Does How You Invest Change When You Age? You’ll be Surprised!

There’s a lot of advice out there when it comes to investing in property, and it seems like everyone is an expert. Asking a hundred people what the best strategy could be is most likely going to yield a hundred different answers, and it’s not made any easier when each person so passionately backs their own viewpoint. From what I’ve seen in the industry, it’s apparent the subject of investing has served as the catalyst for many a heated debate.

But it begs the question: Is there one best ‘way’ of investing? The answer is not straight forward; as everyone’s situation is unique, different strategies will be more beneficial at particular points in time. So how do you know when the best time is for a particular strategy? It might be surprising but one of the best indicators for a certain investing strategy is…..

Age

Yes age, but not necessarily from a biological point of view. What I’m specifically referring to here is your investment age over the course of your investment life. However it’s true that your investing age and life indeed mirrors your biological ones. Allow me to elaborate:

The Investment Timeline

The entirety of your investment life can be broken down into three phases:

Phase One: Acquisition

Phase Two: Consolidation

Phase Three: Prosperity

 

Phase One: Acquisition

We begin in the Acquisition phase of our investment life, where the aim of the game is just that; acquiring as many properties as we can afford to take under our belts. A general rule of thumb is that if you currently own less than five properties you are in the acquisition phase.

A great way to navigate your way through this initial period is to set yourself goals which will enable you move onto phase two. One such goal could be to purchase one investment property per year for the next ten years. In order to achieve this goal you could set a sub-goal of saving a 5% deposit every year to purchase a property.

It might be difficult altering your financial (and life) habits to achieve these goals but once you create those positive habits and secure your first purchase the process will become easier and more natural to you. Think of it like going to the dentist, every year you set a date in your calendar for a check-up and in the meantime you get into the habit of maintaining your oral hygiene by flossing and brushing etc. Now transfer that mindset over to investing, where every year you set a date to purchase one property and in the meantime you get into the habit of being financially sound by budgeting and saving money for the deposit.

In addition, your hard work and discipline will be well rewarded in the long term, as we will soon see.

 

Phase Two: Consolidation

With a few years of investing under your belt and your property portfolio impressively amassed, it’s time to mature into the second phase of your investment life: Consolidation.

The aim of the game this time around is to decide whether

1. We have made enough equity through property growth to sell down your portfolio, so we can pay off bank debt and realise profits OR
2. Whether we need to diversify our portfolio by purchasing additional properties we can add value to through developing and strata-titling

If we look at our portfolio and find ourselves in position A, we can begin selling our stockpile of properties and building equity for our self-retirement. For example if we purchased 10 properties for a total of $4 million and have made $1.5million in capital growth after 7 years, selling now would give us a seven figure sum to live comfortably off of for the rest of our lives!

If we find ourselves in position B, we can start looking for properties to purchase which have scope for capital growth. We need to do this because if our current property portfolio hasn’t fully realised its full growth potential, we need to add properties which can help it do so.

There’s no point selling the properties we already have in this case; doing so would be selling the properties when they’re not worth their full potential and thus cause us to miss out on profits we could receive by holding onto them for a few more years.

So which properties can help us realise growth? Any real estate that can be:

• Subdivided (i.e. a large block of land split up into smaller lots to sell off individually) or
• A block of units that can be strata titled (i.e. a block of 3-6 units which are currently owned by one person and do not have a title for each individual unit). We can make a title for each unit and sell them individually for the sum of more than what we paid for them without titles

Both options are examples of properties we can add value to first hand and improve the overall profitability of our portfolio while we wait for our original property purchases from phase one to mature fully.

 

Phase Three: Prosperity

The final phase of your investment life is the most fulfilling, hence why I call it prosperity. It’s at this point now that all the hard work, sacrifice and discipline you showed in the first two phases pays off and rewards you not only financially but also emotionally.

I believe that in the end the money is not the most important thing; it’s the person you have grown to become and the legacy you leave to your family and community both now and in future generations to come. It’s about fulfilling what’s truly important to you in life, whether that be supporting your parents and children or by helping charities and institutions that resonate with you personally.

It is for these reasons why I believe so strongly in real estate as an investment tool. Not only can you create a lifetime of financial security for yourself, but the skills and traits you craft over the years in doing so will serve you well in all other aspects of life and bring you enormous personal satisfaction and accomplishment.

 

Conclusion

Make no mistake, when it comes to real estate investment, there’s certainly more than one way to split a block! Whist there is no single strategy which serves us 100% effectively all the time, if we break down our investment life into phases we can see that difference processes and goals can be put into place at certain points to help us make the most of our time, energy and resources.

In the end, we see that smart real estate investment can not only serve us well financially, but can also mould us into wiser people living fulfilling and satisfying lives for ourselves and those we truly care for.

Thanks for reading this month’s edition of my blog; I truly appreciate the support you show me, so stay tuned for more property insights coming up!

Joseph’s Property Pricing Guide – What the Jargon Means

Have you ever been looking online at properties for sale only to be bamboozled by real estate jargon and phrases, especially when it comes to pricing?

It seems there’s an endless amount of ways agents advertise the price of a property, some of which don’t even mention a price at all!

