Investor Tips

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Prospective buyers visiting auctions or looking at the market may have heard the term “passed in” before.

The quick summary is that this means that the reserve price has not been met and therefore the property has not managed to sell at the auction.

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This does not necessarily mean that the property doesn’t sell on the day – often, the highest bidder will be taken inside for further negotiations and the property may sell straight afterwards.

Century 21 notes that it can be frustrating for the vendor to have a property passed in at auction and it can be emotionally charged. They note that it is always a potential outcome and to ensure you have chosen an agent who will be able to best negotiate on your behalf if you are unsuccessful with selling during the auction.

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“Many prospective buyers will even increase their offering from what was bid at auction in order to secure the property, sometimes reaching the reserve price,” they advise.

In some states, the highest bidder has that first right of negotiation.

If the property passes in on a ‘vendor bid’ this means that the vendor has used their hand and no other bid was made past theirs.

If you don’t know what a vendor bid is, you <a href="/expert-insights/buying/31163-what-is-a-vendor-bid-property-investment-terms-explained" target="_blank">can read our explanation here</a>.

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If you’re the highest bidder and it is passed in, there are some things you can do to ensure it swings in your favour.

Firstly, understand that it doesn’t mean the property is a dud because it has passed in. The auction could have been lacklustre, and there could be any number of things causing people to keep their hands in their pockets on that day. 

You can read <a href="/expert-insights/buying/13460-what-to-do-if-you-are-the-highest-bidder-at-an-auction-that-is-passed-in" target="_blank">this guide from buyer’s agent Warwick Brookes</a> on what you’re supposed to do if you are the person with the first right to negotiation.

“Don’t be frightened to say things like, 'This is already at the upper end of what I think the property is worth' even if that is not the case. If there are no other buyers in sight and everybody has left except yourself, then minimise the amount you are willing to counter-offer,” Brookes advises.

And if you don’t have first right? It may end up on the market again. It’s also worth giving the agent a call and saying you’re still interested, or waiting around to see how the first prospective buyer responds.
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jduke-EHk3XBmHkn

What does “passed in” mean? Investment terms explained

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Sometimes, an investor is presented with the exciting prospect of picking up a dual-income residence at below-market buying rates. Many readers will be very familiar with the ‘duplex’ housing type in Australia. Throughout most capital cities and regional centres, duplexes have been a popular choice for many decades.

Modern innovation on the humble duplex design have also paved the way for new investor opportunities.

For those not familiar with duplex property types; a duplex property is effectively two conjoined properties occupying one block or plot of land and will share at least one common wall. Both dwellings in a duplex are constructed at the same time, however, depending on the title structure, they may be strata or non-strata titled.

If strata titled, each dwelling may be sold and owned separately. However if not strata-titled, it means both dwellings within the duplex can only be sold together. Sometimes investors can purchase both sides of a strata-titled duplex, enabling for the opportunity to owner-occupy one half, whilst renting out the other half.

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Each dwelling in a duplex is completely separate with no shared rooms or entrances. Each dwelling has its own bathrooms, bedrooms, living areas, courtyards and sometimes their own garages. Duplex designs have come leaps and bounds in recent years, evolving from what were once pretty ugly property types that were viewed as only occupying dodgy suburbs.

This was because decades ago, tenant demands were very different to what they are today. Typically, ‘good quality’ tenants favoured only houses on large blocks, located in suburbs very far from the CBD centre (greater than 20 kilometres). For this reason, duplexes were harder to market, with rental return sometimes not being strong, due to renter demand preferring detached houses.

However, fast forward to 2014 and as the cost of land skyrockets across most major capital cities and renter demand is shifting towards smaller living spaces (but in closer proximity to CBD centres); the concept of the duplex has become a popular talking point again.

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So here are some of the pros and cons for the duplex housing type:

Pros 

<ul>
<li>
The biggest pro is the potential to pick up two income revenues on what is effectively one property. 
	 </li>
	<li>
If well-purchased, this rental return rate can make for a positive cash flow from the outset. 
	 </li>
	<li>
Duplex properties tend to fare better in terms of re-sell value compared to a traditional house that has had a granny flat added to the property. 
	 </li>
	<li>
The potential to have no strata title structure creates an opportunity for investors to not only reduce holding costs (thereby adding more rental return to the property), but it also enables greater control over the expenditure of both properties. 
	 </li>
	<li>New providers and builders are innovating in this space. Designs are way more aesthetically pleasing these days and are in fact are being designed to give the appearance of one big house (from the street) rather than a duplex or an uglier ‘bolt-on’ house. This adds curbside appeal to both dwellings and helps maintain street value, and for investors this also enables greater capital growth potential for both dwellings.</li>
</ul>
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Cons 

