Should You Be An Active or a Passive Property Investor?

You can be an active investor and be involved in doing work to manufacture growth or you can be a passive investor where you simply purchase a property and hold it. There are pros and cons to each and you’re likely to invest in both ways throughout your journey to financial freedom.

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0:00 – Introduction
1:00 – What we love about being a bit more active as an investor
2:23 – Choosing what to do as an active investor to get the best bang for your buck
4:30 – There are different levels of active investing from minor cosmetic renovations to major renovations or developments
7:45 – You will likely shift from being active to passive to active to passive
9:57 – Development is a way to be more active as an investor
12:20 – No one wants to be an active investor for live, passive income is more often than not the goal
14:00 – There are different strategies for different times of the market

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Transcription:

Ryan 0:00
when it comes to investing in property you can be an active investor where you actually actively do work to improve the value of that property both the rental value as well as the sale price value of the property or the equity or you can be a more passive investor where you just purchase something that is more low maintenance that’s just going to take over and so behind us today we have a property that pumped on property have secured for one of their clients which is one of those properties where the investor has decided to be active and so we’re going to walk through it and talk a bit about active versus passive investors as we kind of show you the renovation so let’s walk down previously today we did look at new build properties and obviously you’re being active in the beginning with those but new build properties tend to be very low maintenance given that everything is

Ben 0:53
yeah so very active in the start and then just don’t even think about it for the 15 years after that

Ryan 0:58
yeah and so there are a lot of investors who just want to buy something that is in good condition that they can rent out maybe they want to go ahead and build a granny flat i guess which is being active or maybe they just want to hold that single high quality income property for the long term

Ben 1:14
you know what i love about a property like this for a client that he is prepared to be a bit more active and like we’ll talk about in a moment you know it’s not really him doing too much he’s just asked his property manager to give him some quotes for painting and for carpets and stuff but it means that he was able to secure the property because it looked a little bit ugly to the market and a better price point than he might have been if someone had cleaned it up first and so he’s buying a little bit of a better price point and then he’s using a bit of his own blood sweat and tears or in this case his property managers sort of pull some quotes together to just paint and carpet and do those little things to really increase the value himself and

Ryan 1:51
this property is currently mid renovation and so there has been rewiring done because the owner is a sparky so they’ve been able to take advantage of their skills to do that and then there’s also been some repainting done so we can see that all the walls have repainted the flooring is actually yet to be sanded so again you got to use some imagination kitchen is in pretty original condition but still fun enough to rent out and this is when it comes to being an active investor is about choosing what you’re going to do what’s the best opportunity at what time because in the previous we’ve done a walkthrough of this property there’s actually so much opportunity here so much it’s crazy like by the investor doesn’t want or can’t afford to do that all at once and it may not be wise to do that all at once so they decided to do a minor cosmetic renovation to increase the renter rentability of the property and the rental yield of the property and rent it out in the short term

Ben 2:51
you know one type of active investor might buy this property and not do anything and just chuck a tenant in it for a couple of years and then come back and be more active or they might be like geron you know painting the walls polishing the floors replacing the blinds replacing the carpets and just doing that baseline stuff someone else like more emotional might rip out this kitchen these walls that we’ll look at in a minute to create a nice big open plan redo kitchens bathrooms put a deck on it and really go all in as you can see a lot of the neighbors are doing as well

Ryan 3:23
yeah and so it depends what you’re trying to get out from your property at what time so for jared he wanted to land bank this property and actually able to secure the property under land value so this property was purchased for like 3540 grand

Ben 3:37
below market yeah below land value sorry the house was free black the land

Ryan 3:43
so ben recently sold a block of land for more than it costs the investor to purchase this property and so the land bank can’t they obviously want the rental income to help pay for the mortgage but they’re not at the point yet where they’re ready to revalue and access equity in order to go again on a property so doing a major renovation which we’ll talk about some of the ideas that we have which are just ideas and obviously there’s different things that different people might do but it might not be the right time for that right now and so yeah fresh coat of paint fixing the floorboards there’s fresh carpets as well in the bedrooms is just going to your being active to get a return that you want right now but then there’s still more potential in the future so as we come through here into the living area which is going to be quite echoey because there is you know no furniture but as you can see quite a lot of space for an old property so the kitchen

Ben 4:40
was just behind this wall here as well which is where we’re talking about opening up a little bit and creating that being shared space

Ryan 4:46
yeah and so obviously that would be more of an extreme renovation where you’re redoing the kitchen at the same time as well as i’m not sure about structural walls and things like that

Ben 4:57
you know the age of the home i can guarantee that this starts up might add an extra 1000 bucks to get a professional out here to check it and get rid of it. But, you know, it’s certainly not something that would be too hard to do with the right team of builders

Ryan 5:09
around. Yeah. And then even the opportunity to adjust layout in here. So currently as you in order to make your way outside, you come out into this, I guess little sunroom here. The sunroom is actually under the existing roofline. So does that create an opportunity to potentially like wall this in and turn this into living space? Absolutely.

