Okay. Day six.
Now we're going to look at strategies that allow you to keep borrowing.
If you get stuck
or if you want to work with other people, what can you do for property investing?
So day six, we're going to look at joint
ventures, property trading, property flipping and double settlements.
The reason that a lot of people turn to these is because they've heard a no
when it comes to borrowing more money, or
maybe their partner is not keen on buying another one.
No investment property on their own and they want some more help
If you're running out of borrowing power, the key thing to remember
is it doesn't mean you have to stop investing in property,
just means you need to be more creative and you need to understand
different methods So first one is joint venture.
JV, usually this is going to be two to three people
with different skill sets, and they're going to
they're going to split the profits and there's more accountability
when you're working in a group and it can be more fun.
It's like a game, but you might have somebody
that's quite handy, somebody who's got access to money
and then somebody that's going to finding properties.
You might have three people that all have money
and one of them's good at finding properties or two people with money.
One's good at finding properties. You've got to be creative here.
So if you've got no money,
you've got to be either handy or good at finding properties at the right price.
And you can find other partners
to come in on that deal with you because the price is right.
Splitting the profits.
If you've got two people, then you might get
80/20, depending on who has put the money in.
You might get 50/50.
You can get creative on these terms.
The key thing I like about Joint Ventures is the accountability.
It can be a little bit more difficult getting finance, and that's where working
with a mortgage advisor to get specialist mortgage lending is, it's helpful.
Now, property trading is
it's a
strategy where you get a property on a contract.
You might get early access,
you might do a little bit of work, but generally speaking,
you're going to settle and own this property and you're going to sell it
quickly at a profit Let's say you see something advertised for 600,000.
You think it's worth 650.
After a little bit of work done to it and you buy it for 580.
Now with $5,000 of home staging,
a thousand bucks on landscaping and maybe a few photos
from different angles, you might be able to sell it for 650.
What you thought it was your cost of finance and staging
and and all the handy stuff is 20 k so you get a 50 profit
and basically property trading is arbitrage.
It's spotting opportunities that other people don't see
or seeing value that other people don't other people don't see.
And property trading is generally quite quick.
You don't want to hold the property for long.
You just want to get the deal done.
But the profit and move on.
Now, if you're short on capital, property trading is something to
look at more seriously.
Now, property flipping
is similar to property trading except you're going to do a lot more work.
So if you haven't watched the BRRR video, watch the bird video.
But generally speaking, you might be buying something that you think is worth,
say, 750,000.
After you've done a lot of work to it.
You buy it for 600, you spend
100 K on the rhino and you sell it for 750.
So you getting you're getting a $50,000 profit.
But what you have to understand is the costs associated.
You're going to have to pay tax, going to have to pay agents fees.
There's going to be a whole bunch of holding costs.
So property flipping, it's really important to understand
those renovation costs.
You've got to understand risk of tainting,
risks of buying and renovating a property
that doesn't actually come out more valuable at the other end.
You've got to factor in your time.
You've got to factor in the finance holding costs.
If you get six months finance with a non-bank lender
and you don't get everything done in six months, you have to roll your finance
and pay finance fees again.
So property flipping can be extremely lucrative,
but you just need to understand that there's risk there too.
And it does involve a sale.
So generally, you know what?
What actually a lot of real estate agents, they can do property flipping
and they can get good deals on the sales of properties.
Double settlement is wholesaling of properties.
That's when you get something under contract,
hopefully with a long enough settlement that you can find another buyer
to come in and buy their contract off you and you make a profit.
So you see a lot of
this is a very high risk, high reward strategy.
So you might see something advertised for $1,000,000.
You get that property on a contract for 980
and you put six months settlement and the vendor's happy with it.
Now, your job in the next six months is to find someone
to pay you one mil, 50 or 1.1 million.
You are going to advertise it in that period
that another buyer is going to come in and take over that contract.
And you've got to convince the agent and the vendor
that you can settle on that property if you don't onsell it.
And as soon as you go in with a plan or if there's an understanding
from the vendor or the agent that you're going to try and wholesale or
flip this property on for a profit, then it might be hard for you to get that
under contract.
The thing when the market goes down is easy to get loan contracts,
and it's one of those strategies that if you had to make $1,000,000
in the next six months,
it would be a good year to go and find a $10 million property
for $9 million and try to sell it for a 11 million dollars kind of thing.
A lot of it's bankrupt or current bankrupts end up.
They are wholesalers and sometimes they do extremely well and sometimes they don't.
And if you read on National Business Review or Business Herald and you'll see
stories of even listed entities getting properties
under contract for a long period of time and on selling them to some different
construction company or some different investment vehicle and often at a tidy
profit it's great when the market's going up, when the market's going down.
If you have a long contract and you can't find another buyer,
then you're going to have to sell on that property.
That you've gone unconditional on,
potentially at a price that's lower than the valuation.
And this is what causes the bankruptcy.
So you really got to make sure that you understand
your risks and obligations alongside the potential upside.
And these not all of the strategies
for when you run out of borrowing power, you need more accountability.
But there are plenty of successful investors in New Zealand
that have dozens of properties and they are doing joint ventures
with friends or family and even Blandon my business partner,
he has done a joint venture, I think it's a property in Hawke's Bay.
It was about 980,050
50 with one of his friends and clients
and they split all the costs, split the rewards.
There's just a bit more
split risk
and accountability and split profit.
So they're both at the time.
We're at a point where they couldn't go out and buy that $980,000
property on their own, but they could comfortably buy half.
So it's good to consider these options and there's definitely more.
If you run out of borrowing power, let us know in the comments, if you've got
any questions.