<ul>
<li>
Whilst it is great having no strata costs; the reality is as owner of both halves you must maintain both dwellings as you would any other detached house. This can mean three to four bathrooms to maintain instead of just two; two kitchens instead of two; two gardens; HVAC systems and so on. 
	 </li>
	<li>
Further to this; you thus lose many of the ‘economies of scale’ gained when owning a unit in a strata titled complex of say a dozen or so units/villas. Things like roof maintenance become much more expensive when split between only two dwellings versus a dozen. 
	 </li>
	<li>
I mentioned the opportunity to live in one half and rent the other, however there could be capital gains tax consequences to doing this. The reason being it is effectively one title on the overall property. On the flip-side however, you could strata title each one and owner-occupy one dwelling (and never rent it out as an investment property) there is potential to qualify for capital gains tax concessions for that dwelling only. However… 
	 </li>
	<li>
Traditionally duplexes on one title are harder to sell. This is because you can only market the property to either owner occupier investors or owner occupiers who require a second dwelling for extended family. So, it shrinks the prospective buying pool, which may result in a less favourable sales price when you do find a buyer. 
	 </li>
	<li>However, this may not be such a bad thing, because as our aging population gets older; the potential demand for properties that can occupy a young family, along with the grandparents, is significant.</li>
</ul>
Image courtesy of the the NNECAPA photo library/<a href="https://creativecommons.org/licenses/by/2.0/" target="_blank">CC</a>.
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cmcevoy-Go82SmsJA9

The pros and cons of investing in a modern duplex

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ANZ Banking Group is raising interest rates on home loans held by property investors. 
The rate change will add $48 to the monthly repayments on a $300,000 mortgage, up by 0.27 percentage points, the most dramatic decision of the current clampdown on lending to restrain the current investor frenzy.
ANZ on Thursday said its index rate for investor property loans would rise to 5.65%, as part of a move to shift the mix in its loan book towards owner-occupiers. 
ANZ's changes come seven months after the Australian Prudential Regulation Authority forced the big banks to cap their loan growth among housing investors to less than 10% growth a year.
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Chief executive of ANZ's Australian operations, Mark Whelan said the bank was trying to reach an "appropriate" mix between its investor and owner-occupied loan book, which with around $65 billion of housing investor loans is the smallest of the big four banks.
"It is very hot," was how Mark Whelan described the investor market when speaking with Ross Greenwood's 2GB Money News today.
The decision re-instated differential price which had existed pre-1998, he advised.
"It's a bit back-to-the-future for the current hot market."
He said it was not related to the <a href="/expert-insights/financing/interest-rates/44202-july-20-home-loan-borrowing-rates-set-to-rise-after-apra-s-latest-decision" target="_blank">recent risk adverse requirements sought by APRA</a>, announced earlier this week to take effect mid-2016 .
He described recent investor loans as "very good risk." 
ANZ cut various fixed rates for owner-occupiers by between 0.10 and 0.4 percentage points.
Effective Monday, 10 August 2015, ANZ’s variable Residential Investment Property Loan (RIPL) Index Rate will rise by 0.27% to 5.65%pa (5.76%pa comparison rate).
Fixed rates for new Residential Investment Lending will also increase by up to 0.30%.
Mark Whelan said although interest rates for residential property investors are at very low levels historically, "the decision to raise interest rates for residential investment lending has been difficult but necessary in the current environment.
“It allows us to balance the mix of our lending between owner-occupied and investment lending as well as the impact of changing market conditions.
"This includes a decision to cut fixed rates for new owner-occupied home lending.
“This is a considered decision that takes into account our customers’ position and the criteria we look at when setting rates including our competitive position, our regulatory obligations and the state of the residential property market,” Mr Whelan said.
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jchancellor-FAypfDUnLy