What do they all mean? Are there actually any differences between them? Do they change the way I make an offer for a property?  The answers to all these questions have been laid bare below, thanks to my Property Pricing Guide for this month’s blog entry. Read on!

Let’s start with most straightforward pricing type:

List Price

A property with a list price is one with a single price advertised, it usually looks like this:

$500,000

Interpretation: The seller is asking this price for their property, match/better it and the place is yours. If you offer less than the list price, the seller may reject your offer and there is no guarantee they will negotiate a lower figure with you. This is the most common form of pricing type.

Price Guide

A property with a price guide is one with a price range advertised, it usually looks like this:

$500,000 -$550,000

Interpretation: The seller is looking to sell in the specified price range, offer them a figure within this range and technically they should accept your offer. I say technically because with a price guide the seller may reject an offer in the lower end of the price range and ask for a figure closer to the higher end. This is a bit sneaky but it can happen, however price guides are not particularly common relative to the others mentioned here.

Offers Over $….

A property with this type of price guide is one that is open to offers above a specified price, it usually looks like this:

Offers over $500,000

Interpretation: The seller is happy to consider any offers over the specified price, and doing so most likely means they’ll accept. It also means the seller will likely not consider offers lower than this. Very common form of pricing type which leaves the buyer room for negotiating, which can only be a good thing!

Submit Offers

Similar to ‘offers over $…’ however a property with this pricing type is one that’s open to any written offers at any price point. It’s simply written as:

Submit Offers

Interpretation: The seller is happy to consider any reasonable offers on their property, and is willing to negotiate with buyers on pricing. It is a good idea however to do your research before making an offer to avoid over paying, as the seller isn’t giving you a yardstick to go off here. Although vague, buyers can get a great deal from a property with ‘submit offers’ depending on how motivated the seller is. Common pricing type for properties in a buyers’ market.

If we started with the most straightforward, it’s only right we end on the most ambiguous pricing type:

Contact Agent

Unlike any of the previous pricing types, a property with a ‘contact agent’ price is one with no price advertised at all. It’s simply written as:

Contact Agent

Interpretation: The seller is giving nothing away in terms of pricing or their willingness to negotiate, which could be good or bad depending on their situation. A surprisingly common pricing type, contact agent could mean any of the other pricing types mentioned above. Usually used by agents who want to boost enquiry levels for properties by making buyers interact with the property unnecessarily, meaning the property could be unpopular or over-priced. As such, the best way for buyers to take advantage is to ask the agent what price the seller is after, then bid low and negotiate hard. There’s a good chance you’re dealing with a motivated seller!

Closing Comments

There’s a lot of lingo in the world of real estate, but this guide is a good overview of the main pricing types you’ll find in Australia. Understanding what they each mean can give you the inside scoop on what the seller is thinking, and can help you secure your dream home for a great price.

I hope you enjoyed this month’s edition of my blog, thanks for reading and stay tuned for more real estate insights!

Commission – Why the Cheapest Agent Will Usually Cost You the Most!

When considering an agent to sell your home, one of the biggest sticking points can be how much commission the agent will charge for their services. This fee is negotiable and varies from agent to agent. There are many reasons why agents charge different commission amounts however in my experience when it comes to commission, the old adage ‘You get what you pay for’ rings true.

What do I mean by this?

Real Estate Agents Are Alot Like Cars

When buying a car, there’s lots of different manufacturers all competing for your business. Even though all cars operate and function in the same way (transporting you from A to B) their design, features and cost all differ. Even cars that compete in the same class (SUV’s, sports cars, trucks etc) can vary in cost and features massively between manufacturers. For example:

Average cost of BMW sedan = $65,000

Average cost of Toyota sedan = $30,000

Although both these cars do the same job, why is there such a big difference in price?

The BMW is made from higher quality materials, has more safety features, more performance, is more comfortable to drive, has better resale value and has a prestigious, upmarket affiliation to it. Drive a BMW and people will think you’re rich and successful. They are built to a (high) standard and they charge accordingly for the privilege of owning one. Not only this, but the people who pay $35,000 more for a BMW over a Toyota are happy to do so, because they see the value in paying more for a better product and appreciate it.

On the other hand, Toyota’s sedan is built to a price, a price which is cheaper than the BMW. They do this because they know if they charged the same money for their car as BMW did, no one would buy a Toyota. After all, what would be the incentive? Price being equal, any rationally thinking individual would go for the better product i.e. BMW. Toyota appeals to buyers who do not see the value in the benefits the BMW has, so they charge less and that’s how they make their money.

Real Estate agents are not much different. In Queensland commission fees range anywhere from 1.8% to 5% and often GST is added on top of this base rate. Why the massive difference? It’s similar to the car scenario, where if the commission fee was equal for all agents across the state, only the best agents with the most expertise, professionalism and reputation would be employed. The best agents know they are the best relative to the competition and charge accordingly (BMW). The lesser agents know they cannot compete on a quality level, so they offer lower fees and appeal to sellers who do not see the value in paying more for a better agent (Toyota).

The thing is, everybody SHOULD be employing the best agent they can find, not the cheapest, and shouldn’t be making a decision based off their respective commission fees. A lot of people may disagree but this is precisely the point of this post, to demonstrate the value a good agent brings to the table.

