Forum Replies Created
Yack,
Sounds like good advice. I’ve waited this long, a little longer in order to read Peter Spann first wouldn’t hurt. A 2 bedroom unit in my area wouldn’t be cash flow positive though. I looked in to Dee Why units and the best I could get was around $300K generating $300 a week in rent. For my money that’s not a wise investment. That’s negative gearing in a maturing market.
What can you do when your local market doesn’t give you the +ve CF properties you are looking for. Maybe NZ is a little too far abroad and I should source something in Aus, but local may not necessarily be the go. I do ultimately want to have some NZ properties in the portfolio though.
Open to any suggestions on what my first step should be. But I’ll read Peter Spann first.
Thanks in advance,
Michael.Here here, onya Salubrious!
I too donate regularly to charities. I give to Save the Children and the Wilderness society monthly. The Wilderness Society is a funny one as I work for an MDF company which makes its product from Woodchip, but as I said to the lady who signed me up, I see it as an opportunity to engender change from the inside.
I truly believe that what goes around comes around, and that generosity of spirit is a key enabler to true abundance in all aspects of life.
Sounding a little Zen now so time to sign off… [biggrin]
But remember, its all about balance, and any imbalance in your life does create disharmony. Mind, body and spirit. I’m flogging my mind constantly learning as much as I can but you got to remember the others too.
Cheers,
Michael.Greg,
I’ve just got to say that I’m blown away by your support and assistance. It exceeds my wildest expectations of this forum.
A quick update…
I spoke to my wife last night and we have agreed to finally bight the bullet! She too is an amazing woman who has been instrumental in accelerating my personal development.
We’ve decided to enter the IP market with a very simple and low risk buy and hold strategy. We’ll look for a positive cash flow property in NZ at around the $50K mark. This won’t generate massive capital gains in the near term and the cash flow return probably won’t even beat our 6.5% mortgage, BUT it will deliver the following:
1. First and Foremost it will eliminate our procrastination.
2. I will get a Mortgage Broker on my team and know my true borrowing power.
3. I will have set up a trust.
4. I will have executed a strategy (albeit a small and conservative one) which will initiate my active learning process.So a big vote of thanks to all of you who’ve assisted me in getting to this point and I’ll definately post an outcome once I’ve executed. I know there are better strategies at present that a buy and hold for +ve cash flow in NZ, but its a start. Kay, my wife, also loves NZ and wants to move there one day so she’d love to start building a portfolio of properties in the land of the long white cloud.
I’ll continue to proactively search out other opportunities and mechanisms in the REI space. I’m going to read Peter Spann first and others to follow (Steve, you’re on my list too). I want to accelerate my plan to the hundreds of properties level, but I’ll never get there if I can’t even buy one!
I’ll be “off the net” today as I’m conducting an internal audit of our sales and marketing business so my posts will be limited so apologies in advance if I appear unresponsive. Greg, BTW, MDF = Medium Density Fibreboard. Its like Particleboard but is yellowish in colour and is made from wood fibres and not woodchip. Its used in many building applications including kitchens and cabinetry.
Thanks again to all who’ve assisted to date and watch this space…
Michael.
he he… I was wondering whether vascilate might elicit special treatment. I like big words they make me feel smarter. [blink]
Signing off before I go blind…
AussieRogue,
Thanks, I think I needed that! [biggrin]
I know that I know quite a lot and that I have solid disposable income, a lot of equity and a hefty deposit, so I guess the only thing holding me back is me!
Remember my very first post was a question on whether I should wait or jump
I’ll jump the minute I can realise a return greater than my mortgage payments of 6.5%. That doesn’t even have to be cash on cash, even an internal rate of return allowing for capital gain of > 6.5% would get me excited.
Anyway, I’ve wasted enough of everybody’s time with my vascilating.
Thanks again,
Michael.Doh!
Now I wish I was on the Sunshine Coast too!!
Just reading this thread has given me a new injection of enthusiasm (and a little blush, Greg you are far too kind). [blush2]
What I have realised is that I’ve fallen a little behind in my readings. Off to the bookstore for me to pick up $10 Mill in 10 years for a start (Thanks Greg!). I was already also considering Steve’s books and Jan Somers too. Time to get specific!
