Linz’s Musings – Sphere of Control

And as another weekend looms, Melbourne descends into lockdown…  While this is certainly not a unique experience for us Victorians, it can cause some anger towards the ‘establishment’.

But the truth is, regardless of how justified the anger may be (believe me that is an entirely different rabbit hole) it really doesn’t get us anywhere.

I made a conscious decision last year to ensure that I did not allow myself to be affected by things outside my sphere of influence or control or influence.

See, we all have a small and finite group of things that we can directly control.  Then there is a slightly larger circle of things we may not be able to control but can exert some influence on.

Then, outside of those two, relatively small circles, is everything else, everything that we do not have control over.

Now, while we do not have control over most things, one thing we can control is how we allow those external forces to affect us.  We certainly cannot control the weather, but it is my choice to be grumpy at the rain, or happy with the sun. That is a conscious decision I make.

Even when we cannot affect these things outside our sphere of control, we CAN control the impact these forces have on us.  And that is a real secret to happiness.

It is fine to feel anger, regret, sadness as certain forces as they wash over us, but then ask yourself, “Is this something I can control?”

If so, great, go ahead and change the situation or circumstance.  But if it is not, then can you change your reaction to it?

What things, outside your sphere of control are you reacting poorly to?

Will the U.S. housing market crash?

In spite of troubling times, the U.S. housing market is booming. 

With people working from home because of COVID-19, demand for homes spiked and the market grew incredibly competitive. It made consumers a little uneasy, especially since it seemed to mirror the jump that occurred in 2006. Those interested in the market were so unsure of this sudden surge that Google searches for “will the U.S. housing market crash?” shot up 2450% in April 2021.

Concerns about the stability of the market and if it would become a bubble that could burst at any moment were valid. Amidst economic uncertainty and the continued efforts to strengthen public health, the average consumer didn’t really anticipate the jump. And with the long journey back to normalcy, it was natural for doubt to creep in.

With the market trending upward, however, and price appreciation not slowing down, it doesn’t look like it’ll crash any time soon. That doesn’t mean that it’ll rise indefinitely, though. So if you’re looking to invest in some U.S. property, it’s best to make a move now while the market is red hot. 

What’s going on in the U.S. housing market?

It seemed that when the real estate market had to put a stop to operations last year because of the rising number of COVID-19 cases that it wouldn’t recover. However, in a miraculous turn of events, people were flocking to buy property as soon as transactions resumed. 

A lot of apartment dwellers wanted to be in more spacious, private areas and to get away from cramped buildings so they could avoid contracting the virus. Others thought of upgrading their homes to optimise remote working and sought better properties. In a classic demonstration of supply and demand, prices ballooned as more people were looking to buy. 

Housing prices increased to 11% at the quickest rate they’ve been since 2006. And it’s predicted to remain at that steady rate even through summer and fall (our autumn). States like Idaho, Montana, and Arizona are observing incredible annual increases of over 27%, 18.8%, and 18% respectively. Other less-populated states are also gaining more home and property owners.  Many are leaving more populated areas to be in more rural ones in an effort to stay safe and continue social distancing.

And while it’s predicted that there won’t be a crash because stricter lending policies have been put into place, it is expected to cool as many buyers will be shut-out because of exorbitant prices that are rising faster than incomes are coming in. Things will simmer down eventually and people will be able to have access to affordable properties without having to worry about an all-out crash because of the new structures put in to withstand this sudden demand.

Has the U.S. housing market crashed before?

In 2006, the U.S. housing market was experiencing a very similar spike. Lenders were very loose about their terms and their repayment schemes which drove prices up to unreasonable rates. Because more people had the money (through those lenders) to buy properties, the demand quickly outpaced supply—much like it’s doing now. 

Lenders didn’t care much for how borrowers would repay their loans, they just saw an opportunity in eager home investors and low-income borrowers. Because of this, about $3 trillion US dollars went into the mortgage market between 2003-2006. 

The number of homeowners surged and they faced a difficult time repaying loans because there were either flimsy or no structures in place for them to make payments. Simultaneously, the housing bubble reached a critical point wherein demand was dying down because prices were unrealistically high. This also drove up the risk factor. Because people didn’t want to take the risk with the high prices and the low demand, they began to pull out of the market, leading it to immediately deflate. Homeowners who were once enticed by low interest rates and the lax lending suddenly found themselves unable to make their mortgage payments, leading to defaults and foreclosures all over the country. 

