Pumpkin,

re: boyfriends, don’t you just love a man who is handy. Not being sexist or anything and realising I could do a lot of it if I was into that kind of thing, but I have found that I am not!

My perfect idea of ‘doing’ a reno is controlling and paying for it, but not necessarily labouring. OK I don’t mind ‘working’ on a renos as morale- and vibe-merchant and keeping spirits up, making everyone coffee, food and treats, dj-ing the ghetto blaster, rolling a bit of paint on a wall until I get bored with it, bogging the odd hole cause that’s kinda fun, being production runner, hiring two burly local yokels for $10 an hour cash to do my work and then some so I don’t feel guilty, and giving my partner a lovely massage at the end of the day! hehe

I will insert one bogging tip that I made up myself so here it is! You have two mixtures, one the usual thickness with which you use a trowel, and one you make up (using the powder sort as it’s cheaper anyway) a bit thinner like about icing thickness. And with this mixture you use a brush. it’s brilliant for when you have sanded over old paintwork and it’s still a bit up and down, and you just paint a light coat of the thinned bog mixture over with a brush before you paint. Works a charm.

So back to renos, I have this added criteria that each reno should only take two days of my life maximum, should coincide with seeing my folks (a tax-deductible trip home!-) and preferably not even require me to set foot on the property at all, cause let’s face it, I’m into leverage and renovating is not the best possible use of my time!

OK my motto is ‘a stitch in time saves nine’.

I figure if you sort out the problems NOW all at once, firstly they won’t get any worse and cost you more later, and secondly you use your time (and your tradespeople’s) most effectively, by doing all jobs at once. Also, you guarantee a lovely spick and span place attractive to tenants and competetive in the market, you hopefully can get more rent for the property to boot than prior to renovation, and then your property should just be able to chill along nicely putting money in your bank account, while your rental managers praise you and wish every landlord was like you, and thus prioritise your properties, waxing lyrical about their merits.
Also settlement is a convenient time to renovate, if you leave the tenant in until whenever, when they leave might not suit you to go and sort it out. At least if you do it at the beginning you are in control of when it happens, and you have the weeks prior to settlement to organise everything to start on day one. (or sooner if you have access prior to settlement.)

a heat lamp in the bathroom is a $300 investment that I think has a ‘perception’ much grander than the expense, especially in a property which is otherwise kinda (though spick and span) still a bit ‘un-luxurious’.

Leaving the properties for a year before reno just was not an option for me or two of mine. This is because I doubt i would have got a tenant the way they were! I decided to buy three grovel-pits and reno them for the price of two ‘better’ places because I could see that at the time even ‘better’ properties that cost a lot more still had maintenance issues, and the cosmetically challenged one was a much better deal. That I could ‘create’ properties of the standard and price-range that I couldn’t have afforded to buy ready-done. So instant CG’s really.

Also my intention was to buy and hold, so I think the reno you do should suit your intended purpose. I intended these properties to be able to last a good 10-15 years as rental income producers, so I did a lot of ‘invisible’ stuff that wouldn’t really improve the value of the property but would ensure the long serviceable life of the building. If I had been planning to flick in a year I might have left some of those things off the list.

joy to the world

I am loving this discussion which touches on the spiritual ramifications of wealth. If there’s one word that I’ve learned the meaning of since learning to become – and then becoming – an investor, it’s ‘leverage’. Leverage is power.
I LOVE how there seem to be more enlightened millionaires (meaning that care about living an ethical life and giving back to the community) around the place these days, who have this power, and who are using it for good and to make the world a better place.

One day I figured out that what I really want to do is help the environment. Now, if I put down my tools and just work some part time job enough to live hand to mouth and do volunteer work for the environment the rest of the time starting now, that’s great but there’s no leverage in it. That’s all I can do. But if I continue to grow my empire into a self-growing cash machine, giving what is hopefully going to be an ever-increasing ten percent to the community, and one day even leave the whole lot to greenpeace or whoever, let’s say I leave them 5 million returning 10 percent and holding it’s value against inflation one day, then that’s 10 people’s full time wages working for the environment forever for the world. Much more than I could have done on my own even if I stop right now and wear sack cloth and ashes forever.