I just have to say, to all of the successful and energetic REIs out there, thank you so much for your time and contributions on this forum. It certainly doesn’t go unnoticed by us NooBs.
Nobleone, care to share your NZ market secrets with an enthusiastic noobie? I’d love to invest in the land of the long white cload if I could yield positive cash flow. I’ve already got $50K in my mortgage offset account which I could draw down for a 20% deposit.
Regards and many thanks,
Michael.Salubrious,
I think I agree with you, but I’m not sure I got your exact message down pat. There is far too much wanton consumerism in western societies. But this is what props up their economies. I personally avoid this consumerism and still reap the benefits of a boyount economy that someone else is funding. [biggrin]
But at the end of the day, I am investing to make money. A dollar now for 10 in the future, but I don’t intend to take it with me. I want to enjoy life and give something back to society. I can’t do this if I’m locked in a 9-to-5 job working for the man. If I can build financial independence then I can buy my freedom. Freedom to do the things I want to do and have enough left over to donate to the worthwhile charities that I select. It may mean that today I’m working hard and don’t have the latest Gucci bag or watch my DVDs on my plasma TV, but in 10 years time hopefully I’ll be free.
Regards,
Michael.I need to second persistence’s point.
I too am the “in search of perfection” type of investor. I am a perfectionist and am always looking to ensure I am in complete possession of all the available information before I act. This can result in analysis paralysis, but at least it ensures I don’t make any rash decisions that I will regret later. But in delaying too long I incur a lot of opportunity cost. To find the investment that returns 20% I forego the one’s that return 10%, and that’s 10% opportunity cost I can never recover. I should maybe lock down the 10% then work to incrementally improve it up to the 20% and more investments next time round.
Thanks for the posts and sound advice.
Regards,
Michael.All,
As I’m still “finding my forum feet”, I’m probably one of those new users to whom this thread applies and who is most at risk of fault in this regard. I do, however, see the merits in both arguments. I tend to agree with Marc that this is a “forum” and is meant to foster discussion. It would be unfair to suggest to new members that they’re not entitled to have a discussion on a topic that has already been discussed. This almost says that forums have a “used by” date at which point everything has been discussed so no more posts are allowed. This would also suggest that the forum exists solely for the benefit of established members who got here first. They get to pose the obvious questions first and benefit from the dialogue, and as the forum matures, they only see new topics come up that they haven’t already participated in and are saved from having to screen threads safe in the knowldge that they’re not repetitive.
However, specific “black and white” questions around formula or terms should be answered using the search engine IMO. There seems to be a lot of posts lately asking what the 11 second guide is. I did a quick search when I first saw the term used and, viola, found a dozen threads describing the test and its application. I think this doesn’t occur enough.
So, my suggestion would be to leave the forum unchanged, but maybe re-inforce to new members more fervently that they should search before posing specific questions with simple black and white answers. The situational questions should continue to be acceptable forum discussion topics.
Sincerely,
Michael.Greg,
Thanks for the excellent post, and no you don’t come across as someone trying to teach me (or others reading) to suck eggs.
Funny you should mention bootcamp, as this is something on my radar and in fact I’ve spent a lot of time reading John Burley’s forum and others in the MasterMind forums. However, it is quite expensive and not something I would do until I was already a REI. Once I’ve read all the books I can and applied some of this by actually entering the investment market, then I’ll be in a better position to truly leverage an investment of that magnitude.
Thank you for the reference to Peter Spann’s “$10 Million Property Portfolio in just 10 Years?”. I haven’t read this book and it seems precisely the sort of specific information on how to select and invest in optimum properties that I’m looking for. To date my reading has been limited to the more generic authors such as Robert Kiyosaki’s “Rich Dad Poor Dad” and “Retire Young Retire Rich”, as well as John Burley’s “Money Secrets of the Rich”. John is a bit more specific with his Level 5 investor analogies, but still lacks the specifics I would like for investing in the local market.
