By Rich Harvey, CEO and Founder propertybuyer
Like property itself, those who choose to use it as an investment vehicle make up a wide and varied cohort. Anyone who looks to describe all investors under the one definition really doesn’t know what they’re talking about.
The image of investors as rich fat cats sitting upon a mound of cash, gorging on the profits created by hording all the good assets is plainly false. They come in all forms, including first time buyers trying to establish a long-term foothold in the market, mums-and-dads building portfolios to create better futures for their families, and pending retirees looking to secure their near post-work future.
Because they’re a complex collective, the reasons for investing vary too, and among their considerations will be time.
For younger entrepreneurial types, buying for the long haul is easy. Time helps forgive rash decisions. If plain bad luck saw you pick a property lemon from the apple tree of profit, then riding out a market cycle will often ease, or even erase, any financial pain.
But there are also buyers who require quick gains and a fast turnaround to meet their goals, and while property speculation is not the best choice if you have to pay down a nasty gambling debt to a shady character, there are options within the real estate world where you can make gains fast.
Who suits fast profits?
In most cases the right sort of financial advice is crucial, because fast gains usually carry higher risks. Overextending yourself into a venture with the promise of a big upside can bring ruination if you don’t step carefully and seek the right sort of advice.
Buyers for these sorts of properties usually need to have a buffer for the unexpected. An extended resale period or planning hurdle might see tragic time and cost overruns.
Quick draw property gains
In the case of fast money, you’re mostly going to pick up equity via hard work or opportunity.
Renovation
While the pros and cons of renovation are debated more than the fish or beef options at an alternate drop dinner, there’s no doubt that if smartly approached, renovation can be a great way to build equity in a short space of time.
In my experience, ‘keep it simple’ is the mantra of choice.
Property that requires a little cosmetic attention usually does best. A lick of paint, a bit of landscaping or even a minor upgrade to a kitchen or bathroom can pay handsomely in the right property.
Best of all you may not need to sell the holding to realise your gains. Tip the home into your rental portfolio, then organise a revaluation and drawdown to leverage your way into a second holding.
Small development
For those with a little more tolerance for risk, a small development project can be the go.
Simple splitter blocks are always tempting, but do your numbers. It’s a competitive buying market for these deals so they tend to be fast turnaround, but low margin. An unexpected hiccough can cost you, so being solid on your numbers and contingencies is key.
For the even more adventurous, there’s always the chance to do some small construction. Perhaps a duplex style project or two townhouses in the large back yard of an inner city suburban block. There are, again, risks so planning and numbers are key. Factor in contingencies and expect to have time blow-outs. If they don’t eventuate… good. That’s a little more profit in your pocket.
Opportunity knocks
Another way to gain is through stressed seller and off-market transactions.
This is where you find a vendor looking for a fast, uncomplicated sale, and you should stand to profit immediately by buying below fair market value.
This sort of purchase usually eventuates by drawing on well-established networks of agents and owners. Buyers must be well connected and prepared to jump because when the phone rings, you need to be in the position to give a quick “yes” or “no” to the seller.
Make sure your loan is preapproved and you can run your research on legislative and building issues quickly. Again, experience pays dividend.
Joint ventures
Teaming up with other experienced investors to tackle a larger scale project is another strategy to make some good coin. You may have loads of equity and low cashflow (serviceability) while your investment partner could have good borrowing capacity but low equity. A JV strategy may involve finding a raw site to develop a duplex or small townhouse project to make a solid gain over 18-24 months. However, with all developments there are considerable risks in partnerships, so choose your JV partner very carefully and have written legal agreements protecting your position and profits.
Making fast gains in property is possible, but there are still key elements of the process that can’t be ignored. What can appear to be the bargain of a lifetime can turn suddenly south if you’re neither prepared nor well versed in all the required skills of trading real estate.
The best way to ensure you secure a lucrative fast-gain property is undoubtable to lean on the talents and wisdom of a buyer’s agent with the knowhow to help you find the perfect quick deal with a minimum of fuss.
