02 Mar What makes a successful property investor? – Andrew Mirams
Property success stories are everywhere but we have to warn that there are many stories we don’t hear about because there are many people who fail. So what makes a successful property investor? That’s what we discuss with Andrew Mirams from Intuitive Finance who has seen it all.
Kevin: Joining me this time to have a look at another one of the common myths in property investment, Andrew Mirams from Intuitive Finance.
Andrew, welcome to the show.
Andrew: Good day, Kevin. Thank you.
Kevin: The one I want to tackle with you is that you can actually get rich quickly by investing in property. What are your thoughts about that, mate?
Andrew: That’s a great question. If it was, why wouldn’t we all be doing it, Kevin? It seems so simple, doesn’t it?
I think one of the things that we often get presented with, as financiers, is people coming and wanting to flip properties. It’s “I’ve heard someone do it, and you make good money and it has to be an easy way to make money in property.”
Kevin: Let’s firstly qualify what flipping property is.
Andrew: Buy a property or buy a quick reno or improvement, turning it back over in the short-term. Flipping is all about not a long-term hold; it’s a short-term strategy where you can turn it over quickly and make a good profit from it. I’ll preface this by saying there are people who can do this, but the greater majority in our experience have been failures, and some have been quite dismal failures.
Kevin: Just on that point, of the ones that you’ve seen succeed, what are some of the qualities that they bring to the table that others don’t?
Andrew: There are probably five things that are really important in flipping properties, and when we go through the five things, you’ll see probably where people are both successful and fail.
The first one of those that we find is a lack of knowledge. By that, I mean that people haven’t done their research on an area or a suburb, they haven’t done their research on the type of property, and more importantly, what will sell and how long it might take to sell at the end.
People jump in thinking “I saw a house next door,” or “I’ve done this,” or “I’ve done that,” and not doing their knowledge tests and having some skills behind them is probably the first step. Again, people who do research that really well and know the areas that they should target have done fantastically, have gotten good results.
The second point is a lack of skills. The skills that are probably the two most important are the financial in terms of actually doing the correct analysis, and then more so, probably, the technical and being able to get in and do a lot of the work yourself.
People who can do a lot of trades and people like that who can do work themselves, it can be profitable, but if you’re outsourcing and think you can turn it over quickly, all your trades are going to want their margins on a property, and doing it then erodes your profit or potential there.
The next one is a real lack of patience, Kevin. Probably the next two work together: a lack of patience and a lack of time. The first one is a lack of patience. “Is it done yet? How quickly can this thing turn around so we can get it back on the market?” A lack of time tends to be probably the effort that they can put into the property. Obviously, if you can do work yourself, you don’t have to pay someone their wages to do it for you.
Kevin: I would imagine that’s a fairly big one, that ability to roll your sleeves up and do some work yourself, because that adds straight to the bottom line.
Andrew: Yes, absolutely. The time and the patience are all working together because at first, it sounds like a great idea. At this time of the year, people are on holidays and they think, “We’ll get in and we’ll do that.” All of a sudden, things take longer and there is something else to do – “It’s a nice day; I’ll go to the beach.” – and all of a sudden, it doesn’t get done. That’s where we get impatient or then it becomes a burden. That’s the real lack of time. Every week, “I have to go to this place and do this again.” It can become a real burden.
Those who are good at it, love it. They can’t wait to get there and they’re really clever at both the finishes they can put on and also the work that they can do, like you said, rolling up their sleeves and doing a lot of it themselves.
Kevin: Andrew, also on that point, I find, too, that the really successful ones are the ones who treat it like a business not like a hobby, not like something I’m just going to do on the weekends, so I’ll fit it in and I’ll have to make all that other stuff fit around it. For them, it’s a job really, isn’t it?
Andrew: Absolutely. I think what you said, getting rich quick, that’s the thing. The ones who do it as a business not as a hobby are the ones who are successful, and the people who want to get rich quick because it’s so easy to do are the ones who tend to run out of these first four things.
Certainly, the last point that I’d like to make is the major one as far as what see. It’s the lack of money that people have. They think it’s a relatively cheap exercise – get in and do it because everyone is doing it. But there are three things with that lack of money. There is the buy cost. People don’t often look at what it costs to buy a property, the transaction costs, the stamp duty, and things like that.
The second point is while they’re renovating, they’re not getting a rental or anything else like that so it’s your hold cost. You’ve still got interest, rates, and other things. You have to meet insurance while you’re holding it. Then there’s the sale cost. It’s getting agents in and how you advertise it, and things like that.
Those three things can really cruel a project. If you’ve been able to do all those first four steps potentially yourself but you haven’t done your research on what the monetary items are, you can end up doing it for nothing. We’ve seen people do it for nothing and/or lose money from trying to do it quickly and turning it over.
Kevin: There you go. It might be possible, but it’s not easy. Our guest this time, Andrew Mirams from Intuitive Finance.
Andrew, thanks for your time.
Andrew: My pleasure, Kevin. Thank you.