Something I try to drum into my clients is if you don’t start you will never have anything!
The property market has a habit of making the worst and most inexperienced investors look good so long as they hold their properties long enough. It is important to remember that a property purchased today that meets 90% of your criteria, is still better than a property you never get. You have to be in it to win it! If you don’t actually own a property, you have zero chance of making money from real estate.
Remember, good property investors don’t just buy properties, they buy time. They set themselves up with the right structures so that they never have to sell and can keep the property forever. That way it doesn’t matter what happens to the market in the short term, because in the long term, they are guaranteed to end up in front if they hang in there long enough.
Another thing I am always reminding my clients is beware of joint ventures!
In property investment, a ‘joint venture’ is usually referred to as a situation where two parties combine to purchase a property. Examples may include a brother and sister, friends, or parents and their children, where all names are on the title and all parties are joint owners. Whilst this may sound very tempting if you are struggling to get into that first property, it should be avoided.
The problem with joint ventures (JVs) is that if you are in a JV with someone, your bank assumes that you owe ALL of the money owing on the property, including all of your partner’s debt and this, dramatically reduces your borrowing capacity. To add insult to injury, whilst they assume you owe all of the money, they will still only credit you with your share of the rent received.
The banks’ reason for doing this is that if one of you falls over financially the other will have to pay the bills. So when it comes time to buy your next property no one will lend you any money because you are overcommitted to the first property in the bank’s eyes.
If you are going to go into a JV just to get started, the best thing to do is have an agreement between both parties that at an agreed point where you expect some equity to be available, either one party will buy out the other, or both parties will sell the property. They should never be a long-term thing.
I hope this is helping you see the bigger picture to building your property portfolio.
Tomorrow I will show you how to build a $2 million portfolio from the ground up!
~Daimien Patterson
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