iNetWorx - Helping you Navigating the Tricky Terrain of Property Investment

WHY MOST PEOPLE GET IT WRONG

The allure of property investment is the go-to asset class for millions of Australians, but the journey can often become a maze for those who opt for the Do-It-Yourself approach.

New data from the Australian Taxation Office (ATO), reveals that over 20% of Australia’s 11.4 million taxpayers owned an investment property in 2019-20.

That means that around 2.22 million taxpayers in Australia are property investors, and collectively they own 3.25 million investment properties.

Here’s how many properties investors hold in Australia:

71.5% of investors hold 1 investment

18% of investors hold 2 investments

9.7% of investors hold 3, 4 or 5 investments

0.8% of investors hold 6 or more investment properties

The data also shows that, while older Australians used to own the majority of investment properties, that has now shifted - today, ‘working age’ Australians dominate when it comes to property investment. 

Why then, in a country where tax breaks make it affordable, where rents are soaring and vacancy rates are at all time lows, do the vest majority only have 1 investment property when they could easily have 3,4 and 5 in the same period of time?

Why DIY doesnt work for most

Here's what typically unfolds:

Preliminary Research: Armed with a few internet searches, most start by analysing property prices and locations, maybe they even buy a DIY book on investing. While this is a start, it barely scratches the surface of the research that should go into an investment that can be very costly to exit and has so many variables to consider.
Talking to your bank: Banks don’t work for you, they work for their shareholders. They use a variety of methods to tie your home to your investment purchase which can expose you to unnecessary risk if something goes wrong. Talk to someone who makes money getting you out of debt, not someone who’s entire business model is based on keeping you in debt.
Agent Engagement: Trusting traditional real estate agents is a bad move when it comes to finding the best possible property for you because they don’t work for you, they work for the seller, and must at all times act in the best interest of the seller, not what’s best for you. Add to that the limited listings each agent has and you can see why this approach rarely delivers optimal results.
Mismatched Property Listings: Instead of tailored recommendations, you're led to properties that don’t match your long-term investment vision simply because they can only sell properties they have the right to sell, which 99% of the time is an exclusive listing which they have for 30-60 days before it goes to another agency.
Flawed Cash Flow Analysis: Without expert guidance, many either stretch themselves too thin or miss out due to underestimation of funds required. This isn’t just like a second home your paying off, there are multiple vital steps you need to cover to ensure its not only the best investment at the point of sale, but that its structured correctly as well.
Price point Negotiation: Entering the negotiation believing the price point is the most important thing to consider is short sighted at best. There are 10 plus steps you need to take before you even begin looking at the price point to ensure the best possible outcome is achieved.
Missed opportunities: If you commit to the wrong property, your cash is tied up and you can miss better opportunities that may be just around the corner. Exiting a poor investment is pricey and can take years to sort out, avoid these pitfalls and don’t be another DIY statistic with 1 investment property when you can have 3-4 in the same timeframes and with less time and hassle spent to get it done.

The grim result for the vast majority of investors in the property space who go it alone? A minefield of financial setbacks, unforeseen expenses, and protracted periods of negative cash flow.

don’t LEARN the HARD WAY

Property investing is a sophisticated financial endeavour and must be treated accordingly.

The confidence most people have when it comes to investing is they believe because they can get finance and access realestate.com.au they can do it on their own, but the vast majority of people get it wrong.

Let me ask you this question: If you were about to spend $500,000 on a Ferrari, would you insist on the DIY approach? Would you put the car together on your own? Would you manage the ongoing maintenance and service requirements on your own? Of course not!

Here are just a few things you should consider when it comes to just the research stage of considering an investment property:

Economic and Property Cycle:

Understand the current phase of the economic and property cycle to avoid buying at the peak.

This means that when you’re ready to buy, it may be best to look outside your geographical area if your market cycle has recently hit its peak.

State and Suburb Selection:

Invest in states at the right stage of their own property cycle.
Choose suburbs with a history of strong capital growth that outperform the averages.
Check demographics and target suburbs with higher disposable incomes, suggesting more potential for property value growth.
Avoid areas with short-term oversupply risks.

Location within the Suburb:

Some streets or areas within a suburb will outperform others.
Avoid undesirable areas like main roads or those too close to high-traffic locations like schools, train lines, or commercial zones.