ANZ raises property investor loan interest rate by 0.27 percentage points

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I've been going through some personal challenges lately. While it's been emotionally very hard, it's made me realise something I was totally unaware of.
I treat and deal with my personal obstacles in the same way I do the challenges I encounter in property developing.
I hadn't thought too much about the way I work and the way I live and kind of assumed they were separated by an invisible line in the sand. But the longer I've been running my business, the blurrier the line has become.
Yesterday I had to go into a very unfamiliar space. I had to negotiate something of upmost importance to my family's future, but it was personal and highly emotive stuff.
To get through it, I put on my business hat and approached it in the same way I would if I was negotiating a property deal or managing a development issue.
By doing this I could emotionally remove myself from the situation and make some very straight calls. This helped me get through the day but more importantly, the result I had visualised for a few weeks leading into this actually materialised.
I felt that this mental preparation gave me a guideline or goal for an acceptable outcome. Let me explain what I mean by 'preparation'.  I'm literally talking about only a few minutes every couple of days thinking about what I wanted to happen. That's all.
I'm not sure if I'm noticing this more as I get older or it's because I'm more 'tuned in' but this whole visualisation thing works for me, in work, at home and in business. 
I'm certainly not a 'new age' type but I've found if you open yourself up to an outcome and allow some emotion reasoning behind why you want that outcome, then magical things can happen.
Apart from my personal results, I've also been very pleased with some business results this week. Property Bloom has completed a few developments for our clients, we've found some very good development sites and had tenants literally jumping to sign a lease on a completed dual occupancy project.
In order for these enthusiastic tenants to move into their new homes, we needed to handover the project. This means the final drawdown has to be paid by the developers bank into the builder's account before keys will be released. This process can sometime take weeks, but we didn't have weeks, only days.
Our ducks were lined up after we held an open house a few weeks before completion knowing that tenants will need to give two weeks' notice before they could move into the new villas.
We conducted our Practical Completion inspection on the duplex instructing our client to put the final invoice to the bank for payment – at the same time we managed some small items still to be finished on the build.
The bank's valuer inspected the duplex on Tuesday, the bank paid the final builder's invoice on Wednesday, funds hit the builder's account on Thursday and keys were delivered to the agent ready for the tenant to move in on Friday. This precise timing means our client has a rental income from the day after handover.
So how did visualising help?  Well I knew three weeks prior the day the tenant had to move in and while you cannot control this part of the development as we are relying on banks and payments to hit accounts, all we could do was ensure everyone had all the information they needed to do their jobs and 'know' (hope) that all would be well.
In this case it worked, but there has been others where it hasn't.  Where I've had a feeling someone is going to drop the ball, whether it's an impression I got from the bank or the builder or the valuer or the agent or the tenant. Whatever it is, you need to act on this feeling and adjust the finish line. It's about using your gut feel, intuition, experience or whatever you want to call it.
So refocus, and get your eye back on the prize.
<a href="https://www.propertybloom.com.au">www.propertybloom.com.au</a>
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jochivers-wq5Bp59R5a