I don’t have access to too much in the way of statistical projections, but I am the Demand Manager for one of Australia’s largest MDF businesses. This is a lead team role reporting to the Business Manager. Every month I sit with our Sales and Marketing business unit and review the strategic projections of demand. They present information on housing starts based on projections from BIS Shrapnel and others. We are projecting 160,000 starts next year which is pretty close to 2004, but then declining through ’06 and ’07 recovering in ’08. At the moment BIS Shrapnel is the most conservative of the projections and we are adopting a marginally more aggressive projection. We use housing starts as a key lead indicator of demand for our product.
Just to wrap up, are you suggesting that these micro markets are not subject to the dynamics of the macro Australian RE market? And, if I use targeted analysis at the micro level I might still spot an opportunity for an informed investment even in this nationally depressed market? That’s an interesting concept, and I must admit, I thought all of Australia would be subjected to the dynamics of increased interest rates and reduced sentiments.
Thanks again for your informative post,
Michael.
JRW,
11 second guide says all 3 are a go. Look good to me.
Cheers,
Michael.TerryW,
Thanks. I guess its the “many ways” that I’m looking for. In my ignorance of these I have locked in a worst case of owning my home and being debt free in 2.5 years. If I can improve on this then I’d love to do so.
Any ideas of how I can find some info on the other options such as the Eurofinance securities. I’m time poor (as is everyone I guess) so I’m trying to learn as much as I can in the odd hour at work I steal from my boss. I’m paid a hefty salary so I really can’t steal too many of these. [biggrin]
Some details on the Eurofinance would even help me get started with a Plan B.
Thanks again,
Michael.Prodigee,
On a serious note, be careful! Don’t do anything until you have solid financial advice. If you don’t know what to do with it then park it in a term deposit and then get professional advice. A balanced share portfolio geared to growth might not be a bad long term option if you’re short of investment knowledge. But this is not a recommendation, I’m not qualified to do that.
Just concerned that you might come to this site in good faith looking for answers and get short shrift. Please do be careful and seek some professional advice before you act. Its far too easy to lose that sort of money through poor investment decisions.
BTW, I am not necessarily advocating a “Financial Planner” when I say “Professional Advice”. Just arguing that you need to be informed before you act.
Best Regards,
Michael.WauloK,
They’re out there, just getting fewer and far between. Check the posts on Warnbro for example and others.
Given current market dynamics, I’m looking to exit my mortgage with my spare cash instead of investing. Not advocating you do the same necessarily, just be aware that its getting tough to find true +ve geared investments. Others would suggest switching to shares in this climate from property etc. Lots of options, but that’s what this forum is about. End of the day you got to go your own way…
Good Luck!
Michael.bullseye!
But this is all back-of-the-fag-packet math. There’s calculators out there that will give you a more accurate take on what is and what isn’t positively geared.
I think the 11 second test would suggest you should pay up to ($350/2*1,000) = $175K for +ve gearing. But, I was never any good at math [blink].
Cheers,
Michael.WauloK,
At the risk of sounding flippant, what’s not to understand? [biggrin]
In investing vernacular that’s called negative gearing. If it were an investment you’d be claiming that loss as a deduction and hoping the capital gain would offset your net outgoings once you get those tax dollars back.
If the capital gain isn’t there then its not a wise investment decision and you should look to find either +ve geared property for cash flow, or -ve/neutral geared for capital gain. The mix depends on your situation and leverage.
As its your PPOR, then this is all moot. People buy their homes with their hearts and should buy their investments with their heads. Don’t think of your home as an investment. Some would argue its a liability and not an asset as it takes money out of your pocket and doesn’t put money in your pocket. At best, the equity you build up in it over time gives you borrowing power and therefore leverage through your investments.
Regards,
Michael.AussieRogue,
Absolutely! Your post sounds far too close to home. I get the whole perception of tight ass thing too, yet I’m the most generous by far of all my siblings. I set up a managed portfolio for each of my nieces and nephews with a grand in each when they turn 5. My wife berates me sometimes for being too generous, but as most financial wellbeing authors would suggest, its important to “give or donate” a portion of your income if you are to be truly abundant.
