Buy and Invest Like A Pro For Any Property

Simon Loo is a successful property buyer’s agent and director of buyer’s agency, House Finder. He has many years of experience and shares some of his knowledge with us here at Property Investory. We learn about different strategies we can use to help us buy and invest in a property for investment and build our own successful portfolio. 

Come with us as we delve into the topic of buying property like a pro. We find out about a particular client of Loo’s that he helped purchase their first property, what kind of research goes into finding the right property, some advice on what to look out for, and what you should do and what you shouldn’t do when buying property and much much more on this episode of Invest Like A Pro brought to you by House Finder!

We dive right into the topic as Loo shares with us a little background about a client who had been living overseas.. 

These particular clients that I recently bought a property for, which just settled, had a bit of an interesting background. They'd been living overseas for a number of years. Originally they were from Australia, but they moved overseas to work. And they moved back to Australia around about five years ago from which then they decided to buy a property to live in Sydney. 

So did they buy this property before they left overseas or did they buy this property just recently when they came back?

They actually bought the property while they were still overseas in anticipation of them moving back. I'm not quite sure how many years prior to them moving back. But let's just say it was pre-Sydney boom. Which they timed it, you know, knowingly or unknowingly extremely well. It was in a very nice sort of blue-chip area in Sydney. You know, these guys are quite financially well off, you know, working overseas. They were earning decent money but they recently had some young kids which they wanted to grow up in Australia. So they decided to pick up their stuff and come back to Australia where they can find new jobs and continue working here.

So they are a couple in their mid-forties. They are both in the financial services industry. They really didn't have much idea about property investing in Australia. They'd been overseas for many, many years. You know, they've got a sizeable share portfolio. Houses have always been something to live in, you know, not necessarily to invest. I'm sure through their work in the financial industries they know that you can make money through property, but that's just never been their goal or they've never kind of looked into it. So look, when they first reached out, we kind of sat down, I had a couple of chats on the phone just to work out where they're at, what they want to do, why they're looking into property, how does it fit into the overall goals of wealth creation.

From that I could tell that they were very new and they were also very risk-averse. So clients being risk-averse tend to jump around a lot when it comes to looking at different things to invest in. Even if their goal is to buy property, they can buy, they can be looking at, you know, Sydney or Brisbane or Melbourne or regional or commercial developments or residential houses, units, like there's so many different elements to invest in. So our initial chat when they first sat down was to find out what their goals are and then they work out a strategy that works towards that goal. And the third thing to look to, is to kind of talk to them about the types of properties to avoid and types of properties that may historically work better in the Australian property market, in terms of growth and as an overall investment. So just really basic fundamental stuff.

Once the clients were fully locked into the idea of purchasing a property it was full speed ahead for Loo.

There is a lot of conversation, a lot of questions. So a lot more phone conversations and a lot of questions about everything. We met a couple of times as well just to see each other face to face. And it was more like a bit of a strategy session where I was on a whiteboard showing them different scenarios and showing them the differences between different cities and different locations and growth trends historically looking at different demographics and where there was a lot of plans, government infrastructure. So just the really basic fundamentals and it took a little bit of time for them to decide, okay, let's get started.

Let's go and find a property. And that's when they signed up. Obviously as a proper client. We started looking and their criteria ended up being something that was sub $500,000. They wanted to buy in the Brisbane market. They wanted a suburb that was not lower socioeconomic, that was not like your working-class areas. They wanted something more kind of middle class, kind of just your typical family, middle-class suburbs that's also a reasonably affluent area, I guess you can say. They wanted a lot of those emotional elements as well. Properties that were close to public transport, close to trains, close to major shopping centres in decent school catchment areas, things like that.

And they also wanted something that was extremely low maintenance because like I said before, they were very risk-averse and one of their major concerns was ongoing tenancy issues or ongoing maintenance issues. The reality of owning any property, whether it's brand new, multi-million dollar properties, you are going to have to deal with maintenance and tenancy issues at some point in time. But there are certain properties that you can buy that just reduces the risk of that happening more frequently. And you know, it comes down to the style of the property. If you have a property that's just a very standard house, one-story house that's brick, there are no major overlays.

It is not always what house is the fanciest or whether it is two stories, sometimes simplicity can be the key. 

From a physical perspective, then those would have been more suitable than maybe like a fancy two-story house with a lot of personal touches from the person that built it and multiple kitchens or things like that. So something that's quite simple. And even though they could spend a lot more money than $500,000, I think for the initial property, they wanted to keep the budget at a bit of a minimum so that they could just kind of test the waters a little bit. Make sure the strategy worked out well. And that's when we started looking, we started reaching out to our contacts.