Playing the property game, keep your eyes on the prize

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SPONSORED POST
“My one bedroom investment property created more wealth in 3 years, than I could have saved in 13 years in my career. At this point, I realised I needed to take property investment very seriously. Because just one property purchase had changed the course of my life.”
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/12/Bruce-262x300.jpg" alt="">
<h2>CASE IN PROFILE:</h2>
<ul>
<li>Former graphic designer/account director and Ironfish customer</li>
<li>Career change into property investment</li>
<li>8 investment properties, 5 purchased through Ironfish</li>
<li>Rent-vestor</li>
</ul>
<h2>That one property purchase</h2>
Bruce has been with Ironfish for nearly 3 years and is a senior Strategist as well as being part of the leadership team in the Ironfish Burwood office.
Prior to joining us, Bruce enjoyed a successful 13-year career in the design industry, starting out as a graphic designer and moving on to account management when (as he says quite matter-of-factly) he discovered his talent and love for working with people far outweighed any natural creative genius! At around the same time as making this switch, Bruce and his wife Evelyn, also decided to buy their first investment property: a one-bedroom second-hand apartment in Stanmore, a suburb in Sydney’s inner west. A decision which turned out to be life-changing.
<blockquote>
“The amount of wealth my one-bedroom investment property in Stanmore created for me was about 10 times more than I could have saved in my career for the past 13 years. I knew then that I needed to get involved with property – initially that was by becoming a more active property investor, and eventually, this put me on the path to joining Ironfish as well.”
</blockquote>
<h2>Why I decided to buy property with Ironfish</h2>
After Stanmore, Bruce and Evelyn purchased two off-the-plan apartments in Parramatta through a different company, and after two years, when they had built some equity across all 3 properties, they agreed to meet with Ironfish Burwood Strategists Yusi and Haibin to consider further investment options.
“I’ve bought from our ‘competitors’, I’ve bought from traditional real estate agents, and what I’ve found is that most people are quite transaction focussed, and there is very little contact after you’ve bought your property.
“When Yusi and Haibin came to our place, it was a very different type of service. Initially I was still thinking from a transactional view as well, and wanted to just quickly view properties and move on. But before they would show me any properties, they first asked me questions like: ‘What are you going to do in the next 10 – 15 years?’ ‘What are your dreams?’ ‘What are the things you want to pursue in life?’ And a big one, which we had never considered: ‘How can you ensure you can continue the lifestyle you enjoy now, in the event that one or both of you needs to stop working?’ What I learned from our first meeting was that Ironfish Strategists were different; they were not focused on the transaction, they truly cared about my future and about building wealth for my family.”
<div id="attachment_7493" class="wp-caption alignnone">
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/12/Bruce-evelyn-1024x768.jpg" alt=""> Bruce and his wife Evelyn, with their Strategists Yusi and Haibin
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<h2>A cut above</h2>
While Bruce was impressed with the service and ethos of Ironfish Strategists, he and his wife also fell in love with the properties. On their second meeting, they decided to buy two properties: one apartment in Brisbane (The Melbourne Residences) and one in Melbourne (Aurora).
“The quality of the properties and the locations of those properties were a cut above anything else I’d seen out there. For example, we bought a one-bedroom apartment in ‘Aurora’ for $397,000. Aurora is built on top of Melbourne’s central station, and is the only building in Australia with direct lift access down into the train station and shopping centre below. Imagine if a luxurious skyscraper was built on top of the QVB – that was the kind of building we’d managed to buy into. And I always thought that you needed to be a millionaire or have special connections to get into those developments. The fact that Ironfish could offer me a property like that made me think this company has a lot going for it!”
<h2>Paying the price</h2>
Shortly after their purchase, Yusi invited Bruce along to one of Joseph’s half day seminars – which set him on his path to a new career.
<div id="attachment_7480" class="wp-caption alignleft">
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/12/bruce-dreamboard-low-res-e1512083506577-168x300.jpg" alt=""> “Travel to all the fabulous places around the world” – A page out of Bruce and Evelyn’s dream-book
</div>
“I was extremely impressed and inspired by Joseph, and I knew immediately that he was someone I wanted to learn from. There was one thing he said that sticks with me to this day. He said: ‘First, you decide what it is you want from life, secondly, ask yourself what price you have to pay to achieve it, and thirdly, pay the price.’ I went home and asked my wife that question: ‘What do you want to achieve in life?’
“We sat down and made ourselves a ‘dream-board’ with pictures of everything we wanted for ourselves and those around us. At the end of the day, I really believe in the law of attraction. I knew that joining Ironfish, talking to successful investors and entrepreneurs like Joseph or [Burwood MD] Linda everyday would help us get to where we wanted to go – and that staying in our current jobs wasn’t going to be adequate. So, my wife and I both made the decision to resign from our jobs and came onboard with Ironfish. It has completely transformed our lives – not just financially, but mentally – how we look at life and perceive things. I can safely say it’s the best decision we’ve ever made!”
After joining the Ironfish team, Bruce has since purchased a further 3 investment properties diversified across multiple cities, and has helped nearly 100 customers invest in the Australian property market. Bruce’s next investment is likely to be a house and land package in South East Queensland.
<h2>Bruce’s property investment tips:</h2>
<ul>
<li>Buying an investment property rather than a home to live in may help accelerate your ability to build wealth – so it’s worth considering if this is more of a priority to you than immediate lifestyle demands.</li>
<li>Build a successful team with the sole purpose of protecting and building your wealth, e.g. a successful property professional, a mortgage broker who knows the ins and outs of financing structures, an accountant who can help you with tax minimisation, lawyer who can identify clauses that might put you at disadvantage in your purchases.</li>
<li>No market is perfect, no market is certain. As an investor, be prudent and diversify and look at where the bigger picture lies. If an area has good scope for population growth, infrastructure spending and employment, and the property is high quality and you can service it comfortably, then I have the confidence to recommend my customers get into any market – whether it’s a peak market like Sydney, or an up and coming market like Perth.</li>
</ul>
Bruce Guan is a senior property investment strategist at Ironfish.
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jrobinson-rf4aSBido9