The Cheapest Agent Will Usually Cost You the Most Money

This may come as a surprise but I see all too often in Real Estate where a seller has chosen the cheapest agent and lost literally tens of thousands of dollars when it came to the final sale price. They lost all this money because the agent representing them was a poor negotiator who couldn’t extract the absolute maximum amount of money from the buyer. An agent’s negotiation skills are the single most important skill they offer their client, and mastery in this area cannot be undervalued.

If you only want market value for your home, simply sell it yourself and do not employ an agent. BUT if you want a premium, if you want to maximise how much someone is willing to pay you, then you employ an agent and a good one at that. I’ll demonstrate my statement with an example of what happens when a good agent sells a home verses when a not-so-good agent does:

The Good Agent

The good agent knows what they bring to the table and charge 3% for their services. When selling their clients home worth approximately $500,000, they use their expertise and are able to extract an offer of $530,000 out of a buyer.

Maximum price obtained – $530,000

LESS commission of 3% – $15,900

EQUALS Money in client’s pocket = $514,100

The Not-so-good Agent

The not-so-good agent knows they will struggle competing against the good agent, so they charge 1.8% for their services in the hope that a lower commission fee will be enough to convince the seller to choose them. When selling the same client’s $500,000 home, the highest offer they are capable of extracting from the same buyer is $515,000.

Maximum price obtained – $515,000

LESS commission of 1.8% – $9,270

EQUALS Money in client’s pocket = $505,730

As we can see, even though the good agent would cost $6,630 more to employ than the not-so-good agent, they were able to put an extra $8,370 into their client’s pocket come settlement time.

Conclusion

Real estate is the single most valuable asset we will ever own, and it pays (literally!) to understand that when it comes to selling property, we must always employ the agent we believe is the most capable, skilful and competent in terms of expertise and negotiation ability. Failure to do so leaves you open to the risk of selling your most prized possession for far less than what it could have, and I’m sure you’ll agree such a risk is simply too great to take.

Thanks for reading this month’s edition of my blog and stay tuned for more of my real estate musings!

Top 5 Ultimate Party Pads!

New Year’s is upon us again, and that means most of us are primed for a long night of drinks, laughs and general shenanigans! However, is there a property somewhere which would act as the perfect setting for such good times? Check out these 5 ultimate party pads; you be the judge!

Number 5: Palm Beach Villa, New South Wales

For a cool $2450 per night, this massive villa looks like a real hoot! Generously spread over three levels, every room is open-plan and uses glass walls, sunlit terraces and a huge balcony to soak up endless views of the Barrenjoey Lighthouse and Pacific Ocean.

Number 4: Gold Coast, Queensland

It’s pretty much the party capital of Australia, so it’s only right we include one party pad from the Gold Coast.

The pick of them would have to be this magnificent beach mansion, spanning three storeys with the golden sand literally on your door step! This house features everything you need for a crazy New Year celebration including Jacuzzi, patio, outdoor dining terrace, entertainers’ kitchen, rooftop retreat, spiral staircases and a pool which runs the entire left hand perimeter of the property!

Number 3: Kangaroo Valley, New South Wales

If space is your number one priority, it’s hard to go past this estate. Situated atop Barrengarry Mountain, this 301 acre ‘property’ is more akin to a personal land island! Featuring creeks, dams, springs, cattle pastures and your own private rainforest complete with old logging trails for you and your friends to explore before midnight!

When you do find the main estate, you’ll be treated to an architecturally designed mansion filled with nothing but the finest craftsmanship and materials this country has to offer. For the more sophisticated New Year’s revellers among us, you can sip whisky by the fireplace, enjoy a quiet moment on the loft level or catch up on classic literature in your private library.

Number 2: Port Douglas, Queensland

A mansion is always nice, but how about your own resort? Check out this pad in Port Douglas, essentially a tropical sanctuary made up of nine individual pavilions encapsulated by topical gardens.

All the villas are connected via a massive timber boardwalk and the pavilion design means stunning views over the bay serve as the backdrop to every room. There’s also a 25m infinity edge pool and every other resort style facility you could possibly imagine.

Number 1: Napoleonic Fortress, Hampshire (Technically) England

As you can see, our fine country has some pretty special places to host a New Year’s shindig, but this last one is pretty damn cool, and we have to go across the pond to the UK to find it!

Originally designed to protect Portsmouth harbour from the French invasion, the Napoleonic Fortress began its construction in the 1860’s and took 17 years to complete. Fast forward to 2015 and the Fort has undergone a $6 million refurbishment; transforming it into the most unique party venue money can buy.

Accessible only by charter boat or helicopter, many of the original features such as the windows, vaulted ceilings and gun emplacements are still intact. Complimenting this rich history is a dedicated Champagne bar, function room with ocean views, library, gym, two rooftop sun decks, sauna, open-air hot tub for 10 people and your very own lighthouse serving as the ultimate new year’s countdown ball!

Thanks for reading this special New Year’s edition of my blog, wishing you all the best for 2016 and beyond!

Is ‘Location, Location, Location’ all that really matters in Real Estate?

