Investing in ‘renovator’s delight’ properties: strategies and risk management

The GFC proved to be a fairly good time for investors, but developers don’t have much opportunities in the market back then, according to him. So, instead of buying the asset as a development site, he purchased it as a property investment.

He said: “We ended up buying some more land off some people attached to it, changing the DA and still retain some houses, and doing some major renovations on houses and building the units.”

Since then, the opportunity to capitalise through renovation and development has always been part of his investment decision-making process.

Risk management

Purchasing preference

For the most part, he still considers himself as an investor instead of a developer because of the strategy he chose to implement—buy as a property investor instead of as a developer.

By doing so, he maximises his investing opportunities while maintaining control of his investment journey regardless of market movements.

The investor said: “I was careful to buy properties that work as investments and also give me the ability to do something with them from a development perspective.”

“Other properties I've bought since that had the ability to build another house in the rear. I wasn't buying them as a developer, I was buying them as someone who could develop them should I chose to or I could make a development application and potentially sell to a developer.

“But I've never been forced to be a developer, which is a great position to be in because it gives you some control over whether or not you have to do it,” he explained further.

Financial choices

Aside from making sure that he isn’t forced to do something he doesn’t want to do through his purchasing preference, Mr Beer also manages the risks of investing by being meticulous about his finances.

The investor utilises offset accounts so he could be ready for any unexpected occurrences that might affect his finances and, at the same time, be able to take control of the next deal he wishes to make.

Mr Beer said: “I've always been someone who likes to revalue and make sure my equity is liquid. I push it back to offset accounts because I think finances are very important part of your portfolio.”

An offset account is a loan feature that helps you save money on interest by allowing you to ‘offset’ the amount of mortgage you owe with the savings in your bank account.

Essentially, it can be treated like an everyday transaction account since you can withdraw as much funds as you like through ATMs and other common transaction devices.

The money you save through the account can be transferred easily to another account for the creation of a new loan, therefore, helping you plan for your next property purchase.

“I didn't need to ask the bank for the money for deposits or for renovations, or anything like that. I can make it very simple now and it gives me more negotiating power when I want to do things that maybe the bank doesn't like … Sometimes, you don't need them,” the investor highlighted.

Plan of action

After years of property investment, Mr Beer believes that there’s still so much to learn and do within the landscape to help him realise his wealth-creation goals.

At 42, he continues to be willing to give property investment a ‘red hot go’, albeit within reason.

Knowing how it was like to start from the bottom, Mr Beer emphasised the importance of managing his finances well in order to afford the freedom to make bolder choices.

To do this, he encouraged his fellow investors to get a better understanding of the markets and the whole property investment process through education and mentorship.

At the moment, aside from constantly updating himself about market movements and trends, he’s also working with seven different lenders and around 15 property managers who all help him make the best investment decisions.

According to the investor: “It's about managing that risk and not leaving yourself too close. I'm probably bullish in different ways now because I've got a good equity base.”

“I think making sure I revalue, refinance and control the cash means that I make decisions before the bank does, and that’s what I need if it gets hard,” he concluded.

Tune in to Brad Beer's episode on The Smart Property Investment Show to know more about his development strategies and how he best cover himself from financial risk.