How one property purchase changed the course of someone's life

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SPONSORED POST<a href="http://www.ironfish.com.au/blog/2017/12/14/australias-population-growth-30-years-ahead-schedule/"> </a>
In 1998, the Australian Bureau of Statistics (ABS) predicted that Australia’s population would grow to at least 23.5 million people in 2051.
In reality, we reached that milestone back in July 2014 – that was the ‘low-growth’ prediction.
At most, the ABS predicted, that our population would grow to 26.4 million people by 2051.
But in 2017, our population already sits at 24.7 million people, meaning we’ll hit that upper-end forecast as early as 2021 – about 30 years earlier than the ABS predicted.
According to current growth patterns Australia is set to reach a population of about 38 million by 2051, around 12 million more people than even the highest forecast from 1998.
<h2>Population growth drivers</h2>
Social researcher and demographer Mark McCrindle says that this isn’t because the calculations were wrong, but that “migration policy changes, longevity increases and a solid birth rate have defied the trends that were evident 20 years ago.”
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/12/Ironfish_Infographic_AustralianPopStats_A4FINAL_150dpiResolution-724x1024.jpg" alt="">
Back then, they assumed that women would have fewer babies and the fertility rate (the number of babies a woman would have in her lifetime) would continue to drop to a minimum of 1.6 babies and a maximum of 1.75 babies. However, the fertility rate didn’t decrease, it increased, and now sits at 1.81: a figure which is above even the higher forecast from 1998.
In 1998, life expectancy at birth was 76.6 for and 82 for women. The 1998 prediction for 2051 was that life expectancy would hit a high of 82 for men and 86 for women. However, current life expectancy is already nearly 81 for males and 85 for females and will reach this 2051 target decades early.
“However,” McCrindle says, “the biggest growth factor that has blown out previous population modelling has been the rise and rise of Australia’s net overseas migration.
“In 1998 it was thought that it would grow our population annually by around 70,000, or at the most, 90,000 people. In the last 12 months, Australia has added 231,900 through net migration which is more than 2.5 times even the high-forecast of two decades ago.”
<h2>Global leader in growth</h2>
In the decade to 2016, Australia’s population growth rate was 1.69%, outpacing many other developed countries including other English speaking countries, such as the US, Canada and New Zealand. In fact, Sydney  alone is now home to more people than the whole country of New Zealand.
The world’s more developed countries in aggregate grew by an annual average of 0.3%. The world’s population as a whole increased by an average of 1.2% per year.
According to the UN Population Division, the only developed countries that had a faster rate of population growth were Singapore, Luxembourg and Israel.
 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/12/Australia-population-vs-world.jpg" alt="">
Source: Tom Wilson, Principal Research Fellow, Charles Darwin University, writing for <a href="https://theconversation.com/bloom-and-boom-how-babies-and-migrants-have-contributed-to-australias-population-growth-78097" target="_blank">The Conversation</a>
<h2>The states compared</h2>
Queensland, NSW and Victoria are all outperforming the nation as a whole, with population growth rates of 1.85%, 1.87% and 2.4% respectively.
Back in 1998, Melbourne’s population was expected to reach between 3.6 and 4.5 million by 2051. It’s already surpassed this range, with a current population of 4.8 million people. Sydney was predicted to reach between 4.7 and 6.2 million. It has a current population of 5.1 million and set to reach the higher forecast within the next 10 years. Melbourne is also now tipped to overtake Sydney as the most populous Australian city in the next 20 years.
While overseas migration has been a primary driver of this growth, according to Principal Research Fellow at Charles Darwin University, Tom Wilson, even if migration policy changes take place in future, the population will still grow significantly.
“In particular,” Wilson notes, “relatively large numbers of people are in the peak childbearing ages. This means that even if migration fell immediately to zero the population would still increase. Demographers call this age structure effect “population momentum”.”
How does population growth affect property prices and where to invest in property in 2018?
Essentially, this comes down to a simple question of supply and demand; when the number of people grows faster than the number of new properties on the market in those key growth areas, then the shortfall will place pressure on prices.
“Of course, this is only one piece of the puzzle for property investors,” says Ironfish National Apartments Manager, Will Mitchell. “Our property and research team looks at the overall picture and considers a number of factors such as infrastructure and government spending, transport and employment options to select areas and properties set to outperform the wider market.
“However, the fact that Australia’s population has surpassed all forecasts from 1998 is truly remarkable and should not be taken lightly.
“One of the most common questions I am asked by people looking to buy investment property is whether now is the right time. My response to that is simple: property investment is a long-term investment, and in 10, 20 or 30 years, do you think property will be in more or less demand in Australia?
“Our unprecedented international migration reflects how unique our country is, and the lifestyle that it offers – we have stunning scenery, world-class healthcare, education, retail and dining and we are ranked as one of the <a href="http://www.businessinsider.com/worlds-safest-countries-global-peace-index-2017-6?IR=T" target="_blank">safest countries</a> in the world.
“I think it’s an amazing country, and that’s why so many people want to move here,” he said.
According to McCrindle, the lessons to be learned from this rapid growth in Australia’s<a href="http://mccrindle.com.au/resources/Australia-Population-Map-Generational-Profile_Infographic_McCrindle.pdf" target="_blank"> </a>population is that urban planners and governments alike need to keep a close eye on population forecasts and plan early for growth.
“And when in doubt,” McCrindle adds, “assume the higher growth forecasts not the lower ones. I’m yet to see an Australian population forecast that needs adjusting down.”  
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Australia’s population growth 30+ years ahead of schedule

