REAL ESTATE: HIGH VS. LOW RISK

HIGH RISK: REMOTE LOCATION WITH SMALL RENTAL RETURN We purchased a three bedroom home in Elvina Bay, NSW, Australia which is a remote location that can only be reached by boat. This limited possible future renters and buyers and I remember my grandfather doubting my decision to buy this property because of those reasons. The property had excellent bones and was for sale at a great price, so I decided to go ahead and purchase the home and do a full remodel. A year or so later I had a realtor approach me with an interested buyer, that submitted an great offer to purchase the property. I decided to sell. My grandfather said he was proud of me, and was surprised by this result. In hindsight, this was a disaster waiting to happen. It was very risky because there was a large amount of money invested, in a remote location and a small rental return.

LOW RISK: BUYING IN A SOUGHT AFTER LOCATION We purchased a small inexpensive apartment in a sought after location in Neutral Bay, NSW, Australia. The kitchen and bathroom were not the most desirable, however the property rented out easily and had strong capital growth. There was an old kitchen and bathroom, we ensured that the property was clean and functional for our tenants. The goal for us was to have as many small properties as possible that would generate income. We would hold the properties for many years and then sell the smaller properties to buy something larger, like a multi-family property.

START SMALL AND CHECK THE VACANCY RATE IN THE AREA The smaller one and two bedroom condos were less expensive to buy and had an excellent rental return. We were advised to check the vacancy rate in the area to ensure it would be easy to rent the property. If there is a low vacancy rate in the area, it would mean that there is a demand for rental properties. We would try to ensure the rent would cover all expenses and put money in our pocket, every month.

THE TEMPTATION TO SPEND THE PROFITS The goal for us was to have as many small properties as possible that would generate income. We would hold the properties for many years and then sell the smaller properties to buy something larger. The temptation was to sell the property and then spend the money, however we were advised wisely to re-invest all the funds. Instead of spending the equity, we were to wait until there was a surplus of cashflow from the rental properties.

BUY + HOLD + SELL + RE-INVEST That’s our motto. Start small, do your research, and follow our lead towards valuable and income driving properties!