Prices severely dropped and the economy took a turn for the worse. The foreclosures led to a steep increase in supply when demand was almost abysmal. These events all preceded The Great Recession in the U.S. and were direct contributors to it. Because homeowners were so focused on repaying debt and avoiding foreclosure, they were no longer spending and, therefore, no longer contributing to the economy.

Experts have come together and have scrutinised the current shift and how the market is operating and noted how lending and mortgage underwriting has been stricter than it was in the early 2000s. With better structures in place when it comes to lending, it’s easier to avoid such a dramatic dip in the market. 

Further, with modern-day economic arsenals complete with the ability to print money (quantitative Easing Policies), and central banks not afraid to use it, U.S Federal Reserve Chairman, Jerome Powell, confirms that the QE policy will continue until unemployment & Inflation rate goals are met.  So it seems that the new world version of Bidenomics will continue to throw cash around until everyone is happy…  This will certainly keep the market hot, for the time being.

 

How to start investing while the market is hot

The housing market isn’t going to be this hot forever as the current rate isn’t exactly sustainable. So striking while the iron is hot is critical. 

Investing in the U.S. housing market is a great way to open up a new stream of income. Because it’s cheaper to invest there than in Australia and New Zealand, you have a better chance of positive cash flow and landing a great property that will reward your efforts if you take the time to optimise it.

We’ve put together a process that will help guide you through investing in the U.S. It’s a five-point blueprint called STARR.

  • S – S stands for “strategy.” Without one, your entire approach won’t work. By mapping out your end-goal first, your strategy will be easier to shape because you’ll know what kind of steps you need to take to reach that end goal.
  • T – T stands for “team.” You obviously won’t be able to take on this endeavour alone as hopping on a 15+-hour flight just to go visit the property isn’t feasible. Hiring people you’ve thoroughly vetted and trust to take care of the property is crucial.
  • A – A stands for “acquisition.” You want to ensure that you acquire the right property at the right time through thorough research and reviewing (and repeating those processes until you’re completely satisfied with your property of choice). 
  • R – R stands for “renovation.” By having a dedicated team of contractors who can renovate the house, you build equity into the property and optimise your profit. 
  • R – The second R stands for “realisation.” Once you’ve put all the hard work in, you’re sure to be rewarded with cash flow or a sale. 

While it can feel a little risky to invest now, experts have predicted that there will be no crash despite how eerily similar today’s housing market resembles that of 2006’s. With stricter structures in place and more attention being paid to transactions, the market will continue to heat up in the months to come (but probably not forever).

If you need any help navigating the rapidly growing housing market in the U.S., feel free to book a call with us.

How to Screen Tenants for your U.S. Rentals

Here is a great little flowchart from Biggerpockets about screening prospective tenants properly.

Now, while I would NEVER recommend you try to manage tenants yourself, from half way across the world.

It is something you need to ensure you ask your Property manager, how they screen tenants and are they taking these points into account

Doing your due diligence on your team (Property Managers, Realtors, Contract teams etc) is EQUALLY IMPORTANT as doing your due diligence on properties!

I cannot stress this enough. One of the most important assets you have is your team on the ground.

Find good ones, and when you do, keep them!

Linz’s Musings – The Selling Season is here…

After a beautiful weekend, weatherwise here in Melbourne, the first week of May now descends into a taste of winter for us.

And while we are finding it getting cooler, particularly in the southern states, the U.S. is starting to heat up!

With their economy soaring a massive 6.4% and the hot selling season of their spring/summer just upon us now, this year could certainly be a case of ‘hold onto your hats folks’!

With the U.S. market on such an incline, this next spring summer period could set some records.  With the stimulus packages apparently doing their job, it will be really interesting to watch the next few months.

We will be listing 3-4 properties this month alone, maybe more as a number of our rehabs come to a close, and we are currently very aggressive on our pricing.  One particular property had two people interested before it was even listed!

And while it may see like an ideal time to get into the market right now, with media here in Australia, New Zealand and even the U.S. predicting massive upswings in prices, each type of market comes with its own set of challenges.

