I posted some questions for Steve a week ago in the “soap box” forum. Mini aswered some of the questions, and for the benefit of all we are moving the “discussion” to this forum.
Enjoy!
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I have been reading this forum from when it was first started less than 2 years ago. There where good times and bad times but generally speaking I have enjoyed coming here and reading the posts.
Over the last 2 or 3 months however I have found this forum “not so interesting” and perhaps for different reasons than you think.
Mainly because there haven’t been good debates for a while….
I can understand that people just starting in property investing will look up to you and agree with all that you say, however there are many of us here who have a lot of experience in PI and know exactly what we are doing even if it is different from your strategies. We haven’t writtem books nor do we conduct seminars, but does this mean we do not know what we are doing or saying?
Some people have made some pertinent remarks but have been “wiped out” or labeled “Negative” because they haven’t said things nicely.
So this is what I would like to do (if you agree Steve) to take on a few debates. It will be nice and kind but factual. You will also have to explain yourself in a few areas. We can set it up so that you and I are the only ones that can post (and there will be a “linked” thread where other people can discuss what we are debating.)
Some of the things that I would like to discuss are:
– Positive cashflow. Is it really for everybody?
– Different times, different strategies?
– Does a million dollars in property with a million dollar debt make you a property millionaire?In some of these debates you will have to explain a few things, because I am worried (NOT negative!) that some people are getting the wrong message and will find themselves in serious trouble soon.
An honest factual courteous debate. How does this sound?
Pin
**** Other Interesting Posts ****
Can someone point me into the right direction – TOPIC_ID=4582
Research methods – TOPIC_ID=4437
You Can’t be Serious??!!!! – TOPIC_ID=4437******
Reply by Mini
******pin,
I’ll have a go,
though I’m not Steve,
” Positive cashflow. Is it really for everybody?”no because:
a) some people think they don’t exist, so therefore they won’t be able to find them.
b) it is estimated that only ten percent of properties in Australia are +ve cashflow (I read that somewhere) so therefore 90 percent of people can’t have ’em
c) if interest rates rise and a property is only marginally +ve cashflow, then it will become negative (scarce and getting scarcer)
d) most people (not necessarily on this forum, meaning most buyers in the market) don’t even know how to calculate the yield on their property, not to mention figure out before buying how much their investment might put into or take out of their pocket each week
e) most home buyers are owner-occupiers, and PPOR’s are always negatively geared (liabilities) aren’t they.
e) only 25-30 percent of people rent, though this is rising.
f) not everyone is going to be comfortable purchasing in an area away from where they live. As most people live in cities, but most CF+ve properties seem to be regional, you’d need a higher yield than the 11 second solution 10.4 percent to cover property management costs, maintenance, rising interest rates, etc
Different times, different strategies?totally – I think it takes a great deal of knowledge to act counter-cyclically – i.e., to buy in Tasmania 2 years ago when it had had a declining population for 12 years and when even Dolf de Roos was warning against Tasmania by name at his seminars. But if you HAD bought there then – and you’d probably have had not only +ve CF because of the low purchase prices then, but capital gains since because of what’s happened there in the last year and a bit – you’d be away….
Does a million dollars in property with a million dollar debt make you a property millionaire?i think for the purpose of the TT challenge steve defined it as ‘controlling 1 million dollars worth of real estate’. however i would say that (for example) owning 1.8 million of property but owing the bank only 800K would count.
I am worried (NOT negative!) that some people are getting the wrong message and will find themselves in serious trouble soon.What do you think the ‘wrong message’ is, and let’s say someone had got it, how would that get them into serious trouble?
cheers-
MiniHi Mini,
Thanks for giving it a go. I will reply to some points and make some other statements. I may have to make a second post later…
First I would say that I read the Today Tonight Q&A between Steve and TT. (http://todaytonight.com.au/factfiles/646144.html) and this reassured me, and helped understand where Steve is coming from. It is actually a VERY good read! Read it!