There is an old adage in the property world that says there are three secrets to successful property investment: Location, Location and Location.

However ‘Location, location, location’ is probably the most cliché and overused adage of real estate. There’s even a hit TV show named after it! It infers that regardless of any other factors, the main key to real estate is if you purchase the right property in the right place, you’ll be just fine and almost guaranteed to make a fortune.

Like all adages, there is some truth to this, but also like most adages it ignores the whole story.  Yes location matters a great deal, but how do you know when to buy in that fabled location?  Contrary to popular belief it’s recommended that at least the same amount of consideration given to location should also be given to timing.

But how do we know when the right time is? Is there such a thing? There are no concrete answers to these questions, but what is clear is that the real estate market acts in a cyclical nature. That is, events that occur in the market are regularly patterned or occur in regular intervals. Because of this we can gauge what is currently happening, and what is most likely to happen next.

If we want to gauge what’s happening in the property market, we also need to understand the different phases of the property cycle, and it’s these phases I want to touch on in this article. Let’s get started!

The Property Cycle

There are two main phases of the property cycle: Upturn (i.e. boom) and Stagnation (i.e. bust)

Phase One: Upturn/Boom

At the beginning of the cycle, there is a certain amount of supply and demand for properties in a particular market. Supply representing the current amount of properties for sale and being built, with demand representing all the buyers currently looking to purchase those properties.

What drives an upturn in the property market is increased demand i.e. more buyers entering the market and purchasing properties. There are many reasons which cause demand to increase however the main factors attributing to this are:

1. Population growth and household formation
2. Income
3. Consumer trends and tastes
4. Relative prices
5. Interest rates and credit availability

When those five factors are favourable to buyers, property becomes more popular and is snapped up quicker. As a result, there are fewer properties on the market, and the ones that do come up for sale become more expensive because there are more buyers fighting over it (and willing to pay more in order to beat the competition!).

As time goes on, and prices rise, builders and developers begin to see this as a great time to start building more properties. Their reasoning is that if they can supply these buyers with properties they want, they can cash in on this ‘boom’ and make serious profits.

So developers keep building properties, buyers keep buying them, and everything is going well. Soon everybody is getting in on the act. Some are buying, some are selling, but everyone is making money! This happened in Brisbane several years ago from 2001 to 2007 and was one of the biggest property booms in Australian history. So crazy was the demand for property, that people were making $200,000 – $300,000 on their properties after only 1 or 2 years of ownership without doing a single thing to them. On the flipside developers were selling out high rise buildings before they were even being finished!

But alas, all good things must come to an end, and herein do we find ourselves at the end of phase one, and fast approaching…..

Phase Two: Stagnation/Bust

If Phase One was the wild buck’s party on a Saturday night, then Phase Two is the inevitable and perhaps sorrowful hangover which follows the Sunday morning after.

How does this happen?

At some point, the market reaches what’s called ‘equilibrium’ where the level of supply is perfectly equal to the level of demand. Every buyer who wants a property can purchase one for a price their happy with, and every seller can sell their property for a price they’re happy with.

Once every buyer is satisfied, the demand for property starts to go down. There’s less people looking to buy (because they’ve found something their happy with) and the buyers who are still looking have plenty of options to choose from (because developers are producing properties like crazy), thus lowering competition for individual properties.

The thing is, property takes time to be built; sometimes it takes 6 months for a house and other times it takes 3 or 4 years if you’re building high-rises. This means there’s a delay between when a buyer wants to purchase a property (demand), and when they can physically purchase it (supply).

So say the market reaches equilibrium in year 1, but developers can only have supply ready by year 4 at the earliest. During these 3 years of lag, the level of demand has begun to decrease, and by the time the supply is ready to go in year 4, the level of demand for it is no longer there. Now you have all these properties for sale with not enough buyers looking to buy them.

When this happens, developers become desperate, as they need to recoup their initial financial investment. In a bid to move their stock quicker, developers sell their properties for less than their competitors (i.e market value). When other developers see this, they follow suit, and pretty soon everyone is in a race to the bottom. They also stop building more properties because they can no longer sell the ones they currently have! As a result, property prices everywhere start to fall, and those who purchased in the ‘boom’ realise they can no longer make their money back. This causes them to hold onto their properties, in the hope that one day the market will come back up high enough to justify selling.

Over time this trend continues, with less and less properties being offered for sale/built and less buyers being around to purchase them. In fact the trend only stops when the five factors of demand described earlier start improving again to boost demand.

It is at this point the property market has gone full circle, with Phase Two ending and Phase One beginning once more.

So when’s the best time to buy (or sell)?

Going back to our original question on timing, it’s clear from the cycle described above that the best time to buy in that elusive location is when the market is Phase Two. That is, when prices are falling and supply is plentiful.

Conversely, it is at the very end of Phase One that represents the best time to sell, as the market is now at its peak.  The tricky part of real estate is estimating when Phase One or Two is occurring and when the market is at its lowest/highest.

Many a savvy property investor has lost countless hours sleep dwelling over this; however the best way of knowing is by having sound and up-to-date knowledge of what’s happening not only with prices, but also with the five factors that drive demand. Using this information in tandem with your knowledge of property cycles will ensure you have the best chance of making the best decision.

