There are alternatives but you need to be aware of the pitfalls.
(From the article and interview featured in The Huffington Post Australia)
With so many people literally locked out of the hot Sydney property market, it’s only natural to look for alternative ways to get a piece of the action. Perhaps you could co-invest with a sibling or close friend?
You could look at ‘rent-vesting’, buying a car space or consider property trusts.
One solution by Fintech company BRICKX is a way to invest in a property for less than $100. It works by dividing individual properties into 10,000 ‘Bricks’, which are effectively units, in a Trust.
BRICKX publicly launched in September 2016 and operates as a retail managed investment scheme for people who could otherwise not afford to get into the property market. It works by offering fractions of a property, known as Bricks, rather than purchasing entire houses or apartments.
BRICKX recently put a Bondi Beach apartment on the market, giving investors the opportunity to access the lucrative Bondi property market for just $96.
Real estate expert and author George Astudillo told The Huffington Post Australia there are other ways to get into the property market, but you need to be aware of the pitfalls too.
“If we look at investing with friends or siblings, it’s usually one of those ‘It was a great idea at the time’ moments. Very few property partnerships work well, and there are several reasons why,” Astudillo said.
Co-investing with a sibling or friend
Risk tolerance: How people relate to risks varies from person to person. An investor with low tolerance to risk will need to be cautious and utilise a strategy based on security, while an investor with a higher tolerance to risk will be more aggressive with their choice of strategies. Finding someone that is compatible with your investment comfort zone is quite difficult and this difference in attitude will lead to friction. Be aware of your comfort zone, take a look at our blog “What is Your Risk Tolerance?”
Workload: Many partnerships become undone when one party does all the hard work. When it comes to investing in property there will always be decisions to be made. If one partner is always relied upon to make decisions, this can lead to resentments.
Affordability: All partners need to be able to afford not only the purchase of the property but also its ongoing maintenance and repairs. When renovating, can all parties afford the level of quality that will attract the appropriate tenant and rental?
“You also need to consider exit timing. Selling an investment property is all or nothing. If one partner needs to sell, there needs to be a plan for the other partners to buy that share or decide whether the property need to be sold,” Astudillo said.
Property trusts are an easy way to buy into the property market indirectly. These are either known as Australian Real Estate Investment Trusts (A-REIT) which are listed on the Australian Securities Exchange or Unlisted Property Trusts.
“Before investing you need to know how each trust is managed as this is more like buying shares than property. You can also consider buying shares in a listed real estate company,” Astudillo said.
When you can’t afford to buy a property you would be comfortable to live in, you buy a property as an investment.
“This way, you can then rent a property that is comfortable and rent out your investment, becoming both a landlord and a tenant,” Astudillo said.
“Rentvesting is probably the best of both worlds. It allows you to get into the property market without the inconveniences of living in a property that makes you unhappy.”
George Astudillo is the founder of Property Quarters, an agency that values communication and great relationships with its landlords.
George now has more than 30 years in real estate, including 15 years as the owner of a national real estate franchise. He’s also an accredited auctioneer and is the author of “The Landlord Mindset”, a book with his best tips to help landlords look after their investments. His book has been quoted in the SMH, The Huffington Post and The Age.
As the founder of Property Quarters, George takes great care in looking after his landlord’s investments. Having seen it all and worked with may landlords and tenants, he’s a strong mediator and negotiator and knows how to navigate through property legislation.
George is trusted by his landlords to advise on the financial management of their investments. He’s put in place proven processes to ensure each property he looks after is managed effectively to retain its value, quality tenants and rental income.
If you’re looking for a property manager who thinks like a landlord and whose business is built on tested processes, contact us by clicking HERE.
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