Entrepreneur and coach Kobi Simmat reveals four foundations to invest well in property.
Kobi is a leading business coach who built and sold his own business for over $20 million. Across his journey, he’s learnt the key principles to creating a valuable asset, which can be applied when creating a business or investing in property.
He joined KnowHow’s Bushy Martin on Property Hub’s Get Invested podcast to provide his insights.
Investing with patience
Bushy and Kobi urged investors to have patience with their assets.
“If it’s as boring as watching grass grow, then you’re just doing the same old thing bit by bit and growing things exponentially. You’re going to end up in a much better place than the thrill ride,” Bushy said.
“It’s a rollercoaster for a reason because it’s probably filled with risk. And if you are getting the stress levels and the excitement levels up, then there’s probably something fundamentally wrong with it and it’s going to crash at some point.”
It’s all about location
Location remains the most valuable factor when investing in property.
“I think people should buy the worst house in the best street and live in it, and grit your teeth to put up with the gyrock dust and the cement dust and the tradies and do it up. Add bedrooms to it, because everybody goes onto RealEstate.com.au and searches three bedrooms plus two cars plus two bathrooms, while for the people looking for five bedrooms or six bedrooms, the price category changes. So if you’re renovating a house, always add a bedroom because it puts the house in another category,” Kobi said.
“So if you can buy the worst house in the best street and add bedrooms to it, you will significantly increase your wealth, even if you don’t necessarily need the bedrooms.”
Assessing the guarantee of future profit
Investors need to assess not just the potential, but the guarantee of future profit from their assets.
“If you’re looking to buy real estate, you’re looking for a future profit from passive income. You’re looking for capital gain. And the first thing is to have a look at other businesses or investments, see what makes them great or what makes them rubbish, and then make sure you’re not throwing stones in a glass house,” Kobi said.
“Then the second thing is the guarantee of that future profit. So buyers are looking for safe, guaranteed, sustainable profits, whether the asset they invest in is businesses or real estate. So the first question out of your mouth when you’re looking at an investment property to the agent will be, what’s the weekly rent? What are the weekly profits? And so you’ve got to be able to have that narrative ready to go. Now, unfortunately, I can already hear people out there taking a deep breath and going, oh that’s so much hard work. It is this hard work, but it’s work that will pay you.”
Doing your due diligence
Due diligence is essential to minimising future risks, especially when assessing the reliability of tenants and their capacity to pay rent.
“I think that fundamentally the problem we experienced wasn’t that we were doing successful work, but more related to due diligence,” Kobi said.
“And I think in the current economic climate right now, although you might be earning passive income, you still need to look at your tenant or whomever’s ability to pay. Because while you might set yourself up with this glorious passive income, the house of cards can come crumbling down pretty quickly.
“If your passive income was commercial real estate with cafes and restaurants through the COVID period, your income would have dried up. And while you may still call those cafe business owners to account for owing you the rent, if they didn’t pay because you gave them some time off during COVID, you’ve got little to no chance of getting it out of them. So when you’re doing your due diligence on your passive income, look at the sustainability of your tenant or occupant.”
Listen to the full interview here.