So away with ‘Location, location, location’! From now on the three secrets for successful property investment surely must be: Location, Timing and Demand.

Thanks for reading this month’s edition of my blog, come back next time for more property insights!

Top 5 Haunted Places On Earth

So Halloween is upon us today, and what better way to get into the spooky spirit by reading about some of the creepiest and most haunted places on earth!

5) The Queen Mary Hotel – California, USA

The Queen Mary Hotel is actually a former ocean liner that sailed the North Atlantic Ocean from the 1930’s to 1960’s. In the mid 1970’s it was permanently docked in Long Beach, California and to this day runs as a hotel.

Despite its grandeur The Queen Mary is one of the most haunted hotels in America, with several deaths occurring aboard the ship in its hey-day. After two women drowned in the First Class Swimming Pool (once in the 30’s and again in the 60’s) there have been numerous reports of their ghost being sighted around the ship.

In addition, a woman in white has been seen in the Queen’s Salon, a gentleman in a 1930’s suit often stalks the First Class Suites and the ghosts of two young children can be seen and heard around the old storage room.

4) Halifax Citadel – Nova Scotia, Canada

With hundreds of reports of paranormal activity over the years, the Halifax Citadel is regarded as the most haunted place in Canada. This star shaped fort at the summit of Citadel Hill in the town of Halifax is nearly 300 years old, with the current structure being re-built in 1856.

Countless claims of several ghosts have been reported, including men, women, old soldiers, guards and an old lady who is known to show herself in mirrors.

Staff and visitors claim a little girl follows groups taking tours, with group members experiencing her holding their hands. Other reports include voices, unexplained knocks and bangs, mists captured on film and with the naked eye, sudden gusts of wind in closed rooms, doors swinging open by themselves and on occasion people have been pushed over by an invisible force.

3) Monte Cristo Homestead – New South Wales, Australia

An Aussie home makes the list! In fact the Monte Cristo Homestead in Junee, New South Wales is regarded as the most haunted house in Australia!

The reason this property is so haunted is due to its dark history of tragic events since being built in 1885. The Crawley family, who built the property and resided here until 1948, witness many deaths including a young child who was dropped down the steps, a maid to the family fell from the balcony and a stable boy is believed to have burned to death too.

Then there’s the story of the caretaker family and their mentally ill son Harold, who was chained up in the caretaker’s cottage for 40 years. It is believed one day he broke free from his chains and murdered his mother. Even after the Crawley family left the home, tragedy continued and another caretaker was murdered in the same cottage some years later.

The spirits of all these lost souls are believed to still have a presence within the house, and the Ryan’s Family, who are the current owners, have reported countless experiences. The Ryan’s children would complain about a man peering into their bedroom window located on the second floor; however there’s no verandah outside the children’s room.

Caged Chickens the Ryan’s had were mysteriously strangled to death, while their pet bird suffered the same fate. A piano is heard from an upstairs room yet there’s no piano in the house anymore, and visitors to the house often experience unseen forces impeding them from moving around the grounds.

2) Ancient Ram Inn – Gloucestershire, England

The Ancient Ram Inn was built in 1145 and is considered the most haunted house in the UK, if not the world. The Inn was built on the intersection of 2 ley lines, what many people believe to be a spiritual activity conductor and an ancient Pagan burial ground is said to have resided here over 5000 years ago; how convenient!

The result of all this is a house which has seen everything from child sacrifices to occult worship. During its days as a bed and breakfast, guests would flee in the middle of the night, often reporting fully bodied apparitions appearing at the foot of their beds, the feeling of being touched/pulled, disembodied voices and feelings of being watched.

Even the current owner has freaky tales to tell. On his first night in the house, as he lay on his bed, an unseen force grabbed his arm, dragged him out of bed and across the room! Since then he’s found the skeletons of two children underneath the staircase, broken daggers stained with blood, and evidence ritual sacrifice and markings, and to this day he continues to experience hauntings and attacks on a regular basis.

1)   Poveglia Island – Italy

So these last stories have been pretty creepy, but this one takes the cake for me.

Settled in 421, Poveglia Island sits in the Venice Lagoon between Lido and Venice. Being separated from the mainland, the island served as the perfect ‘quarantine’ location for victims of the plague in the Roman Era and then again centuries later when the Black Death decimated Europe. Victims of the disease were dumped into large pits here and either burned or buried.

As the plague got worse, the population began to panic, and if anyone in the general community showed the faintest sign of sickness they were sent here, screaming and pleading, thrown onto the piles of rotting corpses and set alight. By the time the plagues resided, it is estimated some 160,000 men, women and children lost their lives here. Today a thick layer sticky ash covers the Island, the result of soil combining with the charred remains of the bodies buried within.

And the story gets better…or worse rather! In 1922 the government thought it wise to construct a psychiatric hospital on the Island, complete with a creepy bell tower. Immediately patients on the island complained of seeing ghosts of plague victims and were kept up at night hearing the tortured wails and screams, however these claims were dismissed because everyone already considered these patients crazy.