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SPONSORED POST
Ironfish provides VIP property opportunities with pre-negotiated deals on apartments, townhouses and house &amp; land packages across Australia.
We are highly selective of the properties we introduce to our investors and every Ironfish approved property has been through a rigorous due diligence process.
VIP and Pre-Public Opportunities Ironfish approved properties are carefully selected, extensively researched and pre-negotiated. As one of Australia’s largest investor networks, Ironfish investors receive preferential access to many of Australia’s premium properties before public release.
Detailed Research Ironfish searches nationally for premium investment opportunities in the most dynamic locations, with strong growth potential. Our comprehensive selection process includes specific selection formulas for houses, apartments and townhouses.
Quality Properties Investors don’t have to waste time sifting through inferior investment opportunities: Ironfish rejects the majority of properties it analyses. Astute investors know many of the best new properties are offered to the general public only after other VIP purchasers. We work exclusively with leading developers with a strong track record of delivering quality properties in great locations.
Turnkey Investments Ironfish coordinates everything required for a property’s long-term success and ease of management so that properties are turnkey and as hassle-free as possible.
Which property selection process is best for you? Our approach differs significantly to the average investor strategy. We recommend investors accumulate a portfolio of different types of property that includes a mix of convenience-focused properties (apartments) and land-focused properties  (houses and townhouses).
At Ironfish, two of our overall strategies include: “infill” which generally refers to filling a little gap within an established suburb and “urban renewal” areas. Consider suburbs like Rhodes or Victoria Park in Sydney: if you compare these suburbs today to 15 years ago, you can see the dramatic changes that have taken place.
Beyond location, it’s also about selecting the right development. Major factors we consider include transport, convenience for tenants and future owners, employment and lifestyle factors.
After that it comes down to the quality of the development; we want to make sure that the property appeals to a high calibre tenant and has strong future owner occupier appeal.  I.e. who is going to pay a lot more money for this property in the future? And this has to do with who is the developer, what’s their experience and a lot of what we call – “off-market intel” – we’ve been in the market a long time, we’re looking for opportunities that other people don’t have.
 
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How do Ironfish select properties to invest in

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It is quite sad to see what gets promoted as 'investment' advice in the property space these days.
This was again brought to my attention a few weeks' back when a new inner Brisbane apartment project, under the 'investment' tab on their shiny new website, wrote that apartment values in the area in question had risen by over 10% per annum since 2000 and weekly rents had lifted by over 150% over the same time frame.
It also claimed that the local population is projected to increase almost fourfold over the next 25 years.
The price and rent values used were medians and any increase in population will involve much more new housing supply.
Medians are muddied by new developments, which artificially lift values, especially when used on a small- scale, suburban basis. And there have been a lot of new developments in this area over the past 15 years.
When you look at actual apartment resales, you find a 4.5% annual gross capital average gain over the last ten years in the area (we survey 25 select apartment projects in each major Queensland suburb in order to understand what's going on) and over the past four years there has been little to no resale apartment price growth in the suburb in question.
In addition, the vacancy rate has more than doubled – up from 2% to 4% over the past two years &amp; one-bedroom rents are even starting to fall.
Back in 2000, renters in this area were paying, on average, less than 20% of their income on rent. Local tenants, based on the rents promoted by this new project, would have to give up between 35% &amp; 40% of their income to live there.
In addition, local home values are now close to ten times earnings compared to 3 to 4 times in 2000. Keep in mind that interest rates have fallen from close to double figures to record lows since 2000, and up until the last couple of years, wages were growing by over 4% per annum.
Today, most local jobs are part-time. And a record number of new apartments are proposed in the area; the subject site is surrounded by other development opportunities &amp; population growth/migration are lower than historical averages.
In short, the next 10 to 15 years are very likely to be different from the past decade or two. No doubt there is a movement towards inner city living – heck, I was one of the first (in 1988) to outline why such a trend was imminent – but the cranes on the skyline suggest a potential apartment oversupply. Hopefully, it won't last that long.
But this isn't what gets my goat; it's that too few in the development/selling space really seem to give a hoot about the information used to spruik a new property.
I think buyers should challenge the information supplied. "<a href="/expert-insights/29805-what-is-caveat-emptor-and-how-it-affects-you" target="_blank">Caveat emptor,</a>" many will say; while others will suggest that buyers do their own research and due diligence. I agree with both statements, but where to start?
Here are seven things that a property buyer should do or know when looking to purchase an investment property.
<ol>
<li>Question the time period being used.  Best to look at the last cycle – i.e. seven years, and the last year too.  Try to understand where the local market is in the property cycle.</li>
<li>Ask for resale evidence – the same property, without major improvements, selling over time. Not median prices. Median or middle values work as broad indicators and only when used across big areas, like a city or municipality.</li>
<li>Ask who is buying, the proportion of investors versus owner residents, and where the buyers are coming from.</li>
<li>Request rental evidence, and from at least two independent sources. Ring the sources up and ask them about what they wrote. Ask who will manage the property and the intentions regarding tenant tenure – long or short-term stays.</li>
<li>Quiz the developer, selling agency &amp; local council about the immediate development plans around the subject development. Will the view be blocked out? Overshadowing? Little space between buildings? More competition?</li>
<li>Ask for a 'current market assessment' or 'spot' valuation. Valuers often lowball; they can get things wrong, but to their defence, they carry a lot of professional risk and don't get paid enough. That being said, don't pay more than 5% above the valuation price, unless you believe the area has some real upside (for example, a new hospital being build nearby or major university about to open in the area).</li>
<li>Make sure your property has the potential to be bought or rented by three out of six key housing demographic segments.</li>
</ol>
Better still, I think what is needed is a standard set of rules – a formula that is used to measure all passive residential property performance, regardless of location or property type.
This would need to include the same time frame; same resale equation; same base of measurement – i.e. rate per square metre; same calculation of gross rental yields based on the local vacancy factor and a regular and independent audit of the figures.
Now that would make property investment much easier.
 
