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Focus On What Matters

When it comes to selecting a rental property for purchase it pays not to sweat the small stuff, writes Nick Gentle.

By: Nick Gentle

31 January 2020

As we head into 2020, I have been speaking with a lot of people who are looking to invest, and if there’s one thing I’ve learned it is that what we focus on becomes the basis of our decisions. As property investors, particularly new investors, it is important to focus on what really matters. Learning and understanding what is truly important is why many investors work with mentors and property finders.

I see this all the time as I observe different people’s reaction to the same property. I know that if I visit a property with five people and give them the same information that I will get five different reactions. For example:

You’ve found a property. It is a threebedroom house on a large section and it needs a bit of work. The site appears to be sub-dividable and able to be developed under the district plan, but you would want to check with council first before making any assumptions.

The house has big rooms and needs a renovation, and in about five years the roof will need replacement. Houses around it are similar, albeit a bit better and while the street is close to a central zone it’s mid-market, if that. With a renovation (including the roof) the property will be cashflow neutral or a bit better.

So What Is Important Here?

Is it the condition of the house? The address? Rent potential? Proximity to shops? Subdivision potential? Availability of tradespeople? Maybe the roof puts you off?

‘Almost everything to do with a property can be distilled down to just a number at the end of the day, so buy well enough to offset any downsides’

I’d argue that what really matters is a) the price and rental (or resale) potential and b) whether that property fits into your strategy. Almost everything to do with a property can be distilled down to just a number at the end of the day, so buy well enough to offset any downsides (or allow scope to fix them) and the deal will be a good one. If the deal is profitable and fits your stated goals then go get it.

You can always sell the property later if your goals change. Successful investors focus intensely on their strategy and then drill down to the detail about a deal, whereas those new to the game do the opposite.

They can tell you more about the light fittings and carpet colour than how a property moves them forward. This is a natural bi-product of experience; long term players can recognise the difference between a temporary issue that can be fixed and a fundamental flaw that will halt them in their tracks. They know what investment angles matter and what is background noise .

Don’t get me wrong, those same experienced investors still deal with the small stuff (usually by outsourcing it), but they keep their focus on building and maintaining momentum.

If I can summarise it in one sentence, I would say experienced and successful investors tend to focus first on how a property helps their overall portfolio and strategy and make a plan to take care of what needs doing. Others, particularly people just starting out, tend to get bogged down and over-focused on details that a builder could sort out on a weekend.

A property finder can be a great help at putting a deal into perspective; they keep you focused on what really matters and help to line up tradespeople to deal with the rest.

The long term outcomes are the reason we all invest in real estate in the first place, so don’t let the small details of a deal distract you away from that. If you are struggling to see the forest for the trees it might be worth contacting a property finding agency for some guidance. ■

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