Forum Replies Created
“Thats not exactly normal for a country showing strong economic growth.”
Strong economic growth?
The US economy is on the “rebound” – nothing more, nothing less at this point in time.
“Theres a lot more going on than appears on the surface.”
Let’s just say I know more about what’s going on “than appears on the surface”.
— Michael
“The Looming Property Crash, by Clive Maund”
I would take the above article with a grain of salt.
Most of Clive’s “predictions” are based on media hype during the build-up to an expected economic depression last year.
The depression did not occur – the US economy is on the rebound, which is likely to continue at a faster rate if/when a democratic administration takes power.
As for the property sector, although there has been a moderate adjustment in a few markets, specifically less populated out of the way locations where increased unemployment [which is now down over consecutive months] had more of an impact, or overinflated markets such as San Francisco, on a broader scale property values in the United States have continued to increase – but at a slower rate.
Clive is an example of the many commodity investors who prefer economic doom and gloom because it keeps the US dollar down and gold prices on the rise.
— Michael
Personally I would remove [1] altogether. This strategy will not result in independent wealth in terms of how a millionaire is defined today.
As pointed out, the future cost of money has not been taken into account. And 10% ROI is very high on a sustained basis and I am sure does not take into account inflation and other economic factors.
2. Critical.
3. I don’t agree with “watch every dollar” as such, otherwise time is wasted and opportunities can be missed. This is why accountants were created.
“Be smart with your money” is the rule to follow.
4. “think positively and set goals” – very important.
5. “Use someone else’s money – don’t be afraid of borrowing money.” “Use debt to leverage your returns.”
Two key factors in creating independent wealth, especially when starting from the ground up.
However, I do not necessarily agree with paying off your home loan as fast as you can. The reality is this recommendation is the complete opposite of what many “wealthy” people did in order to achieve their financial goals.
A couple of other considerations which have been overlooked.
6. Do not become focused on “money” – this in itself can lead to failure, in more ways than one.
Those who have created true wealth from the ground up have worked hard and focused on the tasks at hand, not necessarily how much money they will make – which falls into place.
7. As touched on in Monopoly’s response, one of the most important factors in obtaining true wealth is “risk”.
But it is important to understand that wealth is not gained through taking risks, it is how risks [which are a part of every transaction] are managed.
8. “Persistence” is the defining difference between someone who has created wealth from the ground up and someone who wishes they were wealthy.
— Michael
Marc – less arrogance [or ignorance?] and some substantiated input would be welcome.
I will add that I find your reference to others posts/dialog lacking “meat” very amusing.
I for one – and I am sure there are others, find your mere rhetoric severely lacking in any substance whatsoever, needless to say avoiding the topic in question. And I am not only referring to this post.
— Michael
“Tony himself definitely developed – ie the six human needs”
This “needs-based motivation theory” belongs to neither Jamie McIntyre or Tony Robbins.
The “6 human needs” outlined in this post stems from “Maslow’s Hierarchy” formulated by Abraham Maslow an American psychologist who died in 1970.
The basis of this theory has simply been reinvented by McIntyre and Robbins so as to position it as their own.
Almost everything these motivational speakers preach is simply a different translation of theories, strategies and so forth which in many cases have been around longer than they have.
— Michael
P.S. Although not ethical, it can be relatively easy to get around “intellectual property rights” with a few slight modifications.
Australian Financial Review article “Queenstown’s Gold Rush” [May 14th]
http://afr.com/articles/2004/05/13/1084289853898.html
“House Prices still on Rise..” [May 27th]
http://www.stuff.co.nz/stuff/0,2106,2921452a13,00.html
Articles referring to a market “slump” fit in the same category as those predicting a “crash”. The statistics are too broad, many factors are not taken into account, and regions or segments of the market which will not be adversely affected due to supply and demand, and other factors, are overlooked.
How many of the economists/analysts who predict slumps and crashes really understand real estate investment, or any form of equity investment – it would be interesting to know.
Take from the media what you need too as an investor, then do the homework to understand the affects such claims have on your investment strategy.
— Michael
“I wouldn’t mind if someone told us what an exit strategy is.”
— The process by which an owner or investor liquidates his or her ownership in real estate assets, a business or other venture.
“by the time one realises one should be out of the market, there won’t be a buyer in sight.”
— An exit strategy is formulated prior to investment, i.e. before buying a property. And takes into account worst case scenarios, i.e. rising interest rates, potential zoning issues, market trends.
If any of these factors come into play – as a negative – or are on the horizon, then the investor decides whether to implement the exit strategy or ride it out.
“Who else can one ofload to in bad times?”
— See above. An exit strategy is typically implemented before “bad times” arise.