To top it off, one Doctor at this hospital decided to use these victims as experiments to find a cure for insanity. Lobotomies were performed on the patients here using crude tools such as chisels, hammers and hand drills. In fact any patient the Doctor took special attention to was brought to the bell tower, tortured and subjected to numerous inhumane horrors.

According to folklore, after years of this madness the Doctor himself began to see the tortured spirits of Poveglia Island himself. According to a nurse, one day the doctor led himself up to the top of the bell tower and threw himself off to the grounds below. The fall did not kill him however, but rather as he lay on the ground in pain, a mist surrounded him and choked him to death. Rumour has it the Doctor’s body is bricked up in that bell tower, and on a still night, the bell can be heard tolling across the bay to the mainland.

Today, the whole Island is abandoned and tourism is strictly prohibited, with fisherman even refusing to fish in the area as charred human bones regularly wash ashore. Every now and then dare devils and psychics dodge police patrols and explore the island, only to leave in complete terror, saying there is a heavy atmosphere of energy and evil.

Happy Halloween everybody! Stay tuned for less supernatural real estate advice next time!

When Should You Sell by Auction? Tell-Tale Signs Revealed!

One of the biggest choices you have to make when selling your property is choosing the method of sale. For residential houses and apartments, there are two main methods: Private Treaty and Auction.

A private treaty is when the property is sold via an agent with buyers submitting written offers to purchase the property. These offers can be either conditional or unconditional and the agent will often negotiate the terms of purchase with the buyer on behalf of the sellers.

An auction on the other hand, in simple terms, is when buyers compete for a property via a bidding process on a set date, with the property being sold to the highest bidder.

There is a lot of debate over the auction process and whether it is a suitable method of sale. Many people shy away from them while others will swear by it, but personal opinions aside, when it is truly beneficial for a seller to use an auction over private treaty?

In my experience, there’s a handful of ‘key indicators’ which serve as tell-tale signs an auction would be the most beneficial process. By beneficial I mean the process that will yield the greatest sale price with the most favourable conditions for the seller.

The next time you find yourself selling a property have a think about your situation relative to the following points. If they stack up favourably it could be in your best interests to use an auction as the method of sale.

Identifying Auction Situations: The Tell-Tale Signs
Tell-Tale Sign 1: Current Market Demand

The first sign an auction campaign would be suitable is from the current market supply and demand. Ideally for an auction to be successful there must be a strong demand for your property but a short supply of them. Successful auction campaigns occur when there’s a limited number of your kind of property for sale and more than one person interested in purchasing it simultaneously.

If the market is flooded with properties similar to yours you’ll have little chance of creating competition on auction day, as the buyers would have many options to pick and choose from, thus lowering their enthusiasm and motivation to buy your particular home.

Tell-Tale Sign 2: Location, Style and Type of Property

The second tell-tale sign an auction would be suitable depends on the property you are selling, and what characteristics it possesses.

As a general rule, the more unique a property is the more suitable it is for auction. Linked to sign 1, unique properties are less common and therefore lower in supply, meaning they are ideal for the auction process. Some characteristics of a potentially unique property include:
• Prestigious or high value
• Architecturally uncommon
• Historically significant
• Expansive city or water views
• River front properties
• Beach front properties
• Penthouses or sky-homes
• Abnormally large parcel of land for that area
• Development potential

This list is not all encompassing, but any property that offers something that is considered rare or out of the ordinary would greatly benefit from the auction system.

Tell-Tale Sign 3: Vendors Motivation

The final sign comes from the person actually selling the property, the vendor. If someone is truly motivated to sell a property, nothing shouts this to the market louder than putting an auction sign out the front.

By going to auction you are saying to every buyer: ‘We are genuine sellers – and we are ready to do business!’

This is because when a property is offered for auction, buyers have proof the owners are genuine sellers who are prepared to meet the market. When this is established, buyers are more inclined to seriously consider your property and to table strong offers, as they know their efforts will not be in vain and will be taken seriously by the sellers. As such, the sellers’ chances of receiving high offers increases, which in turn means they have a greater chance of achieving the sale price they are looking for.

To summarise, if genuine motivation to sell exists with the vendor, the auction process should achieve the desired outcome for them.

Closing Comments

Although each method of sale has its pros and cons, we can clearly see there are several situations whereby using an auction campaign is a no brainer for sellers looking to give themselves the best chance of achieving top dollar for their property. When used correctly and executed properly by the agent, auction is a powerful and all encompassing method of sale in real estate.

Thanks for reading this month’s edition of Joseph Riga Real Estate, stay tuned for more property insights!

Should You Make Improvements to Your Home Before Selling?

When the topic of selling houses comes up in conversation, inevitably the question of improvements and renovations is never too far behind. Do we fix the leaking tap? Re-landscape the backyard? Add another level to the place?? (Seriously someone once asked me this!)

Many sellers seem to believe that making expensive renovations is a sure-fire way to boost the value of their homes and thus achieve more money on the open market when the time comes to sell. However this is not always the case, or rather it is not always the best option for the seller.

The decision on whether a homeowner should renovate/improve their property prior to selling really depends on one question:

What kind of property are you selling?

Let’s break this down.

The kind of property you intend to sell, and its condition and current use has a big impact on whether renovating is a good idea or not. This is because the kind of property you sell will dictate the kind of buyers who will be interested in it.