Ben 5:33
Like this is built on the same piers underneath, it’s got, as you said, the existing roof line. So it gives you an easy opportunity to shade some walls in charcoal window in, obviously subject to approval, and then, you know, potentially create yourself. In other words, this is probably nine square meters of space for you know, almost zero cost, you’re really excited. And so

Ryan 5:52
then the opportunity, whatever you decided to do with the property is okay, if you could turn this then into living space, rather than having this be how you get to your backyard, wall that in and then if we come inside, then obviously there’s opportunity around here to actually put in, you know, some bifold doors or double doors put in a deck. You know, that

Ben 6:13
gets me excited. As we walked into this property, like, these are the types of properties that I get emotional about, like, and I’m very analytical numbers based investor. But I walk into these places, it’s got a good floor plan, it’s got a great structure, it’s had only had one owner for 50 years, like it’s the right type of property. And with someone, you know, like Jerry that comes in with a long term intention to hold it for 15 to 30 years. He doesn’t have to do everything now. But slowly over time, he’ll turn it into more of the property that you know you and I said becoming and he obviously saw as well when he bought it.

Ryan 6:47
Yeah. And obviously we have a skew towards active investors and we’ll walk through to Ben’s favorite room in the house Ben actually loves the bathrooms. I think that’s amazing. Comment and have a look at well look at this vanity right now.

Ben 7:05
Isn’t that he doesn’t want to brush their teeth and that bad boy.

Ryan 7:09
And then the whip I call this the Winnebago bathroom.

Ben 7:14
Yes, makes making all this stuff as a comeback, man. Thank you for watching for that like antique style, but

Ryan 7:20
Ben doesn’t know what he’s talking about. He’s got an interior designer, as a wife anything that’s a good bathroom. So we’ve got new carpets in here, everything has been freshly painted. New carpets in this is the main bedroom, I believe, as well as this bedroom too. So and I guess, yeah, as I was saying we have a skew towards being active because obviously it can be so great to you know, manufacture some of that value and just create those extra results and reduce your risk because you’re not relying on the market as much but you can also shift from being active to passive passive to active

Ben 7:56
you know, in John’s example, right like this home was purchased for $376,000 the fact that he’s put 10 grand into it’s going to mean the rent return goes from about 330 bucks a week to about 420 like it’s gonna have a huge huge uplift and it’s worth the money yeah, but then I think something

Ryan 8:14
we didn’t say a lot of these walls while they just look bland and painted now actually had a lot of damage in them as well so not only has it been painted but a lot of damage has been fixed to yeah

Ben 8:25
like it’s brought the property back to its former glory and I look into property like this and if it was beautifully renovated you know new kitchen new bathroom was knocked out you want a new bathroom I thought you loved that probably take that off. But you know something like this, put it in the backyard for the kids to buy

Ryan 8:49
gold you wouldn’t they wouldn’t be allowed home until that thing’s gone

Ben 8:55
happy wife happy life on bringing bathroom time. But you know, something like this fully renovated would be worth you know, really decently renovated. 500k partially renovated 450 K to the level that he’s doing it to, you know, easily getting his money back plus some So, you know, at some point I think most investors as they mature through like their investment journey become more active and you know, something like this that might feel overwhelming like thinking about painting carpeting, you know, polishing floorboards, if you’re living in Sydney and Melbourne and thinking about doing an RP can be like whoa, but we introduced yard to one key point of contact is property manager. She’s organized everything except the electrical which he flew up and did over a week himself. So it can be very, very easy to manage stuff if you’ve got the right people around you. Yeah. Yeah, I

Ryan 9:48
was just gonna I got returned flights to the sunny coast for $120 return so and this is Brisbane, so that will probably even be cheaper to fly up here. So as we continue to talk about this week, To move into the backyard where there is a granny flat opportunity in this property. So obviously another way that you can be active is doing different types of developments. So, granny flat is one of the more simple types of developments. So as you can see quite a lot of space in the backyard here, where you could easily have side walkable, side access down the side, and then private, you’d put a fence up, and you would have a private granny flat. So granny flat is one of the easiest ways to do development to have a secondary dwelling that you’re getting extra rental income in. There’s obviously subdivision opportunities, and further development opportunities. And it gets more complex and more risky. The larger the scale of the development, like you’ve done a subdivision and you’ve done a granny flat in your subdivision was an easy one.