As buyer's agents at House Finder, we tend to focus on looking at properties that are distressed. So we really focused on houses that are, or properties that are in situations where the sellers need to sell the property quite urgently. We narrowed down already a number of suburbs within around about a 20 to 25 kilometre radius from the CBD in Brisbane. Actually within 15 to 20 kilometres. When I started getting a lot of these properties what I generally do is I do a lot of research on them before the client sees it.          

We learn about some of the research that goes into finding these properties and how he determines which properties are the right ones for a particular client.

The first thing I look at when I look at any property is that they're not in any major elements that nobody would ever want. So properties that are in flood zones, bushfire zones, power lines, obviously main roads transport, major transport, noise corridors, there's no major easements on the property. The block is not on a 45-degree slope.Just like those really major things that we do the most basic type of research on.

It's like a checklist. And you go mark off and you go, okay, these are okay. You know, we can pass through that first stage. Sometimes it's intuition as well because you know, there is no real checklist to make sure that a property isn't next to like a dumping ground. From time to time I do come across places where people dump their rubbish. So you just don't want to be near any of that kind of anomaly type stuff. The second thing I look at is are comparable sales. 

Is it a four-bedroom house? Is it on a 600 square metre block? 800 square metre? Is it old? Is it new as in renovated? Does it need work? From that, I can look at it from within that criteria, what are the other properties that have sold in the surrounding streets in the past three months that are pretty much exactly the same. If it is a three-bedroom house on 600 square metres, that's unrenovated that is in a particular pocket of the suburb, then I only compare it to three bedrooms, 600 square metre, like very, very like for like as much as I can. And if I ascertain that the property that I can buy is noticeably lower than some of the surrounding suburbs, then that's another box ticked.

Loo shares what exactly he is looking for when he is trying to decide how much a property could possibly rent for.

The third thing I look at is how much you can rent for. So again, I look at comparable rentals, you know, how much have some of these other properties been renting for? And how much can this property potentially get in rent? And then the full thing I look at is the amount of value you can add to that property. So like I said previously, you know, whether you can add rooms or maybe you can add extra bathrooms or maybe it's got genuine granny flat potential, whether you can add sheds, carports or anything that you can do to the property to increase the rent or to increase the value of the property. And if those boxes are ticked, that's when I pull up data from a property price finder or on any of these online sites and check out demographics and vacancy rates and check out historical growth and also infrastructure projects and government projects in the pipeline.

Just general data related stuff that is conducive to the short and long term performance of this particular house in this particular suburb. And whilst I'm doing all this in the background, I'm negotiating with the agent already. It's pointless for me to come up with all this data and all this research and only to find out that there's no way that I could buy the property for a price that makes sense. So it's very important and definitely not before I present a property to a client because if I present a property to a client and told them this house, I can buy it for $500,000 and I got it from $5,000, then it's a waste of everybody's time. So after this negotiation and all those boxes are ticked, the numbers are ticked, you know, all those demographics and data, every box is ticked.

It looks like it's a pretty good deal that stacks up quite well. That's when I put it all together. And I sent it to my client and this particular client, it took about three properties before they ended up buying the property that they were after. And not saying the other two properties weren't good because I actually had other clients that bought the first two properties that I sent to them. After the client rejected them. It was really just because there was some element that they didn't really feel comfortable with and that's with all properties, there's no such thing as the perfect property that ticks 100% of the boxes. Like 90% is probably as good as you're going to get in any property out there.

The perks of using a buyer’s agent is that sometimes you don’t only get them but their whole team can assist you. 

After their third property that I sent to them, they were happy with that. We negotiated the price. So that's when I got the contract together. I kind of gave them step-by-step, you know, what they had to do at every particular stage of the property purchase. So initially to sign the contracts, you know, here are the conditions, we are going with this price. You're obligated to pay x amount of deposit if you don't, you terminate the contract, this is your liability. Like this is what you're responsible for and all that type of stuff. And that's when, at that point in time, I also started introducing some of the people that they would be working with.

So people like solicitors and property managers and building and pest guys. At that particular point I also organised the inspections. So I got one of my team members to go out and do a full inspection of the property. And it's not like an inspection where they just walk through and say, Oh yeah, it looks all right. Like when they go through, these guys have seen thousands of properties previously and in a past life as well they were in property management themselves. So they know like all the safety hazards, all the trip hazards, what's going to be an issue when it comes to getting a tenant, what's going to be a problem when it comes to maintaining a tenant.

