5 Property Tools to Generate Wealth
I used to pick up my coffee from a shop in the city some years ago. Every now and again I would get there a little after the mid-morning rush and find the owner of a beautiful $300,000 Maserati had parked directly outside in a No Stopping zone, only to have a parking ticket stuck to their front windscreen.
I always looked at the car and imagined the driver as someone who had too much money to care about parking tickets or someone equally as arrogant who thought they wouldn’t get caught.
It’s not until I moved my own mindset though that I began to see another side to my story – that instead of driving around the block for 20 minutes looking for a park, maybe this driver’s time was more valuable than the parking ticket he or she would pick up from the illegal park. Instead of trying to save money and find a park elsewhere, maybe they were focused on getting a job done that would make them money. Judging by the Maserati, they seemed to be doing the latter.
We can apply this thinking to our own way of life. How many times have we snubbed trades or professionals in an effort to do it ourselves, only to find out that the few hundred dollars we saved cost us the better part of our weekend? Or worse still, the cost to fix the problems we tried to fix cost us much more in the long run because the other person had to fix the parts we tinkered with.
So when it comes to property investment, how can we shift our mindset into one of making money, rather than saving money? Here are 5 key areas where the benefit of spending the money upfront can really come back to you ten-fold.
Be prepared to pay good money for an accountant. They are more than just a bean counter and when used properly, can bring you wealth you never thought was available.
In cases like accounting, you don’t know what you don’t know. A good accountant will create financial structures like an architect creates buildings. They will move through the law and save you money that you didn’t even know you spent. Be prepared to spend $1000 an hour if it’s going to make you (or save you) $2000. At the end of the day good accountants have the potential to provide you with the financial clarity and strategic direction to take you to the next level.
For many people who are looking to buy property, their lack of experience leaves them with question marks around the real worth of the product they’re looking at. They can’t rely on the word of the selling agent, so who can they talk to?
Bring in the Valuer, a profession usually relied on (and paid for) by the banks but rarely engaged by the public.
An independent valuation will cost around $500 and will provide you with up to 10 comparable sales in the area based on multiple items from square meterage to street position. It will give you a fair market value that will allow you to make an educated decision on whether the property is a fair price or not and will put you miles ahead of the rest of the market who will be stood around guessing or relying on their emotions to guide them.
This is one of the most valuable reports you can purchase if you’re looking at purchasing a unit, yet most people don’t know what they are or aren’t prepared to spend the $250 to get one done.
Strata Reports are a record of all the dealings and financial spends that have occurred by the owners in the management of the building. They highlight any repairs that have been undertaken, any problem tenants, any structural issues. More importantly, they can highlight any special levies coming up in the near future. This point alone can highlight future potential spends that can be in the tens of thousands. The small cost that is required to pay for a strata report prior to purchase can mean the difference between financial gain and ruin for the unwary investor.
Repairs and Maintenance
The idea of having to invest more money into an already very large investment may seem excessive. Property is a material good though and with it comes decay and the need to maintain it.
Trying to save money by not spending in the appropriate areas when necessary not only creates angst with the tenants who live there, it simply delays the inevitable. Suddenly you’ll be faced with repairs that are labeled “critical” and must be paid at a time that will undoubtedly be considered inconvenient.
When it comes to repairs and maintenance, always be pro-active in getting things done. It will reduce your stress around the matter, it will keep your tenants appreciative and it will maintain the value of your investment.
Many people shy away from spending large amounts of money to upgrade their buildings with new balconies, balustrades or rendering. There’s no doubt that this may not always be financially possible for the owner but if the money is going to improve the building then there is a good chance that spending $1 will more than likely return $2.
Do some research and have a look at other properties that have done similar improvements. Compare their value with yours. If you can indeed increase the value of your property then it may be worthwhile financing the improvement and reaping the rewards from the investment once complete.
So the next time you’re faced with an upfront cost, before thinking begrudgingly about how much you might be out of pocket, take a step back and consider the result it could bring you. The reality may be that the “expense” is actually an “investment” and your return could be greater than you ever imagined.