Top 15 risk topics for newbies to consider

i think these 3 below are not for the newbies unless it is a turn key project (without much) or they are working as a venture with someone they know. All these 3 require project managment skills, a good understanding of construction and construction terminology. i remember when i did my first kitchen, the cabinet maker said do you want a "waterfall" and i wasn't sure if he said incorrectly. Also, building code - and now with the new planning schemes in Vic (vegetation rules, site coverages, easement, GRZ2, NRZ) and estate guidelines colour schemes in new land estate. Other topics would be Construction loans, timelines, building inspectors, legal, contracts, dispute management, tribunal hearings and ability to fix problems on the fly.

10. Buying land and intending to build a house and keep as an Investment property
11. Buying to renovate and flip for profit
12. Property development

 

Personally, I agree with you. Especially if they never invested in property before. The risk is way up there as you have said mate. It really goes beyond just investing in property and is essentially a business. Not trying to sound condescending, but I truly believe its not for everyone. Just my opinion.

 

that's true - it's not just numbers it is more like a proj mgmt job - trying to juggle everything and it is very different to buying and holding hence the focus is not necessarily on the no of properties you have or own.

 

@melbournian I am relatively new to undertaking property developments completely on my own (without a business partner) and the biggest challenges I found were 1. Knowing how to find a viable site and buy it for the right price so it will actually stack up profit-wise , 2. Trying to identify all the potential major unforeseen costs (very hard so always have a decent contingency I learnt), 3, Managing people and processors so it runs relatively smoothly. Sometimes i don't know how I'm getting by but I do. The point I'm trying to make is that a newbie to PI who doesn't have any knowledge of cycles, demographic analysis, DD and the list goes on... for them i can't imagine how much more risky it must be to undertake a development project...Anyway i agree with you there is a lot more to it than as you said just " buying and holding" property.

 

Great post @Leo2413
As others have mentioned the number 1 at top of my list is "Going it alone" followed closely by my number 2 "investing with no knowledge".

The trouble is majority of people do BOTH of these. Seek no help with no education and wonder what went wrong?!?

I have going it alone above education because I still believe even If educated you should still leverage others better equipped in there chosen field.

 

@albanga I completely agree with you. Self knowledge and leveraging other peoples knowledge is key.

In all honesty, I was able to build a decent portfolio, almost knowing crap all about:

1. Finance
2. Accounting
3. Legals
4. Structures
5. Town planning
6, Design
7. engineering
8. Building and more!

BUT by engaging great consultants for every one of them along the way and learning slowly, It really works,

 

Spot on Leo!
Finance - People going straight to a bank and getting poorly structured, crossed, loans contaminated.etc (could still happen with a bad broker)

Accounting - People doing before asking (admittedly I am a bit guilty in the past). Then wondering why the ATO is asking for a huge chick of profits.

Town Planning - People wasting endless times and money going through council themselves with no knowledge. I have seen people submit application after application direct. I'm not saying you need an independent town planner but atleast have a pre-app meeting and save yourself!

You get the drift! All avoidable or damage minimized with leveraging the right people and a little self education.

 

@albanga trust me.. i'm so with you on that its not funny

 

As relative newbies (we've owned about 5 IPs at various points but never really had a plan) we are starting our buy and hold strategy with a view to buying at least one IP per year and the first 6 or so to be in capital cities to build a solid foundation before buying anything regional. Are there any other 'must do' in terms of strategy in the early days to avoid failing?

 

I would just try to make each purchase count as much as possible getting you closer to your goals. Always with your goals in mind. Buying good deals in good locations, so you can have the best chance for CG, then redraw to keep expanding. Avoid CC'ing loans. Build a good team of experts along the way. If adding value is your thing, then try to buy places that might also have add value potential. Obviously learning and educating yourself along the way.

But my simple answer is to make each purchase count. Good deals, bought at the right time in market cycles, getting you closer to your goals with risk mitigation in place as well eg buffers, exit strategies, DD on fundimentals of an area etc.

If thats all you do, buy good deals, at roughly the right part of market cycles, with value adding potential (if that suits you) ,you will do wildly well, with many options as they grow.

Just my opinion.

 

Absolutely agree with comments similar to @Taku Ekanayake 's comment (about building great teams). I'm still developing knowledge about how to develop teams - my main question here is what and how to ask questions to sort the 'all talk, no action' from those who walk the talk. (I know this type of question has been asked before, just need to review).

 

The good team aspect is what we are missing at the moment. I will be using a PC broker for the next purchase.

 

+1 for @Taku Ekanayake's additions.. a good team makes all the difference. Team is the right term too.

Imagine a sports team comprising a bunch of ordinary athletes rather than those at the top of their game.

What kind of results would they get?

 

And my input:

• Not networking with other investors.

Probably the single most important thing of all.