It is often said that real wealth with property comes with time. You are more likely to succeed if you take the long-term approach to accumulate
both cash flow and capital gain over time. Which is why it is so important for any investor to build a strong investment team, not just for now,
but for the long term. The goal here is for all the elements of your team to come together like a well-oiled machine over successive properties.
By working out and almost duplicating the formula for successful properties, you eventually arrive at your ultimate investment goal.
So, what makes a dream buy-and-hold team? There are three crucial parts to consider:
1. Your Money Team
Many newbie investors mistakenly assume the first step of property investing to be buying. Hang on a sec. Before you pour
over TradeMe listings, get your access to finance sorted. Beyond the obvious reason that you need to know how much you can afford to borrow,
the last thing you want is to get the reputation as a tyre-kicker if it is shown that you cannot close deals. Falling short at the last minute
because you can’t fund your promise to buy is a surefire way to get off your agent’s roller deck. You may as well kiss goodbye to future opportunities.
So get your money sorted first. There are two elements to your Money Team. The first one is your banker/broker. You got to be
able to borrow the money. So find a banker/broker who understands your goals and is willing to stand behind you for the long term. You
want someone who shares your vision for your future self and with their industry experience, map out how you get there. This person will also
know the delicate balance between when to push your ambitions forward and when to hold you back.
The second important person on your Money Team is your accountant. We often say to APIA members; you can scrimp and save on anything but don’t
ever cheap-out on an accountant. A good accountant is worth his/her weight in gold. You want to get yourself an accountant who not only
specialises in property but also owns rentals themselves. An accountant who is also an active property investor is more likely to see the bigger
business goal you are trying to achieve and use his/her technical knowledge to advise you. Your accountant should steer you towards the best
asset structure for you to minimise tax, manage risk, and achieve steady growth. If your accountant is only charging you to do your
tax return, then we are here to tell you that you deserve better.
2. Your Buying Team
Now that you have your finance sorted let’s go shopping. Home in on a particular market you want to invest in (e.g. CBD apartments, South Auckland
home and income etc) and get to know the top real estate agent operating in that market. Take a drive around the neighbourhood and
take note of the agent name that comes up on most of the for-sale signs. You want to get onto that agent’s call list and eventually become their
first phone call when deals come onto the market. Agents like serious repeat buyers who will not waste their time. Especially in this market,
agents get a lot of phone calls and have no choice but to become good at weeding out time-wasters. So how do you get taken seriously? By
having your money ready, research the market thoroughly, and taking decisive actions. By being able to close deals efficiently, you will show
yourself as a do-er, not a talker.
You also want an excellent lawyer/conveyancer on your side. One who knows the lay of the land at the Council and is well-versed in navigating
rules and regulations in a way that avoids unnecessary delays is indispensable on your team. It may seem a small thing when you first get started,
after all, simple conveyancing transactions are more procedural rather than technical. But do consider that eventually your portfolio and ambition
will likely grow to cover development or commercial type transactions where your lawyer’s expertise will be necessary.
3. Your Landlord Team
A lot of investors spend a disproportionately large amount of time on analysing deals and negotiating down to the final cent of the buy price. What
has often been forgotten is that the real profit of buy-and-hold comes from management. The moment you fall short at your landlord duties is
the moment you cut off your cash flow. Why would anyone do that? Management is the last piece of the puzzle that falls into place and arguably,
the most important and also the most neglected.
At the absolute minimum, your property manager (be it yourself or an actual property manager) needs to understand two things:
- How to seek out and fill rentals with tenants who understand that residential tenancy is a business rather than a transient and casual phase of their
- The political dynamics of residential tenancy and ergo the importance of continuous education and industry update in order to minimise disruptions
and maximise the return on your property.
Your property manager is your front line support and response team for your tenant. It is important to take your time to choose the best manager
who is going to represent your business interest well.
Related article: How to interview your next property manager?
You need a maintenance team who can respond to emergency and general maintenance calls. You want to get to know your maintenance them; things
like whether the services cover 24-hour emergency response, how the team satisfies their HSWA obligations, are their tradespeople in-house or contractors, do they specialise in residential rentals, and how many properties do they service. You
also want to put in place a turn-over team to minimise your property’s stand-down period in-between tenancies. We are talking about
painters, handyman appliance repairers (dying industry by the way!), locksmith, cleaners, and electricians who gets sent into your properties during
vacancies to restore your house back to its original condition. Remember, every day your property stays empty and everytime your tenant is frustrated
at the lack of service is a threat to your cash return.
Ultimately your Landlord Team is responsible for achieving strong cash returns on your properties. Your Money Team can then take that cash to get
you access to better loan terms enabling you to boost the activities of your Buying Team. See how the three elements work together to make you
a strong reliable force to keep buying and growing?