I would like to stress a few things however, when it comes to property investing. (Especially with positive cashflow properties.)
Steve said:
If you really want to do it and you are prepared to pay the price in terms of time and money I’m sure you will be a success.Agreed!
I would like to stress the time factor. You NEED lots of it! Please remember that this *IS* Steve’s full time Job AND he has a business partner (Dave).
If you really want to get into IP you will have to get rid of your day job sooner or later.
IP requires a lot of work and research. (probably more that a normal day job.)
And yes, you will need access to some money somewhere, somehow.
I concentrate on larger regional areas, but the truth of the matter is that because good people live everywhere, opportunities abound.This needs to be stressed! Very reassuring…
Personally, because I know that good people live everywhere, I’m interested more in the person than whether or not the town where they live has a KFC. Having said that, I don’t invest in rural property as it’s not my niche.PLEASE REREAD THIS!!
This is one of the things that has been worrying me. People have been flocking to rural areas to find +ve geared properties, which they will most probably regret. (OK If you have bought anywhere in the last 2 years you will be fine, But I am thinking of people who come to this forum NOW and think “OK I have to buy something, somewhere, NOW!!” and go to woop woop to buy something . Only do so if you a ABSOLUTELY sure about what you are doing!!
I think everyone who invests in property needs to expect that sooner or later they will come across a tenant from hell.This is not mentioned enough. Interestingly there is a thread right now that does mention this a bit: https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=4344
IN CONCLUSION
Most people don’t have the time to do proper research, and fully understand what they are getting into. So I am worried that they will go out and buy something just because property investing is the trendy thing. They most likely (after coming here) will look for a +ve geared property.
They will look far and wide and finally find something in some remote part of Australia, and because they have finally found *it* they will buy without doing due diligence. (this may not happen but this is what I am worried about!)
Also the thing with +ve geared properties they ONLY put something like $1,000. PER ANNUM in your pocket. (i.e. peanuts.) WHY?? because this is eaten up so fast by EXTRA expenses that you forgot to put into the equation.
For Steve this is a completely different story. He has the money and the backing. I am thinking about your average Mum and Dad here, who don’t know what they are getting into to.
Property is deffinitely the way to go BUT you will not become millionaires over night and you MUST do your due dilligence. It CAN be very rewarding however, BUT also VERY demanding!
OK enough for now. I feel that I have left a lot out, but I might write another post tomorrow.
Pin
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Reply by Mini
*****hey pin,
in reply to –
Also the thing with +ve geared properties they ONLY put something like $1,000. PER ANNUM in your pocket. (i.e. peanuts.) WHY?? because this is eaten up so fast by EXTRA expenses that you forgot to put into the equation.I agree you probably shouldn’t just rush out and buy property if you ‘forgot’ about strata fees, property management fees, mortgage application costs, mortgage insurance, loan repayments, closing costs, maintenance costs, insurance, rates, vacancy rates, letting fees, or any other expense to do with buying or owning a property. All that calculation stuff is the kind of thing I learned at the seminar I went to with Steve,
(I actually went twice just to cement some stuff!) along with the ability to work out what that all means in terms of the bottom line.Yes, the yearly surplus might not be large if you are (like me) buying ‘baby-deal’ properties around the 30K mark which rent for 115 per week. but the important thing is that there IS a surplus. And the yearly surplus is the bit that makes me feel secure that i won’t have to put any money into that house – I have a buffer. it’s also the thing that means that i can start looking for another property straight away ….and then keep on going. As the years go by the repayments seem less in relation to the rent – which goes up each year. The property manager should ensure that you have regular rent -increases which at least are in line with inflation.
After analysing a good many deals this year, three of which i bought, I’m at the point where i’m pretty bloody confident that I know what I’m doing numbers-wise (PS – I had to be – my Dad is an accountant and initially was not convinced…until i showed him the numbers!!!) – and I’ve built enough buffer into my calculations to allow for rising interest rates – which also means I’m going to keep my borrowing to a point where I am comfortable. This means I will keep more equity in the deal than a lot of people would. I am happy to go a bit slower in order to be a bit safer. but that’s just me. Also I am freelance so the ‘not digging in to earned income’ thing is quite important to me.