In hot markets like this, while selling properties is not really an issue, buying them may certainly be tricky.  Many sellers get caught up in the market hype and want far too much for their houses, even in poor condition, so be careful not to pay too much.

Here’s the thing… any market is a good time to invest, just know the market, know the challenges and plan/adapt.

Oh and with Mothers day here in Australia, just around the corner, this Sunday, big shout out to all the successful mum’s out there, Happy Mothers Day to all the mums!

Linz’s Musings – Don’t fall victim to FOMO

As we close the chapter on another month, we start our slow decent into Winter here in Oz.

There is certainly on sign of the real estate markets cooling though, in fact, particularly in the U.S. its heating up even more…

I put up a post on socials yesterday, I thought was quite funny (if you didn’t see it check out our social post on Instagram or FB for April 29) describing the real estate market in the U.S. like a game of musical chairs.

Now, while this was ‘tongue in cheek’ so-to-speak, it actually was also kind of apt…

It certainly can feel like the floor is on fire sometimes, when everything is moving so quickly, deals are getting snapped up left, right and centre. We can start to get that dreaded feeling of FOMO (fear of missing out).

Its important though, not to let that frustrate you. Do not be fooled into thinking you are ‘missing out’ or get pushing into paying too much for a property, just to get a deal.

Remember, my father always told me, “You make your money when you buy something, not when you sell. Selling is just the realisation of the profit”.

And while now, might seem an incredible time to get into the U.S. residential market, with the right strategies, its ALWAYS a good time, not just now…

So, have patience, do your due diligence and if you miss a deal, watch out for the next, it will come.

Making U.S. Investing Profitable

My foray into U.S. property commenced almost 9 years ago now.

We had been investors in the Australian market for some time, and, like most investors, the Australian market felt safe… Strong growth, and it was a market I was familiar with.

Fortunately, I had been coached and mentored by some of the best property coaches in Australia, so we certainly only looked for positive cashflow properties, even here in Oz.

Student accommodation, small developments, splitters, whatever we could do to ensure cashflow (however small) and growth.

Being a student of property, I attended a seminar back in 2012, and a couple of the speakers were talking about investing in the U.S. residential market, through either high cashflow properties, or tax lien investing.

This piqued my interest, particularly due at the time, we were involved with some other investors in a development in SE QLD which had the majority of our funds tied up, and we had been in ‘discussions’ (read fights…) with council for some 12 months already, and we were going nowhere…

So, affordable, high cashflow properties, that I could purchase for less than a deposit, here in Australia, was extremely interesting…

Like most though, I started looking for the catch…

I was due to head to the States within a couple of months for my work anyway, so vowed to check this out and see if what they were telling me was true or not…

And, much to my surprise, it was.

Here’s the thing though, it certainly wasn’t necessarily an EASY market to invest in, I mean I knew nothing about it, made all the mistakes to start and had made nothing out of our first few investments.

I mean I was sensible enough, and had been in property long enough not to lose a fortune as well, but after 18 months was going nowhere in the U.S. market either (and our AU development was still locked up…)

Frustration was really starting to set in.

So I sat down one Saturday morning, at our favourite coffee shop and started to formulate a plan of action… Where to from here…

I needed to either ditch the U.S. market altogether, and focus on our developments here, or, if I was going to keep trying the U.S. I needed help.

I realised the main difference was that I spent years learning the Australian market before investing, but took NO TIME to learn the U.S. I just jumped in.

So, I decided to give it another shot, this time, firstly, to find a mentor…

And while, just like here in Australia, we have had ups and downs, with help and support, our U.S. investing journey started, and we starting going from strength to strength.

While I would never have thought where it would take me, and certainly hadn’t planned on investing full time in the market, running our company, AND helping hundreds of other investors invest safely and profitably… I guess it shows that the great journey begins with a single step.

If you would like to look at just taking that first step, give me a call. Would love to chat about property, strategy and see what could work in the U.S. for you

I have cleared a little time in my calendar for the rest of the week, so go on, let’s have a chat and see where your journey can start…

Linz’s Musings – The herd mentality…

I was talking, earlier this week, about changing your mentality and treating your property Investment as a business, rather than just an investor…

While this can be a massive change for some, it is just a small step for others, particularly when looking at overseas markets, this generally is a different class of investor.