Visit Michael's <a href="https://matusik.com.au/" target="_blank">website</a>, read his <a href="https://matusik.com.au/missive/" target="_blank">blog</a>, follow him on <a href="https://www.facebook.com/ThinkMatusik?fref=ts" target="_blank">Facebook</a> and <a href="https://twitter.com/michaelmatusik" target="_blank">Twitter</a>, or connect via <a href="https://www.linkedin.com/in/michaelmatusik" target="_blank">LinkedIn</a>.
 
 
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michaelmatusik-49YzLvdmNv

Seven ways to improve your investment analysis

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Investors seeking maximum rental income and capital growth must invest in property that is high in demand and is also limited in supply. 
What are some important demand drivers to keep in mind?
Essential demand factors to consider when assessing a property for investment are demographic and social changes, because these influence where people want to live and what kind of property they want to live in. 
An example of social change is the lifestyle preferences of today’s Australians. We tend to see ourselves as more sophisticated today than we did a few decades ago. We are more focused on lifestyle and, as such, residing in fashionable locations is becoming more desirable. 
Investors may benefit from capitalising on these preferences by investing in property near café strips, close to rivers, beaches or harbours, and in inner city locations rather than rural locations. 
Another key factor responsible for driving demand is demographic trends. For example, many baby boomers hold the view that the prosperity they have worked hard for is to be spent on lifestyle. Many are trading their large suburban homes for smaller lifestyle-oriented properties located close to the ocean or near café strips. 
Younger generations, particularly those in their 20s and 30s, are also attracted to lifestyle. It is common for these generations to delay marriage or starting a family to allow themselves to achieve career goals. Single family households are also on the rise.  
These demographic phenomena point to smaller, lifestyle-oriented dwellings close to good amenities, transport, schools and workplace being in higher demand in the coming years.
When you are considering the many factors that drive demand, remember to look for properties that appeal to both owner-occupiers and tenants. 
After all, many of the features of a property that are valued by owner-occupiers are also sought by tenants. 
For example, bedroom size, a usable kitchen, storage, and car parking are just as highly valued by today’s tenants who will pay good rents for these features.
If you would like to learn more about professional research strategies, <a href="https://wvw.momentumwealth.com.au/ResearchEbook?utm_source=Property+Observer&amp;utm_medium=Ebook&amp;utm_campaign=Ebooks" target="_blank">check out our new ebook ”How to find investment-grade properties using professional research principles”.</a> 
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jonathanchancellor-7SQnKwU6yx