Every investor has the opportunity to liquidate an investment or adjust to market conditions before the tide turns.
The investor who closely monitors his/her market and understands the negative factors that may affect an investment, will reap financial rewards well beyond passive income.
“Everyone is affected.. Where will it end?”
There is a positive in any market – it is simply a matter of overlooking the negative and focusing on the “opportunities”. Which I might add are far more prevalent when the market is facing a downturn – based on experience.
— Michael
“I pay people directly with my visa card in the USA all the time and that costs nothing.”
Unless I am missing something here, in order to pay anyone with a credit card, they must have a “merchant account”.
The only other method, aside from conventional means, when using a credit card is PayPal or a similar service.
— Michael
If you want a secure and efficient method of payment, simply wire the funds from your bank to the recipients – which I assume is the $25 fee you referred too.
However, depending on which bank in the United States, the recipient will incur a fee of US$10-30.00 per transaction.
If you send a personal check, it may not be accepted by the US bank – again dependent upon which one is depositing the funds. Many banks over here are privately owned and have policies re: accepting foreign personal/business checks.
If you send cash – not a smart idea – you should convert to US currency, or it is possible the funds will be worth less when [if] they arrive.
As for tranferring funds to another parties credit card – I understand this cannot be done in the United States.
The time you have spent finding a cheaper alternative has probably cost you more than $25 in lost income.
— Michael
P.S. PayPal does not charge any fees for sending money, or receiving money – if a personal account. They do charge a 2.5% spread “above the wholesale exchange rate” which is significantly less than the other options discussed.
“The investors who have been quietly building their portfolio over the next few years when property is out of fashion will enter the next boom phase with a large portfolio of properties.
They’ll watch with delight as high capital growth rates kick in across their already large portfolio”— this sums up my point “”crash”.. is when many real estate investors accumulate the most wealth.
“I bought up a similar topic [“exit strategy”] and a moderator tried to pull the idea apart”
— I would enjoy going head-to-head with anyone who discounts the value of an “exit strategy”.
It is a primary factor in every reputable financiers decision process.
And it should be the most important factor when considering an investment in not only real estate, but also corporate entities, the stock market, and any other investment vehicle.
Those who discount an “exit strategy” are the most likely candidates for failure.
— Michael
The key to buying OTP is due diligence and preparing for market adjustments [risk management].
It would appear having taken this into account you have secured a very good investment – and stepping stone for ongoing investments.
As touched on, settlement is not required until after the developer receives a certificate of completion. Therefore, the current valuation seems to be a moot point at this time.
— Michael
“It’s the people who don’t do their homework, buy overpriced and borrow beyond their means that are the first to get hit.”
The above is the catalyst for a so-called “crash” – which is when many real estate investors accumulate the most wealth.
Unlike the stock market, the real estate market does not crash because it is supported by “tangible” assets [not forecast profit margins] which hold value and always appreciate over time.
Those who do not calculate a market adjustment into the equation – and as importantly an “exit strategy”, before buying property, create opportunities for those who do.
— Michael
“Ive just finished reading the book that steve wrote… Now that I have the knowledge im looking for a partner in crime to excelerate the process”
I have a reasonable amount of experience in joint venture partnerships, fund raising, investment, etc.
It would appear that your objective is to find finance partners.
However, it would also appear – based solely on your original post, that your experience in real estate investment is limited to the knowledge you have gained from reading one book – correct me if this is incorrect.
The key to securing finance is the ability to demonstrate “experience” and “knowledge”, not only in real estate transactions but also the legal issues that arise during this process.
If your knowledge in real estate is as limited as you have indicated, then it would be advisable to gain further knowledge and/or conduct a couple of deals yourself. Then you are in a better position to accelerate the process.
If you decide to proceed anyway, then as noted in an earlier post, make sure you first speak with a “qualified” lawyer and accountant – do not try and save money on professional advice when structuring a partnership.
— Michael
Liquidating your interest in a partnership depends on the provisions of the partnership agreement.
If you do not have a partnership agreement in place, or a document outlining your interest in the property – in respect to a partnership, then you are solely reliant upon the other parties willingness to sell.
Either way, you should speak with a qualified lawyer.
There is no such thing as an “informal partnership”.
— Michael
[AP] “a lot of this discussion seems geared to bigger projects”
It seems to have taken this direction. In terms of the original question re: 2-3 units, the developer should simply use a qualified general contractor – with an established network [team] and a real estate agent.
[AP] “not sure if it eludes to the developer walking away from the whole deal if the targets aren’t met”
To clarify this point, try and delay “settlement” for as long as possible – the contract is generally unconditional. Use cash reserves to finance the preliminary stage and not sit dormant in an escrow account.
