Cashing in on low interest rates – Richard Crabb

Cashing in on low interest rates – Richard Crabb

The lowest interest rates we have experienced in a long time could be encouraging some first time investors to stick their toe in the water.  If that is you – Richard Crabb from Aspire Advisor Network has the seven essential factors to consider before you do.

Transcript:

Kevin:  As you know, we support PIPA, the Property Investment Professionals of Australia. They’ve elected two new board members to better represent they’re growing membership database because it is growing and creating a desire for a lot more learning. Sydney’s CoreLogic Head of Content, Kylie Davis, has been elected to the board. Melbourne’s ASPIRE Advisor Network’s Richard Crabb has also been appointed to the PIPA board.

I’m talking now to Richard from ASPIRE Advisor Network. Richard, congratulations on being appointed. I think PIPA plays a tremendous role in this environment.

Richard:  Thank you, Kevin. I appreciate the opportunity to have a chat with you today.

Kevin:  I’m keen to talk to you because I’ve known we’ve spoken a bit off air about what ASPIRE does and what PIPA does, but I think there are a lot of pitfalls for people getting into property. Where do you see a lot of people go wrong, and what are you advising your people through your network?

Richard:  Thanks, Kevin. The biggest thing that we see in the industry is that a lot of these organizations spend a lot of money on marketing to look at selling the property. So they’ll build a story around a property and why it’s an amazing investment. Unfortunately, a lot of the time, that ends up not being the case.

What we really say is that investors need to start with looking at themselves and their strategy. Property selection should be toward the end of any investment process.

Kevin:  What this means to me is that I think there are a lot of people I would call casual investors, a bit like low-hanging fruit. They are the ones who these marketers appeal to and pick off, whereas, if you’re really going to get serious about property investing, you have to treat it like a business. Research it. Understand who’s going to be on your team and whose advice you should take as well.

Richard:  100%. In line with what PIPA is doing in the industry, we’ve built a network of licensed professionals who are actually professionally insured for property investment advice, who actually work with investors on their strategy, their goals, and their objectives and actually learn how to delve into the research and analysis of a property to actually make an informed decision that’s going to deliver for them the right numbers for their investment strategy that they’re looking at.

Kevin:  With those clear financial objectives that are just so important, how many people come to you the wrong way around, thinking, “We’re going to be able to find a property quickly if we work with these guys”?

Richard:  We see it all the time. A lot of organizations that run big seminars, they’ll have very big marketing budgets and advertise and get people into a room and try to actually sell them a property. We get that a lot with our clients, where they’ve been one to these sessions or seminars and think, “Oh, wow. I think this property is great.” We actually sit back with them and say, “Let’s go back to the other end and look at you and why you think this property is great.” When you actually delve in the research, the demographic profile, the area, the location, the owner-occupier, the investor ratios, and the exit strategy down the track and try to align that to a property, they quite often find that what they thought was going to be an amazing investment quite often turned out to be nothing like what they were trying achieve with their actual investment plan.

Kevin:  What advice do you give about the two different areas: cash flow and capital growth? Is it possible to do both?

Richard:  It is. There’s no magic bullet, as they say. When you really look into the numbers, there is good structuring with the finance and how they actually do their finance arrangement. You can get both over a long-term strategy.

Kevin:  Set and forget. Is that something that people should do or they do do that’s incorrect? In other words, buying a property or setting up a portfolio and then just letting it run. How often should you be reviewing it?

Richard:  Great question. Something that we do as part of our process is a twelve-month review.

Kevin:  On the whole portfolio or just the lowest performer?

Richard:  You need to look at your whole portfolio. Part of what we like to do is speak with our investors every twelve months and look at it good, bad, or ugly. Is the property underperforming or over-performing? You really should always be analyzing and taking that time to actually work at where everything is and whether it’s still achieving the objectives of the plan that you had set for the long term.

Kevin:  Because sometimes the lowest-performing property might be the one you shouldn’t get rid of because it either needs a bit of tweaking or it has better potential for the future. It might be worth holding onto.

Richard:  I couldn’t agree more, and we do see that a lot. Unfortunately, sometimes investors will get nervous maybe early on. Maybe they’ve had a property for two or three years and they think, “But it’s not performing.” Getting rid of it at that time is really losing the benefit of holding it for that longer-term period, where you see the continued growth in the area or the evolution of the property. You’ve already had the upfront initial buying costs. Properties across Australia do go through cycles. Statistically, over time, that’ll often come through that cycle and over to the other side. So getting rid of it too early can be worse than not doing the right thing.

Kevin:  Richard Crabb from ASPIRE Advisor Network has been my guest, and he is a new board member on PIPA, the Property Investment Professionals of Australia. We support them, and you can to by using the button on any one of the pages right here at Real Estate Talk. That will take you straight through to PIPA. You can join up there.

Thanks for your time, Richard. Congratulations again. I look forward to talking to you again soon.

Richard:  Thanks, Kevin.

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