20 May Make your property plan – Mark Armstrong
In today’s show Mark Armstrong, from RateMyAgent.com.au, gives us a few tips for new property investors, people who are wanting to get into this market and not missing out on it while it’s going so well. Kevin talks to Mark about strategy.
Kevin: There is a new website I want to tell you about, too. It’s not so new – it’s been around for a while – but boy is it getting some publicity. It’s called RateMyAgent.com.au, and one of the men behind that is Mark Armstrong, who joins me as my guest.
Good day, Mark.
Mark: Good day, Kevin.
Kevin: You must be delighted with the way Rate My Agent is working. How does it work for the consumer?
Mark: What Rate My Agent does is it allows consumers to search every suburb in the country and find out which agents are selling the most property, by total sales value or by the number of properties sold, and then they’re able to read consumer reviews, consumer feedback about the agent’s performance.
It’s a completely independent website. So far, we have around about 27,000 or 28,000 reviews that have been posted on the website, and we’re getting around about 1200 new reviews posted every week. It’s a great resource.
Kevin: Yes. Of course, it is. One of the key things, of course, in selling or buying property is your review of the agent. It’s a great tool. It’s called Rate My Agent. Check it out for yourself.
Mark, I’m keen, with your insight as to what’s going on in the industry, if maybe you could give us a few tips for new property investors, people who are wanting to get into this market and not missing out on it while it’s going so well.
Mark: Yes. I think the biggest mistake a lot of investors make is they hear about a whole lot of different investment strategies in the marketplace and they just try to pick a strategy. They also often get quite confused about which strategy, whether it’s positively geared or negatively geared, or whether they should develop, value add, or a whole range of strategies.
But the advice that we always give investors is to say, “Look. Let’s just take your eyes off the market for a couple of minutes and let’s focus on you. Let’s focus on the individual. Let’s focus on how old you are, let’s have a look at your family situation, let’s have a look at your cash flow and how your cash flow is going to look into the future, let’s look at what you’re trying to achieve, let’s look at your risk profile, and let’s develop the strategy around your individual requirements, not the other way around.”
I think a lot of people get sold strategies, but we’re more about helping people work out what strategy is right for them.
Kevin: I think some people get confused between strategies and outcomes, too – like negative gearing and positive gearing; they’re outcomes of an investment strategy. To have a strategy, you’ve got to have all of those pieces in place, which is what you’re talking about, Mark.
Mark: Absolutely, and I’ve spoken to many people over the years whose strategy has been “I want to buy ten properties.”
I say, “Why do you want to buy ten properties?” If one property makes you as much money as ten, do you want to make money or do you want to buy property?
Mark: Invariably, they come back and say, “Well, actually no. We want to make money,” and I say, “The number of properties has got nothing to do with it.” The idea is we want to attain financial security, or buy a home, or whatever the case may be.
Kevin: Yes. What are some of the other tips you might have for people wanting to start out, Mark?
Mark: I think the next one is once they’ve developed their strategy, they then need to really lay the foundation. They need to look at the structure they’re going to use, taking into consideration tax benefits, taking into consideration financing options, looking at trusts or company structures, or personal name or partnership.
A lot of people neglect those sorts of things, but the foundation of a portfolio is really, really important, so we naturally take people to that next step and say, “Well, now you’ve got your strategy, the structure that that strategy will be built on may vary from a different strategy.”
For example, if you’re looking at a positive cash flow strategy, a trust structure might be a better option because you can distribute the income through that structure. But if you’re looking for a capital growth focus strategy, you might be better off buying in a personal name because you can get the negative gearing tax benefits.
Laying that foundation and giving very serious thought to how that strategy works and the best foundation for it is a really good next step.
Kevin: Yes, that’s been some good advice. I guess it comes down to being professional about this, putting it together like a business and taking out the emotion, understanding that it is a business.
Mark: Yes, absolutely. It’s a plan. It’s a property plan or a business plan. Whatever you want to call it, it’s going through it in a very professional manner.
I think the next tip is making sure that the strategy that you’re trying to implement or you’re going to implement not only works today but also works into the future. I think the biggest mistake that we see people make is they buy properties and the mistake they often make is not that they’ve bought the wrong property, but they’ve worked out that they actually can’t afford to hold onto it – because their circumstances change, whether it’s because they need to upgrade their family home, or whether they’ve had another child, or whatever the case may be. Buying properties, in most cases, is a long-term strategy, so we need to look at how our lives are going to change down the track.
Kevin: Very good. Great talking to you Mark. Mark Armstrong. Check that website out, too. It’s called RateMyAgent.com.au. It’s a great tool if you’re looking around to get the best agent.
Mark, once again, thanks for your time, mate.
Mark: Pleasure, Kevin.