Picking a winner – property research strategies 

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“There’s lots of companies that are just wanting to make money. They basically just tell you whatever’s on their books is the right thing to buy. So, it’s hard to find someone you can trust. 
“What we liked about Ironfish is that they’re a company that educates and takes on board your whole financial situation and goals, not just your ability to access funds to purchase property. There’s heaps of events and education sessions that help improve your general financial IQ as well.” 
<h4>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/chris-cindy-5-e1531102841752-300x244.jpg" alt=""> </h4>
<h4>CASE IN PROFILE</h4>
<ul>
<li>Brisbane based medical specialists</li>
<li>Experienced investors who were lacking a clear goal</li>
<li>Purchased 3 properties with Ironfish</li>
<li>9 investment properties in total</li>
</ul>
<h2>Not really ‘property investors’</h2>
Chris and Cindy Aubrey are Surgical Assistants working in multiple private hospitals in Brisbane. Originally from far north Queensland, Chris and Cindy moved to Brisbane for work, and have a young family of 2 kids, aged 2 and 4. Prior to investing with Ironfish, they already owned 4 investment properties which are scattered around Queensland, Western Australia and New South Wales, along with a Victorian property in their SMSF.
“We wouldn’t have called ourselves ‘property investors’ though. We had a couple of investment properties because we didn’t know what else to do with our money and we thought property was a good vehicle!
“After investing with Ironfish we really started to look into financial education, and at that point get into property investment a little bit more as a passion and with a clear goal.”
<h2>Finding someone you can trust</h2>
Apart from 2 out of their 9 properties, Chris and Cindy’s investments were purchased through a company. Chris and Cindy’s main challenge before investing with us, was<a href="http://www.ironfish.com.au/blog/2018/02/07/cancelled-contract-another-property-investment-company-went-ironfish-instead/" target="_blank"> finding a company they could trust</a>.
“We’ve had experiences with other property companies where they’ve sold us a property and left us. With Ironfish, we don’t feel like we’ve just been ‘sold to’. We hear from our strategist Linna regularly, not only to help us review our current portfolio but also to invite us to <a href="http://www.ironfish.com.au/seminars/" target="_blank">events and education sessions</a>. There’s always lots to learn.”
<h2>Knowing what you want</h2>
Chris and Cindy had a chat with our Brisbane based strategist, Linna Reakes, who listened to what they wanted to achieve and also invited them to come along to some Ironfish events and property investment seminars.
“We’ve been to a few events and they’re really good, especially Joseph. He’s a great speaker. What we got out of those events was that it <a href="http://www.ironfish.com.au/blog/2018/02/23/secret-success-everybody-overlooks/" target="_blank">starts with the mindset</a>, it starts with goal setting – which is not what we did initially in our property journey. We leapt into it without knowing what we wanted out of it. Now we have a clear goal; we are aiming to replace enough of our income so we don’t have to work so hard and can spend more time with the kids while they’re still young.”
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/chris-cindy-2-1024x683.jpg" alt="">
<h2>Property selection</h2>
Chris and Cindy were very specific about what types of property they were targeting when they talked to Linna.
“We told Linna we were looking for house &amp; land, and she helped us acquire a package located in <a href="http://www.ironfish.com.au/blog/2018/07/04/record-numbers-looking-for-homes-in-queensland/" target="_blank">South East Queensland</a> which met our criteria. We also purchased 2 other units in Brisbane, which provide good cash flow and are good quality builds that are going to hold their value. Credit to Linna to understanding what we wanted and showing us what she thought was suitable.”
<h2>The importance of follow up</h2>
While the performance of the property is important, Chris and Cindy agree that ongoing service and support is what makes a real difference.
“We’ve had good and bad experiences with different companies. We can look back and see which properties have done well and which haven’t; that weighs in on deciding if we’re going to invest with them again.
“But it’s also about communication and follow up. Companies mostly make their money on the event of a sale, but if they have good after-sale service we’re more likely to go with them again. And that’s what we appreciate about Ironfish. There’s good follow up; Linna is great, and the property management service has been good, no problems at all. We’re very happy with the care we’re getting as customers and in our portfolio management. And now that we’ve built a decent portfolio, we’re looking at managing that over the long term.”
<h2>Chris and Cindy’s property investment tips:</h2>
<ol>
<li>
Focus on your own education. We go to seminars, we have mentors and ask lots of questions. Don’t pay attention to mainstream media, look for reports from reputable sources.</li>
<li>
Get yourself a good team of people. We have a financial planner, accountant and mortgage broker – this is something we picked up from Ironfish. In the past 5 years, we’ve changed our accountant and planner to find people who understand and help us achieve our goals. That’s made a huge difference. For example, from an accounting perspective in structuring your properties: you may pay for advice upfront, but it could save you thousands down the track.</li>
<li>
Start with ‘why?’ Set a goal for why you’re investing in property and what you want to achieve out of it before you leap in.</li>
<li>
Consider the benefits of investing in new or off-the-plan property. We initially just fell into this type of investment, but we’ve since learned about the tax depreciation advantages. And also, depending on the area, new home starts are a sign of potential growth in an area. We now have 9 properties, half house &amp; land, half apartment. Most are new properties.</li>
<li>
Look at each of your properties as a business. We haven’t even set foot in any of our investment properties. We’ve got friends who’ve not bought based on a property having a colour of paint they didn’t like. Don’t let emotion sway your decision making. Let the numbers make the decision.</li>
</ol>
 
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