Property Type and Features:

Use a strict investment mandate to select the right property.
The property should have something unique, special, different, or scarce that sets it apart and appeals to potential buyers or tenants.

Price POint:

The goal isn't to find the cheapest property but the right property at the right price.
Many people commit to investments far above the price point they need which increases the interest load and can mean major headaches if the property is vacant.
The price should reflect the intrinsic value of the property and not just the market value.

Ratio of Investors to Owner Occupiers:

Properties in areas with a higher percentage of owner occupiers can have more stability in value.
Areas that are too heavy with investors can lead to an over supply of rentals and higher vacancy rates with lower rents due to the competition.

Intrinsic Value:

Avoid properties sold at a premium like off-the-plan properties with added costs.
Buy below the replacement cost or intrinsic value of the property.

Land to Asset Value Ratio:

Look for properties where the land component makes up a significant part of the asset value, even if it doesn't mean a large plot of land.

Potential for Capital Growth:

Locate areas with a consistent history of capital growth and a positive future outlook.
Understand the demographics of the area, which can influence growth potential.

Property with a Twist:

Look for something distinctive or unique about the property that can make it more desirable like dual occupancy or ability to add a bedroom and increase your rental income.

Potential to Add Value:

Properties that offer the chance for value addition through renovations, refurbishments, or redevelopment can provide added capital growth opportunities.

Financing and Budget:

Ensure that you have the necessary finances in place and a clear budget for your investment.

Be wary of over-leveraging, factor in buffers for things like interest rate rises and extended periods where the property is vacant to ensure all your bases are covered.

Long-Term Strategy:

Consider your long-term investment goals and how the property fits into that strategy.

If you plan is to generate sufficient income to fund your retirement, you will need 3-5 properties.
Create a detailed blueprint showing you exactly when to add property 2,3 and 4, as well the appropriate price point so you know when to start sourcing your next purchase.

Rental Yields and Cash Flow:

Understand the potential rental income and how it compares to your investment and maintenance costs.

Research and Data:

Base your decisions on comprehensive research and data rather than hunches or gut feelings.

Retail VS Wholesale stock:

By-pass the retail real estate market, and access direct to developer deals that are custom made for investors.

ATO Obligations:

Understand what paperwork you need to lodge with the ATO to ensure you are getting government support to help you pay the home off years sooner and if the property you have selected meets its strict criteria for accessing tax breaks.

If your into positively geared properties, understand your tax obligations and whether an approach that increases your tax payable is going to provide you the tax breaks your after

Debt Recycling:

Debt recycling is the process of using the income or cash flow generated from an investment property to accelerate the repayment of non-deductible debt on an owner-occupied property by 50%
By doing this, an individual not only reduces their non-deductible debt faster but also increases their tax-deductible debt associated with income-producing assets.

INFRASTRUCTURE SPEND

Understand what future boom areas local and state governments have committed their resources to over the next 10-15 years.
When a government has committed tens of millions to an area before housing estates pop up, it’s a great way to beat the market and ensure the area will only become more desirable as the infrastructure continues to develop over time.

Developer and builder research:

With a large number of builders going broke over the last 24 months, how can you make sure you’re with a builder that has the track record and financials to ensure your build is finished on time, and at the price originally specified?

Factor in the worst case scenario:

What if you lose your job, or the property is vacant for longer than anticipated?

What if interest rates double?
Ensure you have continencies so even if interest rates double, or your property is vacant for months due to renovations, it doesn’t impact your cashflows or the lifestyle you’ve worked so hard to enjoy.

Missing any of these key areas can be disastrous, so why leave it to chance when you can access all this research and more without cost or obligation?

THE WHOLESALER DEVELOPER NETWORK

iNetWorx have created a wholesale network of builders, developers and investment experts that do all the research and create purpose built investments custom made to your financial requirements. Here are just a few of the key takeaways:

