mates and get things done at mate’s rates, but the ever-consuming issue of getting your mates there in the time you need them to be there, adhering to the new Residential Tenancy Law policies and the anguish of it all, does not help you become a success. You have a property manager for a reason – trust them to maintain your property with their expert trades and suppliers.
The only way to get your rent paid in today’s day and age is electronically. Your renter pays your real estate agent electronically, and your real estate agent pays you electronically. It can be all done within 24-hours and there’s no need for cheques and paperwork. The quicker the money is in your bank account, the quicker you reduce your interest owed, so it’s a win-win. Ensuring your property manager is up to date with a cloud-based property management software, like PropertyMe, will make life easier for your accountant when it comes to tax time.
Knowing the Laws
In March 2021, new Residential Tenancy Laws came into affect, which means there is more of an onus on the rental provider (the owner) to make sure that their investment property is safe, secure and healthy for a renter to have quiet enjoyment while living in your property. Consumer Affairs have a great guide, written in black and white to help rental providers with what they can or cannot do before, during and after a tenancy.
As your property portfolio grows, keep your professional team the same. Use the same property manager, the same conveyancer, the same buyer’s advocate, the same mortgage broker, the same accountant, the same building and pest inspector. All these people have a vested interest in your portfolio and understand your investment needs.
Develop a Strategy
You’ll start to need a financial advisor to help you manage your strategy when it comes to buying and selling, working out which properties are income generating and getting capital growth and which properties are costing you money. A great financial advisor will create a five-year, a 10-year and a 20-year plan, so you can understand what you need for growing your wealth for retirement, understand which indicators will show if your properties are performing or under-performing and help you reduce your debt and tax liabilities.
Knowing The Statistics and Understanding Your Goals
In 2011, 5.75% of the Australian population owned one investment property. 18% of all investors, or 1.42% of all Australians owned two investment properties. 5.5% of all investors or 0.43% of all Australians owned three investment properties. 2% of investors or 0.16% of all Australians owned four investment properties. And 0.8% of investors or 0.065% of all Australians owned five investment properties. It takes a minimum of three properties to be on your way to financial freedom, financial security and the independence required to live a self-funded retiree lifestyle. Where do you want to be? Having the right Melbourne property management team will be the key to your success.