Ok, that’s a little dream of mine, but there it is. I GEDDIT! I get leverage, I don’t think there is anything wrong with creating wealth, and I think more good people should get on with it. I agree with the one-minute millionaire book which says that 1 million millionaires (which the book aims to create) who each give 10 percent back to the community can collectively change the economic future of the entire world. I geddit!!! This is a very exciting time we are living in, because I can actually *see* things changing which gives me hope. You can totally see it, even here in this online community. I salute my mentors!

joy to the world

hi BB, I agree with you about strata fees/corporate levies and I haven’t bought that kind of property myself either.
Lower end of the market can definitely mean you buy a property with problems. That’s probably how come you got such a bargain in the first place! I have spent about 9k and 14k on a couple of mine doing complete maintenance on the whole property, total redecoration including polished floors, new fireplaces and bathrooms and vanities and light fittings and all that sort of thing. Holes fixed. Once these properties were sorted the maintenance slowed right down to what you would expect. the odd leak maybe once a year, the odd set of keys needing to be cut about once a year, the odd hot water element needing replacing, (my tip is replace the element not the whole thing, for 1 tenth of the price!) and as far as repainting or painting the roof etc I would probably budget doing that every 5 years.

Basically I bought with a builder’s report and fixed up every single thing on it. Except things I was going to defer for 2 years (painting the roof.)

I would say that the maintenance budget totally depends on the state of the property and if it has been well maintained.

if the property is all good when you buy it then I reckon about 5 to ten percent of rentals a year should do it. Otherwise I would totally recommend fixing everything on purchase. OK it’s capital expenditure so you have to call that part of the purchase price really. But that way you got a quality rental property that will perform as intended. if you don’t fix stuff then yeah you could get an endless stream of problems. not to mention you won’t be able to keep tenants as they will be too sick of things going wrong with the property and the invevitable wait until they are put right.

cheers-
Mini

joy to the world

Hi Rosemarie,

are you talking about your own home, what will be a principal place of residence in Aus, or an investment as such (i.e. one you buy on the numbers).

I’m not saying that people can’t get emotional about their investments, or that PPORs can’t end up good ‘investments’, or that you shouldn’t no whatever you want to your PPOR to make it comfortable for you and your family, just that I think there is a gulf between the two. Also if you try to both emotionally satisfy and be a good investment all in the same property, I reckon you’d end up compromising both.

cheers-
Mini

joy to the world

man, those Aussies must be laughing so hard, it’s pronounce Teh POOKIE by the way not te PUKE…hahahhaa

joy to the world

> Why would anyone who is fortunate enough to have a property which is returning
> more than it costs to maintain, put it up for sale???

i don’t so much think it will be the positive cashflow people putting things up for sale unless they believe they are selling at the top of a boom for CG. Most of the investors I know who sold CF+ve properties in Aus. have already sold like months or a year ago.

>Sure, some will be
> forced to sell for various reasons,

Yes, and I believe the ‘some’ are going to be the ones who own negatively geared properties (apparently 90 percent of properties in Aus are neg. geared). the reason you hold neg geared properties is OK partly to minimise tax etc but also for capital gains. I think if people see prices going down or even just not going anywhere, they are going to re-evaluate the wisdom of holding such properties and the cost of holding them for a few years until we might get into another rising market.I think many will decide to cut their losses and move their money out and into other things or markets – i.e. sell.

>however on the whole, most people who have
> such “cashcows” will IMO be reluctant to part with them.
totally.

>And if they do, I
> personally would be questioning their worth!!! And when (not if) the market
> changes (as the pendulum eventually swings back) in the opposite direction,
> this is even more reason not to offload the goose that lays your golden eggs,
> is it not???

Totally.

> Of course property will loose flavour, it is already happening or haven’t you
> noticed???

Of course I had noticed – hence my post. To be even more specific, rental yields in Sydney have been 2-3 percent since forever, but rents seem to be rising, and prices have fallen. There are a couple of what I would call A-grade properties that I have seen for sale with 5 percent yields on purchase price. This has been unheard of for ages. And I think this might rise another couple of percent. i don’t think that Sydney will ever have every single property returning 10 percent but I am sure it will go up to 6 percent yields for certain properties.

> The herd mentality is alive and well, the flock are taking to the
> hills (or NZ) looking for alternatives – shares, cash and anything else aside
> from bricks and mortar!!!

Yes EXACTLY, it seems you do get my point, so they are moving money out of negatively geared non-growth assets that lose them money and into better investments. However the more people that decide to do that all at once, the more on the market, the less buyers…I think we are already moving into that trend.

> The only way to obtain CF+ properties ATM, and for some considerable time to
> come, would be to create the situation, through properties currently owned.
Correct. Let’s say you bought a 5 percent yield in Sydney and converted it to two flats and maybe did a quick makeover (nothing structural or Smeg) you could create a pretty close kind of CF+ve yield.
If not today then soon!