For example if the property is your big home in a blue-chip suburb and you have looked after it well, but the carpets in the bedrooms are worn thin and a small leak on the roof needs to be fixed, it would be worth your time and effort to fix these issues. Why? Because the buyer in the market for a big home in a nice suburb is most likely an owner occupier, who wants a perfectly presented home their family can move into straight away with no hassles. In this case, the carpets and the roof leak are the only things holding this buyer back from falling in love and wanting to buy the property, so it makes sense for the seller to sort them out beforehand.

But on the other hand, what if you have an investment unit which is 40 years old and needs a full renovation to bring it up to scratch? In this situation the owner would be better off not renovating and selling the unit in its current condition. Why? Because there are lots of buyers out there who are specifically looking for properties with renovation potential, and if the seller was to do the renovations themselves, not only would they alienate these buyers, but it could also lead the seller down the dangerous path of overcapitalisation.

This is a very real scenario because when it comes to renovating, cost does not equal value. If you spend $100,000 on renovating a unit, there is no guarantee you are adding $100,000 or more to its market value. The seller would have to sit down and work out exactly how much the renovation would cost, and then do a feasibility study to ascertain whether such work would actually pay off financially; essentially what property developers do before they decide on which projects to build.

As such, it simply isn’t worth the sellers time or energy doing all this, because the safest option would be to simply sell the property ‘as is’ to buyers who are looking for properties to renovate and to let them worry about undertaking improvements which they are comfortable doing anyway.

Obviously not every scenario is clear cut, but the idea is the same every time: What decision will make my property the most attractive to its target market for the lowest outlay? By doing this, you will minimise your financial risk while maximising your chances of finding a buyer quickly and selling for the price you want.

That wraps up this month’s real estate topic; I hope this gives you some guidance should you ever find yourself asking renovation questions.

Thanks for reading and don’t forget to check back next month!

The Selling Process in Plain English

If you’ve ever sold a piece of Real Estate before, you’ll have a good idea of what happens in-between making the decision to sell and loading your furniture onto a truck en route to your new home. If you have never gone through the process though (either at all or not in Queensland), it can be annoyingly hard to find a straight answer as to what actually goes on when you put a house on the market for sale, not only for you but also behind the scenes with your agent.

Well, be confused no longer, as I have outlined the entire selling process in plain English below. For extra clarity the process can be split into three phases: Preparation, On the Market and Finalisation. For each phase, the individual steps will be outlined and accompanied by a brief explanation. Let’s get started.

Phase One: Preparation

1 – Property Appraisal
Your agent will undertake a property appraisal to establish the price you can achieve for your home in the current market. This price is derived from the sales of similar homes which have sold in the last 3 months, and also from similar properties which are currently on the market.

2 – Signing the Listing Authority
If you are ready to sell and happy with the terms between you and your agent, you sign the paperwork (technically the Form 6 – Appointment/Reappointment of a Property Agent) which gives your agent permission to advertise your home for sale, conduct inspections with buyers and negotiate offers on your behalf.

3 – Photography
Your agent arranges a time for a professional photographer to take HD photos of your home for the selected marketing methods, be it online ads, newspaper ads, signboards, brochures, letterbox drops etc.

4 – Marketing Preparation
Your agent and their staff will write the marketing text for the online and newspaper advertisements, create ‘just listed’ letters to drop around the neighbourhood, arrange a ‘For Sale’ sign to be erected on-site, make brochures to hand out at inspections/Open Homes and have a floor-plan of your home drafted to show to potential buyers.

5 – Marketing Release
Your property is uploaded and marketed through various websites such as realestate.com.au, domain.com.au and agency specific sites as well as through print media such as magazines and newspapers.

Your agent will also contact their database of clients to inform them about your home. This is done through phone calls, texts and E-Newsletters primarily.

Phase Two: On the Market

1 – Enquiry Management
Your agent will monitor buyer enquiries from the advertisements and will qualify these buyers to see if they are genuinely interested in purchasing your home.

2 – Inspections
Private Inspections and/or Open Homes are conducted on a weekly basis to give buyers the chance to inspect your home. Open Homes normally occur on a Saturday while private inspections are individually arranged at a time which suits the buyer. Open Home times are usually listed on the advertising material 4-7 days prior.

3 – Feedback
After each Inspection/Open Home and every few days the agent will convey to you all the feedback they are getting from buyers regarding your home. This includes the buyers’ likes and dislikes, their intentions (owner occupier or investor, why they are buying now), and what they feel the home is worth. Statistics from online advertising such as number of visitors per day, which pictures were most clicked on, what device they saw your ad on etc is also passed on to you.

4 – Generating Offers
Throughout this stage, your agent will be constantly talking to buyers who show genuine interest in your property, and will convert this interest into formal offers for your home.

A formal offer (as opposed to a verbal offer) is expressed in writing and outlines the price the buyer is willing to pay for your home and their conditions of purchase, i.e. subject to a building and pest inspection, subject to finance approval etc.

Phase Three: Finalisation

1 – Negotiating
Once a formal offer is obtained from a buyer, the agent will negotiate with them to get the highest price and the best conditions for you. This step here is where a good agent will make you thousands of dollars extra on the sale of your home.