Ben 10:48
Like what’s the difference in level of subdivision versus granny flat Look, just time and money like a granny flat is a really nice starting point. And after doing subdivisions, I’ve actually come back to granny flats because just because you can do something doesn’t mean it’s the highest and best use of your time like something like this a great home once cleaned up a bit with a brand new granny flat makes a lot of sense, cash flow wise, hopefully long term, it’ll get strong capital growth as well. But you know, the subdivision staff, it’s a little bit more risk, you know, took me 910 months to walk through that took a lot of capital to get it through Council, and it was a lot of risk as well, like, you know, effectively, I could have done something like this and ended up in a better position for probably less money, so and was harder, yeah, less heartache, and just less stress. And I think, you know, everyone’s got a different opinion and a different way of investing. You know, my personal approach is to get property at the right price, like Jared has to get, you know, long term potential for growth, to time the market as best as you can. And you can learn from that stuff online and to try and get great cash flow, and then to own the properties or assets outright in the future. So, you know, there’s heaps of other ways to do it. But that’s the way that I prefer.

Ryan 11:58
And so for Jared, he’s being active, doing the renovation, then is going to convert into a passive investor and just simply rent this property out, and then in the future may turn active again, to build a granny flat to get that extra rental income, may do more renovations on the main home, and then will likely just turn into a passive

Ben 12:17
led real life, no one wants to be an active investor on their properties long term. And you know, I’ve got a passion for property, I know you enjoy it, too, like we both walk around there. And we’re like, oh, we could do this and that, that’s fine. But you know, the last thing you’ve done, it needs to think about it, you just want a recurring income stream coming in for life that covers its costs without heartache. And, you know, I think that’s the type of strategy that I have be very active on the front foot, and then slotted into the passive scalp for the next 30 years, half a year.

Ryan 12:45
Well, that’s the thing, we like it to be active on the front foot so that you can manufacture that growth, manufacture that rental growth as well to put you in a better financial position, both from an equity standpoint, as well as a cash flow standpoint, which dramatically reduces your risk on the property, as well as allows you to hopefully, you know, pay off that mortgage faster if the cash flow is better and own the property outright faster, as well as putting you in a better position to potentially leverage against the property to buy your next investment property as well. So, you know, there’s a lot of benefits to that some people like to be active and then flip properties and sell them and, and keep doing that. And there’s a time and place for that. But I think to build these foundational properties where they’re going to deliver you financial freedom. And then you know, if you want to go and do flipping projects and active stuff on top of that for fun, or to pay to pay off the mortgage on these foundational properties faster than that’s cool, too.

Ben 13:39
Yeah, like I think about a lot of investors journeys, and had we have just bought a couple of really high quality houses and build a couple of granny flats on them 1015 years ago, and Sydney, you know that 400k spend at that time would now be worth a million bucks, and you’d be getting close to 1000 bucks a week in rent, you know, it would have been a lot easier than all the trial and error that I’ve gone through.

Ryan 14:01
Well, let’s keep talking as we move to the front.

Ben 14:03
Yeah. So yeah, like I think there’s different strategies for different time in the market. And as Ryan’s talked about in previous videos, it’s not the time of the market to be overly aggressive to try and get rich quick to speculate and think that just because you bought saw it that it’s going to be worth what you paid for it in a year or two years time. It’s more the bread and butter time by your right markets at the right time. Be patient by great cash flow and try and clean something up as well to make a bit of money on the way in

Ryan 14:32
Yeah, so yeah, really exciting. And yeah, Simon’s doing this sort of thing as well versus what you did, which was just buy lots of random different types of properties. Make money on some lose money on some until you worked out a strategy and then looking at Simon is like, I know exactly what my strategy is and I here’s exactly what my steps are to implement it. So yeah, it’s really cool. Whether you decide to be active or decide to be passive is also going to depend on your personal circumstance. It says your financial goals and what you want to achieve. If you do want more information on strategy similar to this, or what strategy may suit you, whether it be active, whether it be passive, whether, you know, whatever it may be, then Ben and the team over at Pumped on Property are offering free strategy sessions. So head over to onproperty. com. au forward slash session, you can learn more about those over there. And there’s actually a calendar there where you can book in a time that suits you to get onto the phone to Ben or to his brother, Simon, and to say, Okay, here’s where I’m at, here’s what I think I want to achieve in my property journey. How can I get there and what strategy is going to work for me and my risk profile and whether I’m active and passive, they can point you in the right direction. And then you can go and do that yourself, which a lot of people do with great success. Or if you want to hire the team at Pumped on Property, you can get their help, like Joe did to secure you know, properties similar to this one, you know, maybe not under land value. That’s, that’s pretty rare. But yeah, something something really good that’s going to move you towards your property investment goals. So, again, go to onproperty. com. au forward slash session to check that out. I wish you the absolute best in your property investment journey, whether you decide to be active or passive. And until next time, stay positive voice you. People say positive people

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