So I agree that the numbers aren’t big on the small deals but like when you play Robert kiyosaki ‘cashflow’, you start with a bunch of small deals that increase your cashflow, and over time, you can ‘get there’ by just doing lots of small deals, or you can eventually move into the bigger deals. either way it has a cumulative effect and the principal of the thing means you can replicate it. with no loss of lifestyle (other than the time taken to set up the deals, which i am in no way underestimating! However now they are set up, all I do is check my bank statements!!
For Steve this is a completely different story. He has the money and the backing. I am thinking about your average Mum and Dad here, who don’t know what they are getting into to.Steve didn’t have the money when he started. Didn’t you read the book? Read it! You’ll never guess where they got finance when they were starting out!!! The ‘zero’ in the title of his book means none, zip, zilch. They had NO properties when they started and 130 3.5 years later. They didn’t start with any backing, other than finance.
As far as the average mum and dad, they probably spend 105 percent of what they earn. ( I read that somewhere. that’s what the average Aussie does. Scary or what?? Credit cards are a growing sector….) They probably own their own home. Negatively geared of course, because own homes always are.
You won’t see them here.
The UN-average people are the ones who learned to spend less than they earn, eliminate consumer debt, and maybe think about investing the surplus. That is SOOO not average. The average in debt to the eyeballs Aussie mum and dad take the kids on holiday if they have a bit to spare (read: room on the credit card.) That’s why only 8 percent of people that own property own an investment property. And only 6 percent of THEM own three or more. That’s 0.5 percent of property investors. Not the average mum and dad, for sure. Why can’t there be more? Because negative gearing is so prevalent.
Because most people want to invest in their own home first, because of many emotional (amongst other) reasons. because properties that will be cashflow positive are a bit thin on the ground. because a lot of people are way out of their comfort zone buying outside where they live. because most couldn’t be bothered to learn to understand it anyway.A lot of my friends and family are impressed/bedazzled/confused/overwhelmed/challenged with what i’m doing with property. Most are interested enough to have me explain it. Some have borrowed my CD sets or bought the book. Fewer have read it. But a couple of friends
who borrowed the CD set, listened to it, made their partner listen to it, rang me up lots and asked me stuff, looked for deals, analysed them with me, and made offers have now bought cashflow positive properties….they are not average people though….cheers-
MiniNow that I have a bit of time I will make a reply…
Yes, the yearly surplus might not be large if you are (like me) buying ‘baby-deal’ properties around the 30K mark which rent for 115 per week. but the important thing is that there IS a surplusThis is correct. Actually the more I have been thinking about PGP (Positive Geared Properties) the more I agree that there is nothing intrinsically wrong with them! Actually in a down market they would probably be the better approach. However there are some SERIOUS questions one must ask themselves before launching out.
1) How much time do you have?
Finding PGPs takes a lot of time and effort. (This is not stressed enough on this forum)
Think about it. The people who have the most properties on this forum are the ones that make the most posts. If they make so many posts it is because they have the time… Time to post and time to find properties. Newbies don’t always realize that.2) Do you realise that getting a PGP will put about $1,000 per annum in your pocket, therefore you will need about 20 or 30 of them to make it worthwhile….
3) What does “worthwhile” mean to you? What are your goals? How many properties do you want?
So now that you realize you need 20 or 30 PGPs this means you need even more time …PGPs do have an advantage and that is they will probably rent easier in a declining economy because the rent is low. When things get tough and people loose their jobs they will have to rent cheaper properties (that is if they where already renting). However I am VERY wary of PGPs in *** rural town *** because if people start leaving town, then there will be NO ONE to rent your place and even worse NO ONE to BUY it!!