Direct Wholesale Access: Why pay retail? Our developer network means you get properties at unmatched wholesale prices, sidestepping traditional markups.
Future-Proofing Investments: Our extensive research identifies the next boom suburbs, projected infrastructure spending, and long-term growth avenues.
Optimal Structuring & Strategy: From understanding the best loan structures to tapping into tax deductions, we ensure your investment isn't just sound—it's optimal.
Research-Driven Investing: Go beyond mere internet searches. Dive deep into curated insights, ensuring each property aligns with your investment strategy.
Correct Loan structures: Do not ever listen to the banks, they will tie up your home as a part of the loan structure and provide no security for you and your family if something goes wrong. Work with someone that makes no money from debt, as their focus will be to get you out of debt, not keep you there longer than necessary.
Comprehensive blueprint: How many properties do you need? When can you add more to your portfolio? What price-point, vacancy rates and yield do you need? Where is the next boom area and how can you get in on the ground floor? We will map all this out for you, and more, and provide you with the blueprint free of charge.
Long term projecting: Don’t focus on the week to week, paint a picture that covers the next 20 years, including exit strategies, asset protection and retire well before you can access your Super.
Sophisticated cashflow protocols: We partner up with expert finance professionals who understand the loan market and can guide you through how an investment loan is structured and serviced very differently to a normal mortgage. This alone can help you pay off a 30 year investment loan in under 10 years.
Debt Recycling: What stops people adding more property to their portfolios is the amount owing on their owner occupied home loan. Use our cutting-edge software to save 50% off the term of a standard home loan, without making any extra repayments.

iNetWorx: Property Investment Report

Key Issues addressed in report

DIY Dilemma: The allure of the DIY approach in property investment often leads to poor property selection and a lack of insight into the sophistication required to go from 1 home to 4 in just a few short years.
Superficial Research: Relying merely on internet searches, which provide incomplete data. This is like looking in the rear vision mirror to see what lies in front of you.
Misguided Agent Engagement: Traditional agents don’t work for you, have no interest as to whether it’s the best property for your goal, and likely have no experience with finance structures, debt recycling etc.
Mismatched Property Viewings: Ending up with properties that don't align with investment goals, and once your committed it can be quite costly to change your mind.
Faulty Cash Flow Analysis: Misjudging finances, either overshooting or underestimating, using inferior loan products, neglecting sophisticated cashflow software that can help you pay off your investment property in 9 years or less.
Blind Negotiations: Without market insight, there's a risk of overspending or buying at the peak of the market cycle.
Missed Opportunities: Funds get locked into one property, preventing other potential investments. Set yourself up so that when opportunities present themselves you have the ability to act on them without having to sell.
Overlooked Aspects: DIY investors often miss out on understanding proper valuations to build massive cash buffers, growth potential, rental yields, maintenance costs, tax benefits, debt recycling etc.
End Result: The culmination of these issues leads to financial mishaps and periods of negative cash flow which is why 90% of people can’t get past 12 propertyies.

Potential Upsides

Direct Wholesale Access: Avoid retail markups by tapping into the wholesaler developer network with hundreds of purpose-built properties, at below market prices.
Future-Proof Investments: Backed by research that identifies potential boom areas and long-term growth factors including infrastructure spend that leads to increased demand and lower vacancy rates.
Optimal Structuring & Strategy: Benefit from the best possible loan structures and tax deductions. A full 90% of investors get this part wrong even if they find the right property because they take advice from a bank when it comes to finance and neglect all the loopholes the successful property investor doesn’t.
Research-Driven Investments: Get deeper than generic internet searches with curated insights that align with specific investment strategies.

Effect on Finances

Enhanced ROI: By sidestepping the common pitfalls of DIY investment will ensure a better return on investment. If you get the first one right, the next ones are much easier and you can start adding more to your portfolio within a short period of time, where most people get stuck on their first property and never go any further.
Cost Savings: Direct access to wholesale properties avoids retail markups.
Financial Structuring: Sourcing optimal loan structures and tax benefits ensures the financial health of the investment and can help you pay a 30 year loan off in 10.
Future-Proofing: Investing in future growth areas ensures sustained profitability. You will also have all the worst-case scenarios factored in, so if interest rates increase, or your property is vacant for a few weeks longer than you anticipated it doesn’t throw your finances into a tailspin.
Rapid Loan Reduction: Effective debt recycling lets you use your rental income and tax incentives to pay your own home off years sooner. In fact, if you have the ability to pay off one home, you can verey easily pay off two in a shorter timeframe, and without impacting your lifestyle.

IN CONCLUSION

The realm of property investment is riddled with potential pitfalls but with the right strategy, a powerful network that works for you, not the banks, and a departure from traditional pitfalls, your property journey can shift from a challenging maze to a streamlined, profitable highway.

Don't just play the game; master it.