There is however, another mental change to make, and this can be all the more harder to shake…

And that is to avoid the ‘herd mentality”.

So, what’s that, I hear you ask.

Well, the past 12 months have been classic examples of it…

Herd Mentality, by definition from the Oxford Dictionary, is “the tendency for people’s behaviour or beliefs to conform to those of the group to which they belong.”

That is, when most advice (media, property groups, peers, your uber driver etc) suggest it is a good time to buy, investors buy… or vice versa.

As an example, lets take this time 12 months ago… Pandemic had hit, HARD, and most of the evolving markets throughout the world were caught up in FEAR.

Australia/New Zealand/U.S. was set for recession (at best) or depression (likely) and ask anyone if it was a good time to buy property, you would have been told “Are you Crazy??!!”

When in fact, that was a perfect time to buy…

Now, markets have rebounded (strongly) and in the U.S. alone, are up over 10% year on year.

So, ask ‘Alex from Facebook’ now, and the consensus will be “What, haven’t you bought yet??  Why not?!  Hurry or you will miss the wave…”

When really, now is the time to be cautious.

These past 4 – 6 weeks, I have not got many properties under contract, not because of a shortage of options (so-called ‘deals’ are being sent to be every-which-way) but because many are priced too high.

And while this may seem to sound easy, it is in fact difficult.

Who has been to an auction, and had a price in mind they had determined to pay for a property, but got caught up in the heat of the moment and paid too much in the end?

Yes, most of us have…

To go against the herd, or the flow is difficult.

This is such an important point, I will go into more detail on this in the coming weeks, keep an eye out!

Even as the famous Warren Buffet said:

“We simply need to be fearful when others are greedy and to be greedy only when others are fearful.”

If everyone is doing it, maybe it is a good time to pause and reflect…

If the deal is great, then grab it… but is it really?  Careful not to get caught up in the herd.

To reap the benefits, U.S. property investment must be a business

John D. Rockefeller, considered one of the greatest American magnates, once said, “The major fortunes in America have been made in land.” As one of the most influential and most business-minded men in American history, he probably didn’t come about this realisation through mere chance. He likely came to this conclusion through purposeful and intentional moves, akin to running a business.

This is the approach that property investors need, too. Many are simply relying on fortunate circumstances in order to secure a good property. But this isn’t a viable blueprint to follow. Strategy and foresight will trump luck in terms of property investment and are necessary to succeed in the U.S. property market. So in order to thrive, you have to view property investment through the same lens you would view running a business.

Good businesses succeed with thorough planning and with their eye on long-term success rather than just short-term gain. Sustainability plays a big part in a business because you want it to continue running long after its inception. Good businesses are also consistent and follow a model in order to ensure that they’re reaching their established goals.

Treating property investment in the U.S. like a business furthers your chances of good investments and the maximisation of these investments for success. 

Why is property investment a business? 

 

Getting into property investment without a plan is risky as it leaves you without any success indicators and a pretty flimsy way of going about things. Sure, there’s still a possibility of doing well, but there are no actual guarantees in place—and you don’t want that. 

Being able to operate from a business standpoint at least gives you the stability you need to measure success, identify how you can go about an investment and a business plan you can constantly look back on and revise or review if necessary. This plan should include your goals, what you want for your future, and how you will get there.

Property investment requires consistent work. You can’t just expect it to work out after setting everything into place once, it has to be continuous and constant, with you always reviewing your plan, going over properties, and weighing up if an investment will be a good one or not. Like a good business, you can’t expect it to run smoothly if the work is inconsistent and the quality is lacking. 

It’s also difficult to tackle property investment alone because of how complex it can be. Several experts in different fields need to be part of your team in order to maximise success. In a business, a team works together to reach a certain goal or hit a certain mark. Having a team in a business can ensure productivity and efficiency as different people can work on different things that cater to their skills. 

Investing overseas is a business because you need to be strategic, have a plan in place, and work as a team to succeed. 

 

5 ways to turn U.S. residential property investing into a business 

 

It may sound difficult to shift how you operate in terms of property investments but these five methods can help you turn it into a business. 

1. Capital helps you get started 

Getting a headstart is never a bad thing and one good way to do so is to secure capital. Just like businesses need capital, property investment does, too. You need that money in order to fund any venture, even real estate ventures in the U.S.