2 – Presenting Offers
After your agent has negotiated the best offer, they will present this offer to you. At this point you have the choice to make one of three decisions: Accept the offer, reject the offer or make a counter offer.

If you accept the offer, you move to step 3 of this phase. If you reject the offer, the agent will inform the buyer and will invite them to reconsider (i.e. improve) their offer if they wish.

If you make a counter offer, the agent will present this to the buyer and negotiate between you and the seller. The agent’s job here is to work towards finalising an offer which is acceptable to both parties’ needs and wants. This can be easier said than done, however having a great agent going into bat for you at this step is worth its weight in gold.

3 – Accepting an Offer
If you are happy with the offer you have been presented, you accept the offer by signing the contract of sale (i.e. the formal offer the buyer submitted) which says you legally agree to sell your home to this buyer under these terms and conditions.

4 – Overseeing Conditions of Sale
If the offer you accepted for your home was subject to any conditions, your agent will now focus on the buyer meeting these conditions within a specified time period. Some of the common buyer conditions in Queensland are building and pest inspections, valuations and finance approval.

Usually conditions need to be met within 7-21 days of the buyer and seller signing the contract (the contract date), with the property settlement date usually 30-45 days after the contract date.

5 – Settlement
Once the buyer has met all the conditions of the contract, your property can reach the settlement date. Settlement is the completion of a sale when the balance of the contract price is paid to the seller and the buyer is legally entitled to take possession of the property.

P.S. This is when you pop the champagne!

So that’s about it! I hope this gives you a better idea of the selling process and answers some questions you might have had about what goes on during this time. Thanks for reading and be sure to come back for more property insights!

Open or Exclusive Listing: Is More Actually Less?

When you decide to sell a property, there’s a few different ways one can go about the process. For residential property, the two most popular methods of selling are Auction and Private Treaty, with the second option being the more common of the two in Queensland.

A private treaty is when the property is sold via an agent with buyers submitting written offers to purchase the property. These offers can be either conditional or unconditional and the agent will often negotiate the terms of purchase with the buyer on behalf of the sellers.

Within a private treaty though, there are two different authorities the seller can give the listing agent: an Exclusive listing or an Open listing authority.

An exclusive listing means a single agent is given the task of marketing the property and liaising with buyers to procure offers, while an open listing means two or more agents can work independently from one another to sell the same property.

At face value, it would seem the best option for selling your property would be through an open listing authority. After all, more agents selling your home means more advertising exposure, more manpower for your money and a greater sense of competition between agents, thus encouraging them to work harder and bring you a better deal. Right?

As it turns out, this trail of thought is misguided, and can in-fact hinder your chances of selling your property for a premium price. The reason for this can be summed up in one single concept; incentives. Let me explain.

When a person is trying to decide what action to take, in their mind they will weigh up the costs and benefits of each action, and they will only choose an action which yields the greatest benefits to them for the least amount of cost. In economics this is referred to as the ‘Cost-Benefit Principle’.

In an exclusive listing authority, one agent has the task of selling the property. If that agent wants to be rewarded (i.e. paid) for their efforts, they need to work tirelessly and smartly in order to achieve this. In other words, if the agent puts in enough time and energy (cost), the reward of being paid (benefit) would be worth this extra effort. Crucially though, the benefit is guaranteed if the cost is paid – the agent will be financially rewarded should they work hard enough.

Conversely, an open listing has multiple agents selling the same property. Each agent still needs to work hard to reap the benefits of being rewarded, however this benefit is no longer guaranteed.

An agent could work for weeks or months on end negotiating with buyers to present the best offer to the seller. However if one of the other agents comes in at the last second with a better offer from another buyer, and the seller accepts this offer, then all the work the first agent did would have been in vain. As a result, agents in an open listing authority have fewer incentives to work hard for the seller when compared to an agent in an exclusive listing authority. This means less time and effort is spent on selling the property, leading to a lower chance of the seller achieving the highest sale price possible.

In addition to the incentive dilemma, an open listing authority can also leave the seller exposed to being taken advantage of by savvy buyers. These buyers will contact one agent selling the property and negotiate the best deal for themselves with this one agent (lowest purchase price and favourable conditions). Once they’re satisfied they have the best deal from one agent, they’ll contact the next agent and repeat the process.
In the end, the buyer will submit their offer with the agent they got the best deal with and walk away if the seller doesn’t accept. If the seller does accept, they are almost certainly accepting a price less than the maximum that buyer would have offered for their home.

In an exclusive listing buyers only have one avenue to go down, and if they really want that property they will have to deal with only one agent that the seller has handpicked to represent them. If they employ a strong agent, the sellers will retain greater control over the quality of offers they receive from buyers and safeguard the true value of their home.

Closing Thoughts

While it may seem logical and beneficial to employ multiple agents to sell a property via an open listing authority, there are pitfalls to this arrangement which may not be immediately clear.

If any seller wants to have the greatest chance of selling their home quickly and for top dollar, they should employ one agent who is guaranteed to work hard and will protect the integrity of the seller’s price expectations.

Thanks for reading this issue of my blog, come back next time for more property insights and perspectives!