What are the things that will need replacing soon? They take a hundred photos of every single defect with the property, create a report as well and that goes to me and the buyer and the client and once that approval is given, if it's not acceptable, then we just move on to the next property and there's no cost to anybody. But if they're happy with that, then we move on to the building and pest inspection, which I also organise and when we do that, the results of that can come back with major issues. We can either terminate the contract or we can renegotiate for a better price. So basically everything at the moment is subject to x, y, z conditions, subject to building and pest report and all those kinds of things.

We find out about some of the intricacies or nuances of property contracts from interstate that you might not know about. 

Because it was in Queensland if you submit a contract at x amount and you have signed and the contract is executed, which means that both you and the seller have signed it. If the contract is subject to certain conditions, there's a time period. So if it's a finance and a building and pest condition and they're both 14 days, which is standard. You've basically got 14 days to do your due diligence. You do your research and if for whatever reason you don't want the property within those 14 days, you can terminate that contract. You know, if it's finance-related or building and pest related or condition related and you have no financial loss, so you don't lose your deposit, you don't lose 2-5% or anything like that and you just walk away and you move onto the next property.

So during this 14 day period or whatever term we agree to, that's when I do a lot of this research on behalf of the clients just to make sure there's no red flags with the house. Once that box is ticked, we go unconditional. That's when you're basically committed to buying the property. At that point, maybe I would have renegotiated more money off of the building and pest, which I do quite often on most of the properties that I buy for my clients. I end up getting something out of the building and pest report legitimately, you know, not just trying to get like $20,000 off for no reason. 

Depending on the property, there are many ways to use the imperfections within a property as a negotiating tool. 

There are different levels of structural issues like some, depending on the price that we paid for the property, if it was distressed and we bought it below market value, then maybe some minor issues are acceptable because we paid such a low price for it. But at the same time, we can still use that as I guess you can say a bit of ammunition to try and get a better deal, to justify why we want a further reduction on the price. So that's part of my process as well to negotiate on my client's behalf. And then at that point I would, once we go unconditional, I would instruct the buyer to pay the others, pay the second deposits and the obligations from an insurance perspective and help them get the insurance as well.

If the house needed any work either cosmetically or just teething issues as I like to call them. I usually point them in the right direction in terms of helping them obtain quotes to fix certain things. At that point I also introduce a property manager or if they have their own property manager, I get them involved and let them know, okay, the property is settling at this certain date and you want to start advertising for a tenant maybe a week or two weeks out. So hopefully you might end up with a tenant on the date of settlement. And also organise things like the pre-settlement inspection. Give them a lot of advice on what to do, what you should do in terms of to benefit them, get their cash flow going to make that property work on day one.        

Loo shares with us how he can be a kind of mentor at times for his clients as he tries to help them through the process of purchasing the property. 

A lot of my clients tell me that we do a lot of active mentoring as well, whether we know it or not. Look, you can't really buy as a buyer's agent, it's really difficult to buy a property without it actually being for a client, at least without giving them ongoing advice. And, you know, to give that ongoing advice, I guess you need to have credibility yourself in terms of having built up a portfolio yourself and have been through the trappings of things that can go wrong or things that can go right and what you should do and what you shouldn't do. So I think I inadvertently do a bit of mentoring for my clients which I'm hoping most of them are happy with.

And you know, through every step of the buying process within the 35 days or the 30 days or the 42 day settlement period, there's always little nuances and things that you can do and you shouldn't do that will work to your advantage. Every property is a little bit different. What you should say and what you shouldn't say. And, you know, leaving the building and pest negotiation to a certain date. Prioritising your requests if you want early access to the property, which I also organise, you know, after being unconditional it's important that we do get early access to either fix up any potential teething issues or maybe to advertise earlier to try and get a tenant. So in this particular case, we managed to advertise the property prior to settlement.

And we actually got a tenant that was ready to start on day one. That was a very good outcome for this particular client because they were very green and unsure to start with in terms of buying a property. So it was a very, very good outcome for them. 

We find out about the type of property that it was before they got the tenant in there. 

It wasn't owner-occupied. It was vacant. So it was another investor that owned the property. The property required no work at all. It was basically ready to rent as is. The property was about 25 years old. Your regular brick house.

It was a four-bedroom house within 20 kilometres of the CBD on the northside of Brisbane. You know, as soon as we bought it, as soon as the property went unconditional, we obtained not only early access, but also permission to use the existing photos to sell ads to advertise for a tenant. Coupled with, you know, I guess me introducing the property manager very early on in the piece, they could start working on the property immediately as soon as it was unconditional. You get the form six and which is a document that you signed to engage a property manager and all that paperwork out of the way first and then get the ad up as soon as possible.