Capital can cover the actual cost of the investment and even the fixes or renovations you plan to make to the property. 

Finding capital can be the tricky part. Money can be a difficult thing to procure but there are three possibilities, especially for investing in the U.S: Joint ventures, land contracts, and private equity.

A joint venture is when two people come to an agreement and invest in a property together given that you have complementary skills that will benefit you both when it comes to the property. Say you’re more savvy with the real estate market and pitching the property and someone has the capital and the maintenance power for it. Investing together and using both your skills will help you make a sale.

A land contract is when you secure a property and make payments to the vendor or owner for it over a certain amount of time. More often than not, the house is still in the owner’s name until you’ve fully paid it off. 

Private equity is, as the name suggests, a private pool of money used to directly invest in other companies or ventures. It’s an alternative way of financing that is flexible in terms of loans, making it easier for foreigners to invest in U.S. property. 

2. Be in it for the long haul

Be real, there’s no recipe for instant success when it comes to both business and property investment. It takes a long time to lay out your plans, to set them in motion, and to receive the spoils of your effort. There’s nothing instantaneous about either of the two. So buckling in and being patient is all part of it.

Instant gratification is something we all look for now. We want everything quicker, to get results faster, and for things to arrive on demand. Sometimes we settle for short-term success because we want to succeed right away, shrugging off the possibilities for the long-term. But it goes without saying that if you want long-term success, like a good business aims for, you have to have the tenacity to stick with your plan. The rewards of short-term success will probably fizzle out just as quickly as you attained it, which is why you should aim for something more permanent and sustainable.

Stan Lee, for example, was about 38 years old when he contemplated parting with Timely Comics and creating his own set of superheroes to rival that of DC’s. When he did, he created an entire universe that’s become so well-loved that it paved the way for dozens of movies and series and an entire web of crossovers. With patience and perseverance to create something that he loved, he was able to find success.

3. Time and effort sets up success 

Putting in the time and work every day to research your property/ies is also important.

Just like putting together a business, you can’t haphazardly slap it together. You have to take the time to review the right people for the job, where they fit, how the business model works, and what you count as a success indicator. Effortless, lazy work yields sloppy results. The same goes for property investment.

If you don’t put in the time and effort in finding good prices, identifying the best investment opportunities, making good renovations, and working with the right people, you can compromise your success on a property. By putting in time and effort into these four areas, you can set yourself up to thrive. If you don’t, you will end up paying too much for a property, having shoddy renovations, and even find yourself stuck with an unreliable team. Like we said earlier: Effortless, lazy work yields sloppy results.

 

4. Finding (and hiring) the right help 

No matter how good your vision is in a business or in property investment, you’re only as good as the team you hire. If you get the wrong people, you’ll fail to attain that vision. Being able to find good people to help you in the capacities you need them to will be vital to what you picture the property to be.

Just like in a business, you should screen people, look at their strengths and weaknesses, and the skills they have, as well as any references they can offer. If they align with what you want, they can certainly help you out.

When investing in property in the U.S, you need property managers, maintenance contractors, and real estate agents.  

A property manager will deal with tenants head-on and have the keys to your property. They’ll be the ones to handle the tenant. Having a good property manager ensures that they will have a pleasant relationship with a good tenant, keeping the property safe from damage and both the tenant and property manager happy with how they interact with each other.

A maintenance contractor is in charge of the renovations and repairs and, as their name implies, the overall maintenance of the property. Keeping the property in tip-top shape will keep you from shelling out more money for small fixes that could have been avoided. 

A real estate agent handles the “selling” of your property to a future tenant. A good one will ensure that they buy at the right price and will pitch your property well, showing off all the good aspects and playing up strengths. 

5. Commit to reinvesting 

One clever business practice is reinvesting, the act of purchasing additional shares from what was invested before instead of receiving the profit. It sets up a business for success in the long-term and can help grow profit exponentially.

This goes for property investment in the U.S.

 

Take Warren Buffet’s investing career as an example. He started out in high school with a friend, buying a used pinball machine and installing it in a barber shop. It did so well that the two, instead of settling with the money they’d earned, reinvested in more machines and installed them in more shops, growing their profit. 