Steve has not bought a property in a rural time yet, and there is a good reason for that! (see my earlier replies on this thread.)
Not even a week after I started this thread and tried to bring to peoples attention that investing in rural is NOT a good idea
(this is what I wrote:
Most people don’t have the time to do proper research, and fully understand what they are getting into. So I am worried that they will go out and buy something just because property investing is the trendy thing. They most likely (after coming here) will look for a +ve geared property.
They will look far and wide and finally find something in some remote part of Australia, and because they have finally found *it* they will buy without doing due diligence. (this may not happen but this is what I am worried about!))
Someone posted this on another thread:
i have spent hours on end at well MAJOR property listing sites and found that none meet the 11 second calculation, however this is just making me more eager to find even one property.I am stabbing at every country town to see if i strikeThis is exactly what I fear!! I think Steve should do more to worn people … and tell them to be more careful … Yes I agree that good people live in country towns too … that is not the problem. What happens when they leave town and no one is there to rent your place…???
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Steve didn’t have the money when he started. Didn’t you read the book? Read it! You’ll never guess where they got finance when they were starting out!!! The ‘zero’ in the title of his book means none, zip, zilch. They had NO properties when they started and 130 3.5 years later. They didn’t start with any backing, other than finance.It actually is not hard to get started with no doc loans. But the situation today is vastly different than 2 years ago!!. Also I would like to bring to peoples attention that Steve is a “business man” first, a property investor second. The only reason he has been able to accumulate so much is not just due to his property strategies on their own, but because he has MULTIPLE income streams (selling books and seminars.)
This is one for Steve to answer if he has the time…
Steve did you ever hit a bottleneck (I would say around the 20 or 30th pror), and then had to think of a way to make more cash. That is when you decided to sell your wrap kit, seminars and books…? And this is what has allowed you to move on?
I give a lot of credit to Steve for being IMAGINATIVE.. what I am trying to say is that he did not do it with properties alone… (I am more than willing to be wrong! Please correct me if I am.)
BUT really property is NOT an end in itself. You must think of it as a business, and always be thinking of other ways of generating income streams. (I am not talking about obsession here, just healthy business attitudes.) In other words your greatest asset is yourself… Educate yourself and always be learning and always be looking for new opportunities!
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New TOPIC
*******There is something else that I have been thinking about (and this is for Steve again).
Of the people you selected for the mentor group:
1)How many of them have a FULL time 9 to 5 job AND are employees?
2)Of those who qualify for question (1) above, how many of them earn less than $50,000?Ok enough for now…. I STILL have heaps to say … I will be back.
Pin
* bump *
Hi Pinit, your bits are in ” “
re “Actually the more I have been thinking about PGP (Positive Geared Properties) the more I agree that there is nothing intrinsically wrong with them! “
nice one!
“Actually in a down market they would probably be the better approach. “
I actually think that all three of the CF+Ve properties i bought this year had been sitting on the market quite a long time – since the last ‘down market’. i think I bought at a time where although the property market in general was going up, the areas i bought in were going to go up *last* – hence prices were very low in comparison to rents. And this has always been the case in those areas as far as i know – according to ktkiwi you could buy a house in these areas in 1991 for 5K and rent it for 20 per week. That same house is now 50K and renting for 130. Do the math and it’s a great deal – whether you buy now, or then!
“However there are some SERIOUS questions one must ask themselves before launching out.
1) How much time do you have?
Finding PGPs takes a lot of time and effort. (This is not stressed enough on this forum)”True, but if you don’t have time then either a) farm out the inspections or b) use a property finder or bird-dog.
There are a great many calls to make in the due diligence process but to a great extent it can be fitted in to any lifestyle. When I was looking for deals i spent a couple of hours on the net every night looking. Then I made a few calls a day for a couple of weeks. I was also working at the time and fitting calls in either before the work day started or at lunchtimes.