Get the inspections going. It was a great outcome where the property didn't need any work. The tenant moved in and it's generating cash flow from day one. 

So with this particular property, did you know why the vendor was selling prior to actually purchasing it and also what was the outcome of this deal too? 

The vendor that was selling was actually a deceased estate. It was owned by an older couple and one of them had recently passed away and it was in the hands ofI believe the wife and the kids to sell the property. So they weren't too interested in getting the maximum price possible. I think at that point obviously with all the emotions of dealing with a recent death, I think they just wanted to kind of wash their hands and move on in the easiest way possible.

So knowing that scenario, I would immediately think to myself, what's the easiest way I can buy this property that has minimal impact on the sellers? So when we negotiated early, part of it wasn't just only price-driven, it was about what kind of terms and do you want to make it so that you don't have to deal with a lot of shakiness with the whole selling process. So I think that's also very important to understand why properties are selling and the situations behind it.        

The previous owners wanted to sell it quickly, so Loo was able to use that to negotiate them down to a great win-win.

We basically, because my client was in a very strong financial position they didn't really need a finance condition. They already had pre-approvals, so we didn't need the finance condition, which was extremely attractive to the seller. Because in Queensland, the finance condition is considered a bit of a get out of contract clause for sellers. You know, to get out of finance to get out of a contract through a finance clause, you basically just need a letter from your mortgage broker to state that you can't get finance. And you know, there are a lot of contracts that crashed simply because buyers changed their mind and they use the finance condition as an excuse to terminate a contract. So because of that I kind of knew this and the selling agent knew this and I was like, look, we can offer a contract with no finance.

We want the B&P. We want the building and pest because my buyers are interstate, we need to know the condition. We are not buying property blindly. So we kept the B&P condition and like 99% of the deals that I do, I always at least do the building and pest because that's super important. But we only did the building and pest condition at 10 days. So normally it's 14 days. And just the extra four days, just reiterated to the seller that we're genuine. We're not here to waste your time. We want to make sure there are no major red flags. And if there isn't, we’re happy to continue. We're not going to stuff around too much with trying to ask for $20,000 off on the contract for no reason and all these types of stuff.

So that also may be helped. And I think the other thing that helped was just a slightly shorter settlement. So it was a 30-day settlement, which is auction conditions. You know, most of the time when you negotiate a private sale it's 42 days. But you know, the fact that we could settle within 30 days, again, just gave the sellers another confidence boost that we just wanted to get the deal done and we're not here to waste anybody's time. So I think these conditions helped us also get price. They were chasing a much higher price initially. But because we were able to move quickly and do 20 inspections before we even made an offer, I think that helped us get the property across the line at a price that we wanted which was definitely below what the research suggests the property was worth.          

He has said that at House Finder they focus predominantly on distressed properties but that is not always the case.  

The budget was $500,000. But we actually bought this property at just below $400,000. I mean the property wasn't worth $500,000. We didn't buy it that far below market value, but it was definitely worth around the mid $400,000s. We did get a pretty good deal. Sometimes getting it distressed and super below market value isn't everything. We also had to make sure that the property was low maintenance and ready to rent and the cash flow was good as well. Like there's just so many elements that you have to consider.

Even though the value could be huge, like in terms of perceived or real value, you know, if you can't rent it out, if you have to spend $50,000 to fix it up, if it's in a really bad location or next to something that's really bad, it's meaningless. So we have to make sure that all those elements work. 

The first property went so well for Loo’s client, we find out what they are up to now. 

We're already talking about the second property, which they're a lot more excited about now because they've gone through the whole process. And I think it's sort of answered a lot of questions in their mind about whether they should be investing in property and how they should be doing it.

It's always exciting to see clients developmentally in their confidence as well. And obviously, you know, picking up properties in the process. 

Their end goal was to achieve passive income. Once again, a lot of my clients have a very similar goal to achieve passive income. Whether they want to quit their job or not is not something that's consistent across everybody. But I think most people want some level of security, especially when they get to a point where they're a little bit older in life. I mean, a lot of people I think are in the realisation that even though they want to work forever, sometimes they physically can't or maybe the situation arises in their life where they don't have the ability to work.

And just having passive income, whether it's from the property or from anything really I think is super important. So these guys, again, wanted passive income, they wanted to achieve it, you know, they're in their mid-forties and they wanted to achieve it definitely well before retirement age. Just to help make their retirement more comfortable.

This episode was produced by Andrew Faleafaga with narrations and interviews conducted by Tyrone Shum.

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