Articles by Salesh Chand
Recently, I have been asked by several property investors about what is happening in the market and what I am doing. I still believe property investing is one of the safest forms of investment to create passive income and intergenerational wealth, and I am still actively investing.
Here’s what I’ve been up to:
Buying Properties
I’ve been submitting around 5-10 offers every week, targeting cashflow positive, good quality, discounted properties. I love generating instant equity in my portfolio by buying under market value – even though it takes time to find the deals.
When properties require renovation, we negotiate the price to ensure the return remains cashflow positive. By "cash-flow positive” properties, I mean those that generate enough income from rents to cover interest, operating expenses, and sometimes even the loan principal repayments.
I am working with a bank interest rate of 7%, allowing $10,000 per property for operating expenses in my calculations. I’m finding properties in the regions, where the purchase prices are lower, but the rents are comparable to those in Auckland.
Working Capital
Over the last three years, I’ve focused on building working capital within my portfolio. This means establishing facilities with various banks that allow me to access funds for projects when needed. By using multiple banks, I can finance projects without requiring additional funding.
If you have significant equity in your portfolio, I suggest contacting your banker or broker to arrange additional facilities, such as increased overdrafts, offset accounts, or higher credit card limits. Access to funds during a downturn allows you to safely purchase more deals and provides peace of mind about your portfolio.
Having working capital is crucial for any investor. I worked with Kris Pedersen Mortgages to set up these facilities for my portfolio.
Insurance
I have spent considerable time updating all my insurance policies. For years, I have advised people to ensure they have the right coverage for their homes or investments.
For example, if you bought a property 15 years ago for $400,000 and insured it for that amount, the replacement cost might now be $1 million. Therefore, it's essential to adjust your insurance to reflect the current market value or replacement cost. At GRA we use Initio, who offer great cover at good prices – and they give a discount to friends of GRA. Find out more and get a free quote here.
Additionally, it’s important to have life and health insurance. If you suffer a left-field event that means you can’t work for a while, you want to make sure you don’t lose your assets at the same time. I use Steve Munro from Risk Direct Insurance (SteveM@riskdirect.co.nz), one of the best insurance brokers I have met. He has assisted many of my clients and me in securing the right cover. He offers free reviews of your current policies (if you have any) and makes recommendations. I suggest contacting Steve to either establish the appropriate cover or review your existing policies. This is one of the best investments you can make for your family.
Summary
Every stage in the property cycle presents opportunities for property investors, but you need to base your decisions on the numbers and what the market is doing. For help with this, sign up for my regular free Property Investment webinar.
If you’d like assistance with any of topics in this blog, contact us at GRA – phone +64 9 522 7955, info@gra.co.nz or via our online form.
Hi Salesh, I just wanted to send you an email on behalf of GRA to say how fantastic we have found your company to date. As you know, Ben and I joined GRA a couple of months ago and have just found you so amazingly helpful in getting our new property set up correctly and sorted out. We have what I would consider a rather complicated structure as a result and it’s a fantastic feeling to know that we are getting everything done in the best way possible. We have just had approval to put a minor dwelling on the property which will make a massive difference in terms of cash flow and obviously value, something we would never have even thought of without GRA and which we are very excited about. During the buying process we attended a seminar with Matthew and from the outset thought he was fab. We therein signed up for property school and found this nothing short of fantastic. The content was relevant, up to date and comprehensive, but more importantly it was taught in a way that we could actually understand and really get value out of. I wanted to mention also, that everybody GRA have recommended to us has been just so efficient and absolute masters at what they do. A wonderful network of people that we feel very lucky to now be able to call on. From Kris Pederson and Bryan Rist who put our mortgage together to the insurance guys they then referred us to, I’m super impressed. Within GRA, Ellery has probably turned things around for us faster than I’ve ever known before, something which we appreciated so very much when it came to crunch time. She’s always a pleasure to deal with and again, we’re stoked. We’ve just settled on the property today and are about to go and get the keys. I’m pretty pumped and hence this email is probably rather excitable. So, a massive thank you to you Salesh, the partners for such a fabulous 6 weeks at property school and everyone at GRA for their help. May this be the start of our property empire. Thanks again, - A & B - July 2015
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