 

Instead of cashing in right away, reinvesting can help grow the distributions you’ll receive in cash by an exponential amount. Rather than investing in one property and stopping there when you get your desired amount, use that to invest in another property since the U.S. property market is booming. You’ll definitely find other property investment opportunities that can bring you more profit.

 

Investing in property in the U.S. is a great opportunity right now, but going into it blind and without a plan can hurt your investment in the long run. Being strategic in implementing goals, and going about it like a business will bring you the success you need in the market, promising you even more of it the more you do it. 

If you’re interested in pursuing property investment overseas and need advice, download our guide, specifically on investing in the U.S – “7 Simple Secrets to Investing in U.S. Property”.  Let me know what you think!

 

Linz’s Musings –A time for Celebration and Reflection

Happy Easter to everyone!  It is insane how quickly this year is moving already, with Easter upon us once again.

I love this time of year, while not a huge fan of chocolate, it does give me a great opportunity to pause, relax and reflect on how the year has started.

Footy is back, autumn weather in Melbourne is lovely, and with banks and most businesses closing for a long weekend here in Oz, it’s a great time to take a breath…

How has your year started?

Is it what you expected?

The pandemic is still showing us it is here to stay and Brisbane-ites may even have to face Easter in a lock-down…

But sometimes, with the speed of life now, we can get so caught up in the day to day, the fast-moving pace of business and life, time just drifts past us before we know.

We do not often think to periodically stop, reassess, and make sure we are still headed in the right direction.

What if the wind has changed on us?

Did any of our decisions not turn out as we expected?

Do we need to adjust course?

These are all things that should be reviewed regularly.

Personally, at the end of each month, we take a half day and celebrate the month gone.  Then, first day of the new month, again, spend 3-4 hours reviewing how the previous month went, and planning for the next.

Now while everyone may not have the same opportunity to do this, Easter can be a great time to force us to take a breather and have a quick look on what we have been able to achieve so far, and where we need to adapt to keep momentum going.

It is important in this review, to celebrate your wins, no matter how small.  Celebrate the achievements you have been able to make so far, regardless of how many to go.

Then, we can review what changes, tweaks or adjustments can be made to increase the pace or keep progressing.

Progress and action are important, but equally so is rest, celebration, and review.

So, this weekend, kick the feet up, celebrate what you have achieved so far in 2021 and prep for a big 2nd quarter!

Linz’s Musings – Mindset, Growth & Belief

I did a post recently that got some attention, regarding how RE markets in the U.S. are boom (same as here in AU and in NZ) but yet still, some that keep talking about investing, are just not doing it…

What are they waiting for?  Better growth??

In reality, it is fear.  And the most important thing to focus on is your mindset to overcome the fear.

I say important, because without mindset, growth and belief, all the strategy in the world is useless to you.  Without the belief you can achieve, the mindset to be able to overcome the fear and difficulty (and oh my, there will be difficulties!) you will not be able to achieve success, whether it be in business, investments, wealth, or happiness.

It’s the growth and belief that you develop that allows you to firstly recognise opportunities and strategies that you can use.  It’s that growth and belief that will allow you to take the strategies you KNOW you can apply and run with them.

And then again, when things get tough, it is that growth, belief and mindset that allows you to push through the barriers, get up after the setbacks, and keep moving towards your goals.

If you have read any of my blogs or musings before, one of my favourite sayings – It not knowledge that is power, but the application of that knowledge.

Yes, I agree, we all need knowledge.  Hell, I’m pretty certain that none of us (myself included) put enough of our time each day aside to learn, read and grow (well, maybe my business coach who reads a minimum of 2 hours every day) but you get the idea.  Knowledge is needed, learning is critical, but if you do not have the personal growth to apply that knowledge, if you do not have the mindset to succeed in the adversity, then it becomes moot.

Just another course we bought and placed on the bookshelf; just another book that looks great, but we never open the cover; just another strategy we have been taught that we never implement.

It is growth, mindset and belief that will allow us to take and use the tools we learn and to achieve.  And it’s not something that will necessarily occur overnight, growth takes time.

But sometimes, mindset and belief can be like a switch!  Something will resonate with you, a key that will trigger that inner lock deep in your psyche that suddenly unlocks, and all becomes clear…

Find yourself that key, however long your journey takes and suddenly the knowledge becomes vast and available…it was always there, you just couldn’t see it…