As noted, “there should be an out-clause [conditions] in the land agreement which enable you to walk “subject to” finance, planning, etc” – the out-clause is only applicable prior to the sales phase to protect the developers interest.
[AP] “if you are buying OTP please make sure the developer is actually committed to the project and not just sitting back and hoping to make the sales”
There is a lot of work and cost involved before getting to the sales phase. Therefore, it is not often the developer is not committed – although correct, the buyer must ensure the developer is financially secure [part of due diligence].
[AP] “Usually it comes down to a unique point of difference”
Correct. It will be very difficult selling a property OTP unless there is a clear point of difference. This is why most developers only conduct OTP projects in markets where demand exceeds supply – preventing the need to discount the property’s value.
— Michael
“In my limited experience I have not seen such a small development employ that stategy, they usually just employ an agent.”
Correct.
“the sucess in the boom of the OTP stategy was in part due to the teams, who were independent of the develoipers and used to approach the developers for stock.”
Successful developers conduct due diligence on each company/person involved in the development team before selecting them – it is very rare for equity to be involved in the equation unless the developer is short of finance.
“if you can find a team that charges “slightly more than a agent” please let us all know.”
Most “marketing” companies generally cost on par, or not much more than a real estate company that specializes in “marketing/selling” OTP projects.
Real estate agencies with a successful track record in OTP projects charge considerably more than a sales commission.
“I personally thought that Harry and Multiplex were more careful with their money than you infer.”
I have no idea who you are referring too.
— Michael
Mini – take a breath and read what I have said again.
“I got a lot out of De roos and Kiyosaki got me ready for De Roos.”
As I said, “do not focus” on these authors. I did not discount them altogether.
They are “inspirational” but offer little more than a general/basic understanding of real estate investment in a confined segment.
“don’t focus on SFH’s [single family homes]”
Read on – I said not to “focus” on this segment. The follow up to this statement was “or any one investment category”.
The authors noted, and this forum, are primarily focused on SFH’s. Again, I am not discounting SFH’s which are typically a good investment, I am simply saying do not put all of your dollars in one basket.
“I know you are into brand new apartments”
Yes, I am involved in apartment developments. But I am also involved in commercial, retail, multi-use investments/developments and land acquisitions. To offset this I have interests in industries not associated with real estate.
This diverse approach stems from the point I am trying to get across – gain knowledge, leverage, keep a step ahead and think outside the square.
It wasn’t that long ago I was in the same position as Vikash – but the tables have turned, and all without acquiring a single SFH.
— Michael
P.S. correct, I did mean to say “Kiyosaki”. “Koslowski” was an oversight, but a name many investors will be familiar with.
Manage your finances conservatively, but don’t be overly concerned with “saving” in order to become involved in real estate investment – opportunities will pass you by [avoid using your own money if at all possible].
Instead put time and energy into studying real estate markets, investment strategies [not just real estate], and making contacts – advisors = investors = finance = wealth.
Do not focus on authors such as De Roos, Koslowski, etc. These guys preach to the masses – their personal “experience” in building “true wealth” is limited. They primarily derive income from books and seminars.
Join a local real estate investors club. If a club doesn’t exist, start one if you have the inclination. You would be surprised how many knowledgeable people there are in any area looking for an opportunity to share their knowledge and make contacts.
Do not be afraid to set your goals high.
And you don’t necessarily need guarantors, but you do need to know a viable opportunity when you see one – which will evolve over time.
The three key elements of understanding a viable investment: 1. due diligence 2. feasibility 3. risk management.
If the investment is feasible and you can demonstrate “confidence” in your ability the money will follow.
Finally, don’t focus on SFH’s [single family homes] or any one investment category – think a step ahead and be prepared for changes in the marketplace.
The key to independent wealth is your ability to identify opportunities before others [and think outside the square].
— Michael
Queenstown, New Zealand, 4800 sqm land purchased in 1986 for $12,000 – recent private sale $3.6 million.
— Michael
“aesthetics are important to me”
Don’t confuse an attraction to cosmetic features as an emotional decision.
If the property features quality/attractive fixtures and finishes and it is in a good location, then these factors are listed in the [+] column in terms of feasibility.
“If there is an oversupply of available properties, I want to ensure MY properties are not vacant.”
A potential “oversupply” of similar properties in close proximity should counteract cosmetic features and weigh heavily in the [-] column.
Aside from trying to maintain vacancy, oversupply will generally lead to zero or negative capital growth until demand again exceeds supply.
My recommendation is to not acquire any property where oversupply is possible – if you can afford to retain the home/property eventually it may generate a return.
But the “opportunity cost” – inability to put the money retained in the property to work, will put you ten steps back as an investor.
— Michael
