Your property investment questions, answered.
With Ben Everingham, Founder, Pumped on Property.
Is an investment property right for me? Can I use my equity for an investment? What would happen if I added a second or third property to the mix?
These are the questions that professional investor Ben Everingham gets asked on a daily basis. As founder of Queensland-based investment firm Pumped on Property, he’s helped acquire around $250 million worth of investment properties for clients, while personally purchasing 11 properties in 8 years (not an easy feat when you add 3 kids to the mix). “We work with first, second and third time-investors”, he said from their offices just off the Sunshine Coast’s beaches. “It could be someone that’s completely new to the process, someone who owns a home and is looking for an investment, or someone with a few investments looking to take it to the next level.”
We asked Ben some of the most popular questions about property investment.
What are the questions you’re asked most often from potential investors?
The most common question we’re asked by first-timers is ‘what can I afford to borrow?’ The second is ‘what should my goals be for the next 12 months and beyond?’ So while we’re not a mortgage broker or financial advisor, we’ll look at where they are financially, where they want to be in a year’s time, and importantly what their long-term goals look like (including the challenges holding them back). Then, we start the process of educating them on the market and working on an investment strategy to help get them to their ideal future.
Are there any red flags you look for in a client where investment might not be the best option?
Similar to any kind of financial decision – whether it’s regarding investments, home loans or everyday transactions – it’s extremely important people don’t take on unnecessary risk. We need to see they’re in a good savings position, with a decent buffer for protection, and get a good understanding of what their expenses and income are.
Where do you sit on the positive/negative gearing debate?
There’s a few things first-time investors want to focus on when they get started. The first is a positively geared property, because you want a surplus in the account each month. The second is to time the cycle correctly – not many people talk about timing but when you think about purchasing in Sydney in 2012 vs. purchasing in Sydney today, you realise that timing is so important. The third is to aim for medium-to-longer term capital growth, which means buying (mostly) in Australian capital cities.
How far ahead do you think investors should be of their mortgage repayments?
I don’t like being too far ahead of mortgage repayments but I do tend to set up an offset account* with a surplus amount, so if a rainy day arrives where you need 3-to-6 weeks’ worth of income, you’re in a stronger position; what gets a lot of investors unstuck is when they don’t have 2-to-3 months of rent to create a solution. A 12-month buffer is great in the longer term, but 2-to-3 months in the short term is good as well.
Note from UBank: At UBank, we don’t offer offset accounts on our home loans.
How far into my first investment property should I start to think about a second?
I’m a very conservative investor. I prefer to start every investment with a 20% deposit (at minimum) and an LVR (loan-value ratio) of below 50%. But not everyone can do that on the first go.
Note from UBank: In order to ensure a plan that is right for you, we don’t offer loans with less than a 20% deposit.
How can first-time investors simplify the process?
Property investing is, at its core, super simple. All you need to do is 1) get pre-approval in place from your bank, 2) identify where you are financially and where you want to be, 3) identify the market you want to buy in and 4) take your time and buy a quality asset. It’s that simple.
Where can I go to learn more about investment strategies?
I read a lot of books and learnt from the experience of buying properties. A great book for first timers is Robert Kiyosaki and Sharon Lecther’s Rich Dad, Poor Dad; Phillip J. Anderson’s The Secret Life of Real Estate and Banking; and Fred Harrison’s The Power in the Land. A lot of these books accurately predicted the last 3 depressions before they happened. So if you can understand the timing of these things you can capitalise on it and make the most of opportunities before they arise.
Pumped on Property is a full-service buyer’s agency that helps Australians become financially free through property investing. Their team specialises in creating tailored property investment strategies for their clients and finding the right properties to help them achieve their financial goals.
The information contained here reflects the views of Ben Everingham, not of UBank or NAB, and is of a general nature only. It doesn’t take account of any person’s objectives, financial situation or needs. You should seek independent legal, financial, and taxation advice before acting on any of it.