Propertunity Pty Ltd was incorporated in 1993 and is today still headed up by the founding Managing Director, Alan Fox.
Very actively involved within the industry, Alan has recently served for a 2 year period, as Secretary of REBAA (Real Estate Buyers Agents Association) Australia’s only national industry body for buyers agents.
Alan doesn’t just talk the talk, he walks the walk. He has personally bought, renovated, developed, and continues to hold, an extensive residential investment property portfolio both individually and jointly with selected J.V. partners. He and other members of the Propertunity team are all experienced seasoned investors in their own right. They know what to look out for when purchasing property for themselves or for you.
Alan and other members of the Propertunity team all have long histories in the sales profession. In fact, although by no means essential to acting as a Buyer’s Agent, Alan has worked as a real estate selling agent for a number of different agencies in the past. This means that he has intimate knowledge of the sales techniques that can be brought to bear during the selling process.
Now that he and his team at Propertunity operate from the other side of the transaction, they can put that knowledge and skill-set to work in your (the Buyer’s) best interests.
Somersoft Property Forum Interview
Alan was recently interviewed by the Somersoft Property Forum. You can read part of the interview below or you can read the full interview here. (If you click on this last link, then you leave the Propertunity page and end up on the Somersoft forum).
How did you get involved in property?
I purchased my first PPOR not long after my wife and I were married (30 years ago last year!). I remember mortgage interest rates went from 13.25% to 13.5% during the course of the settlement period. I don’t remember feeling too bothered about it though, as we only paid $32,500 for the property and repayments were virtually the same as rent anyway.
What is your property investment philosophy/strategy (CF, CG, renos, houses, flats, buy and hold, develop, flip, wrap, etc)
When I started out seriously buying a lot of property, I was a contractor in the IT field. Yes, I was making a lot of money which I used as deposits on IPs. BUT, contracts lasted sometimes 6 months, sometimes 18 months or 3 years. In between contracts, I was earning nothing, so I needed to develop a strategy that allowed me to buy IPs without the need to fund large cash-flow shortfalls, which I could not handle when I was in between contracts (before you ask, no, I wasn’t any good at saving). This is what birthed the purchase of many IPs that were house and granny flats which were mostly cash flow neutral at worst at purchase, but now of course, are cash flow positive.
To this, I added a strategy of doing cosmetic renos to increase valuations and rental returns. I would refinance at the end of a reno to get some cash out to go towards a deposit on my next IP.
After a few of these, and since I was really enjoying myself, I thought I might somehow make a career out of doing buy-reno-sells. I tried this on my next purchase, but when I crunched the numbers, after taking into account all the transaction (stamp duty going in and selling commissions going out) & holding costs, tax on profits etc., I ended up with exactly the same cash out, as if I just kept the IP (and its future capital gains) and just refinanced the manufactured equity out. I just can’t see how buy-reno-sells in a flat market actually make any money (or at least, enough money) for the time & trouble involved. Since then, I have become a “buy, reno, reval, refi the cash out & hold forever” kind of investor.
I am also a growth type of investor. I really don’t see the point of buying out in the sticks for a high rental yield with no / low / sporadic capital growth prospects. The transaction costs are too high to get into and out of the investment (if you need to). You still have maintenance to deal with and PMs & tenants. If I want high yield, I use the share market to write call options for premium income each month. Alternatively, I’d use term deposits for high(er) interest, over a house in the back of Woop Woop any day.
What is your IP / property story so far?
Around July 2001, I set a goal to buy 1 x property every year for a few years, until the banks would not lend to me anymore. Just a few short weeks later, the twin towers came down – on September 11, 2001. That turned the world on its head for a while, and made me rethink if I had picked the right timing or not. But, I decided in the face of adversity and global uncertainty, to press on.
Some years I bought 1 x IP and some years I managed to buy 2 x IPs and some years I did not manage to buy any IPs but in those years I built a granny flat at the back of one of my failed attempts at making money from a buy-reno-sell that I ended up keeping. These were negative geared until the granny flat was constructed.
Then I reached a point where the banks would not lend to me any more (at least for a little while). That’s when I thought, how do I turn all of this experience into a business to help others achieve what I’ve done and more?
How did you get into your profession?
I was a real estate selling agent over 25 years ago. I started my career just a few months before the stock market crash of October 1987. They were interesting times. I remember the office phone went dead quiet for 2 weeks. No-one was buying or selling – nothing. It took people about 2 weeks to digest what was happening and for money to start being pulled out of the stock market and of course it came flooding into real estate. They were boom times back then.
However, one thing I did not like about selling real estate was that occasionally I knew I was selling the wrong property to the buyer, for his/her objectives. But that was what I was required to do. I was representing the seller, not the buyer.
In between being a selling agent and a buyer’s agent, I had a 15+ year career in IT (as already mentioned). I was actually acting as a buyer’s agent looking for a commercial property for the Director of an IT company. He was impressed with my efforts and offered me a job in IT, for more money and no week-end work, which I accepted.
What criteria do you use when selecting a property to purchase and/or renovate?
That’s now a trade secret
OK just a few hints. I want to buy a property that:
1. I can make back $2 minimum for every $1 I spend on a reno.
2. Can easily have extra bedroom added by simply adding a dividing wall or using a formal dining as a bedroom.
3. Can possibly be developed either now or down the track. i.e
b. Granny flatted (is there such a word?)
4. Has unique features that are in high sales / rental demand. i.e. has period features etc.
5. Is structurally sound.
6. Is not on a main road or in an undesirable location.
7. Has good CG prospects and has had demonstrated, good historical growth.
If a budding property investor asked “what are the top 5 things I should do”, you would say?
1. Find the WHY first. The HOW is easy (OK easy for me but the information is out there for those who look). My own situation was typical case of “When the student is ready, the teacher will come”. So find out why you want to be wealthy. Why do you want to rise above the crowd and put up with the jeers and sneers?
2. When you’ve found the why, then decide on the when. Be realistic. You are not going to be an overnight millionaire (in all likelihood). OK so now you have the long term goal.
3. Break the long term goal into manageable bite-sized bits. Pace yourself. It is not a race.
4. Build the team you are going to need Mortgage Brokers, Accountants, Property Lawyer/Solicitor, Tradies, Property Managers etc to accomplish this. Seek recommendations. Take people out to lunch to see if you can work with them or not.
5. Hang around people smarter than you, even if you have to pay to do it (go to seminars and investor events). As they say, if you are the smartest person in your team, then you have a problem. Find people who have done what you want to achieve and emulate them.
And if that same budding investor asked “what things should I avoid”, you would say?
1. When buying, avoid taking advice from selling agents who represent your contractual adversary (the vendor). Actually I’d say avoid taking advice from anyone that is not at least as far down the track that you want to go. This includes family, friends, bankers, etc.
2. Avoid Off The Plan sales in anything other than a confirmed rising market..and even then….
3. Avoid buying property from seminar spruikers, mortgage brokers being paid by the developer, etc
4. Try to avoid buying property with family or friends (even in Trust structures) as situations can and do change. A great property may have to be sold too early and at a fire-sale price if a co-owner suffers a divorce, bankruptcy or gets sued and so on. Even if one party wants to get married, this can have a similar effect. (It can work but go into it with your eyes wide open and with an escape strategy in place).
5. Avoid hanging around negative people – they are just too draining. You are going to need to keep your regular job while doing this in your spare time. (You’ll need to turn off the TV).
Read the rest of the interview at http://somersoft.com/forums/showthread.php?t=86490