There can be hands-on time if you need to renovate or repair, but I’ve done two complete house reno’s this year in a total of four days of my time. How? by paying other people, in a nutshell.
the four days were mainly spent setting that up.“Think about it. The people who have the most properties on this forum are the ones that make the most posts.”
not necessarily – i,e, Pinky.
I only have three properties but I post a lot! ( i feel like I’m still in some kind of ‘still learning and needing to discuss’ phase….)
” If they make so many posts it is because they have the time”
– it’s because they want to and enjoy it. If you enjoy something, you make time. if you don’t, you’ll find that you are ‘too busy’….“2) Do you realise that getting a PGP will put about $1,000 per annum in your pocket, therefore you will need about 20 or 30 of them to make it worthwhile’. “
True, kinda, let’s say, true if it was the first year in which you’d bought all 20-30. But the point is that you CAN go on and buy 20 or 30 of them as fast as you can find the deals (in theory.) and if the asset itself grows in value over time (land appreciates) and there are tax benefits (buildings depreciate) and the rents are indexed for inflation, i think what happens over time is that the cashflow gets better and better and you can pay down the loans (which seem smaller and smaller over time) ending up with the entire rent as cashflow (less expenses of course) and your portfolio freehold.
“3) What does dÿworthwhileE? mean to you? What are your goals? How many properties do you want?”
If someone wanted to ‘store and grow’ some capital and was looking for something ‘safe and secure’ to do it with – i think CF+ve property is great. i.e. no matter what happens to the economy, people still need somewhere to live – if real estate is considered a ‘safe’ investment, then residential real estate somewhere around or just below the median is considered really safe. it holds its value unlike cash deposits which are eaten by inflation, and the income itself is increased in line with inflation. Basically the more you look into it the more sense it makes. using the banks’s money is considered to be the way people ‘leverage’ real estate – so if you have a neg. geared property you are actually risking your lifestyle. Positively geared property is less of a risk to lifestyle.
“So now that you realize you need 20 or 30 PGPs this means you need even more time”
Yes, I do think that time is a big factor in successful RE investing. But what are the alternatives – Working for a wage or salary and saving it? stocks? Building businesses? All of those have a time factor.
“PGPs do have an advantage and that is they will probably rent easier in a declining economy because the rent is low. When things get tough and people loose their jobs they will have to rent cheaper properties (that is if they where already renting).”
totally.
” However I am VERY wary of PGPs in *** rural town *** because if people start leaving town, then there will be NO ONE to rent your place and even worse NO ONE to BUY it!! “true, and if you buy in a mining town (say) and the mine closes, then that’s a real risk. However….the world has a growing population and so far shows no sign of slowing down. I’m banking on there being more and more people coming in to the Sydneys and Melbournes, and more and more people trading their city pad for a house and some land in the regional towns later in life. And we have an ageing population…so I think that there will still be demand in the long term.
“Steve has not bought a property in a rural time yet, “
I don’t believe he’s into rural as in ‘farms’ but I think he’s bought quite a bit in regional towns which some would say are ‘in the country’.
“Yes I agree that good people live in country towns too “
i think there is a difference between a rental house in a country town and a ‘rural property’ (i.e. sheep station.) Rural properties even have their own drop-down menu on real estate sites I look on.
“What happens when they leave town and no one is there to rent your place???”
tasmania and invercargill had declining populations for 12 years but I heard the yields were really good because the house prices were so low. I personally wouldn’t purposely buy in a town with a declining population though. well not more than half a percent, say.
.”The only reason he has been able to accumulate so much is not just due to his property strategies on their own, but because he has MULTIPLE income streams (selling books and seminars.”
no that came after. he and dave couldn’t have taught about it unless they’d proven the strategy worked, first. I’m not saying they don’t have multiple streams of income now – of course they do. But they didn’t then apart from that Dave was still working in the accounting practice. You *still* haven’t read the book have you???????
*wags finger*
just do us all the honour of reading it first. most of your points are answered in it.
cheers-
mini
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