I’m also the last of my siblings to actually buy a house. And although its the most expensive of them, my parents don’t understand why I didn’t pay millions for a mansion in Mosman or something. I saved over 50% deposit before I bought it and will now own it in 2.5 years time.
I did, however, buy a new MX5 convertible. BUT, I only did it because I could finance it under corporate hire purchase and keep a log book showing 90% business usage. I ran the numbers and realised it was a good deal. I own it outright now. My colleagues drive Z3s and Boxters…
Bottom line is, I have a plan which is heavily geared to future wealth and not immediate excessive gratification. I want to buy a yacht for around $100K, but am waiting until my investments are in place first. I could afford it now but I’d be servicing bad debt and I’d much rather be building financial independence.
I know I’m extremely fortunate to be as abundant as I am already and try to avoid flouting my success. IMO, I am still a little fish on a big learning curve who is taking his first small steps on a life long journey.
Cheers,
Michael.Aussierogue,
I couldn’t agree more. Part of the reason I make zero voluntary contributions to my super is that i don’t trust the government. The burden the ageing population will place on those of us earning an income will be enormous unless significant steps are taken to mitigate this now. I can’t see that happening, so I invest my money directly so i can be a self funded retiree in my own timeframe and not slave to the government. Who says they won’t increase taxes on super payments or defer the eligible age further. Don’t want my money under the control of a government that is going broke.
Smethem,
You are the minority! As am I and probably most of the people on this forum who are taking control of their financial futures. My brother’s situation scares the heck out of me. He earns less than a quater of what my wife and I do yet has bought a McMansion in Kellyville and is working crazy hours and weekends to barely service his mortgage. And just a few months ago he added a $20K pergola!!! What the??? He spends a fortune on the latest and greatest very expensive toys for his son yet he is stressed to the max as he can barely cover the interest component of his mortgage. I’m scared about what will happen when the rates rise…
I’m going to buy him Rich Dad Poor Dad for christmas as a nice easy read introduction to the concept of getting control of your life. If he “gets it” then I’ll give him some of the more specific action oriented stuff in my library.
I seriously don’t know how he sleeps at night…
Cheers,
Michael.Originally posted by Derek:The critical point is what sort of interest savings are you going to make with your current approach?
Related to this is the question (which only you can answer) is what cost to your long term investments will there be if you are ‘out of the market’ for 2.5 years?
Derek,
These are exactly the two questions I was weighing up. Its a question of cost versus opportunity cost. That is, what cost I would incur in interest on the mortgage if I were to direct the money to investments instead of paying off the mortgage, versus what opportunity cost I would incur from not doing so. The opportunity cost is the potential return I could generate from investments.
My mortgage is on a standard variable rate of 6.5%, so for me to decide to direct funds elsewhere the investment would need to generate more than this to be a better place to direct my funds. In my first post i said “If I can do better than 6.5%, then pure mathematics suggests I should start executing my plan now”, and I guess this is the dilemma. Can I do better than my variable interest rate?
But it gets complicated by leverage. Obviously, I could put $20K down on a place worth $200K and it could appreciate 2% pa. If its cash flow neutral then this would be a $4K return, but on only $20K invested. So the actual return in simple terms is around 20% pa on the $20K. This is arguably much better than parking the $20K in the mortgage offset account to offset 6.5% interest on that amount.
I know the internal rate of return formula is more complex than my simple example above, but it paints the picture anyway. The simple question is one of projecting the market. Do I believe my investments will generate more than my (increasing) variable interest rate?
Smethem, my current analysis tends to agree with that given by your advisor and adopted by you. I am personally projecting an unfavourable REI market for the next few years and improving in around 2008, so see this as a good time to clear the debt on the PPOR and be well positioned to make a move when the market is ready to turn upwards again.
Thanks again everyone,
Michael.TLA,
I like the idea of the group presentation. It wins on several counts:
1. Like you said, makes you a “real person” who’s not afraid to tout their wares to a group.
2. Elderly people would probably be very comfortable in a group forum like this and not singled out for special “treatment’.
3. You might even benefit from some group reinforcement of the concept. If one or two start to nod along then you might get some groundswell.Anyway, what ya got to loose?
Cheers,
Michael.