I know exactly how I am going to create a CF+ve property in Sydney and live in it to boot. It will have to have 5 bedrooms though. I am working my way up to being able to do this idea in about a year’s time.

> People such as yourself have put yourself in an admirable position Mini; you
> were lucky enough

OOh, you pressed a button here. It was not LUCK!
it was planned and I got the outcome I expected. I knew exactly what I was looking for, found it, mitigated my risk, consulted my mentor who had done it in spades and whose system I was following. I have lived through a year of 90 percent of people thinking I am crazy, and I realise that with that paradigm the only way it works for those people to rationalise what I did was to call me ‘lucky’. But in the end what they think is their business and not my concern because i know what I did and why and what I expected to happen and why I expected it to happen and what happened etc and that it was not luck!

> and smart enough to buy well,
yeah that’s more like it…!!!

>and your time will come to
> gain even more from your investments.
totally….
>However, sadly for the others looking to
> our shores here in Oz, the boat hasn’t totally disappeared, but it is so
> distant that one risks drowning to reach it!!!

Not that I am deliberately missing your metaphor, but ‘distant’ does make me think of something I want to say –
NZ is less distant than perth or darwin from where the bulk of Aussies live.
It’s aheck of a lot cheaper to fly to NZ than to fly to Perth. $99 each way on virgin last time I went over the other month. Sydney to perth I think is $500-600 return if you’re lucky! I travel a lot including interstate, and honestly I go overseas on a plane more often than I visit the suburbs of the city I live in (sydney).

I don’t have any problem with the logistics of owning an investment property in NZ that I would consider to be any different to owning an IP in Queensland or Perth. Or the US or the UK, for that matter!
It’s hard to manage a property yourself where you don’t live, but no harder whether it be 500k away or 1500k away.
I don’t manage any of my properties myself, they are all professionally managed, and I don’t intend this to ever change even if I one day end up owning around the corner.

> Therefore in terms of CF+ deals, IMO NZ is and will remain the better option
> for quite a few years yet!!!

That may be true, but keep an eye on the Aus market – I certainly am.

cheers-
Mini

joy to the world

Hi there,

well my fellow investors and I have done probably close to 40 flips in the last year, and the way we do it is to put a contract subject to due diligence within 20 days on a property in our own names (perfectly legal) and/or nominee. (perfectly legal).

Then we advertise the property to our clients along with pictures, what we reckon, what we’ve found out, good points, bad points etc etc, and if someone wants the deal we assign the contract to them with a (legal!) document.

Strictly speaking the deal is in our name still (despite the assignment document) until it goes to unconditional. It’s at that point that it fully passes to the client legally absolving us of the obligation to settle and passing that on to the client. So we have to watch the deal and make sure the client is doing all the stuff they are supposed to do. The client advises us that they are going to go ahead or not, and then we advise the vendor that we will go unconditional, and the new principal is our client. We actually put a clause in the contract that the vendor signs off on that says the vendor accepts that we may assign the deal.

As far as I am aware we are not actually buying on anyone’s behalf but our own, and we are assigning the deal to someone which it is already contractually agreed by all parties that we are allowed to do.

Seeing as we have done so many deals now a large amount of lawyers have seen our deal structure and give or take the odd lawyer that wants an additional tripartite agreement drawn up between us, the vendor and the client, all seems to be legal and above board. We are only doing deals in NZ though.

if we were doing them here I would expect our Australian property lawyers to help us make sure we are complying with the law, just as our NZ ones have done.

cheers-
Mini

joy to the world

OK, I admit, I’m a NZ property bore! But in time, the +ve CF properties will pop back up in Australia. Interest rates high, rents rising, property prices, errm, ‘flattening’, time passing, people going off properties, more sellers than buyers- when those conditions start to dig in you will find the deals again. You’ll also find 90 percent of people advising you against them. basically when the prevailing wind is against property, that will be the time to start buying!!!

slowly that will change again and then you will have already bought and be poised (complete with CF+ve properties) for the next boom.

According to folklore property cycles are 7-8 years and might be longer if the boom has been longer. So by my reckoning that buying phase might be any time in the next 3 or 4 years.

meanwhile, check out NZ!

cheers-
Mini

joy to the world

Dear Steve McKnight,
re:

“Hi,
I’d gladly pay $5k for a property with positive cashflow meeting my requirements.”

Hehe…so what are your requirements??

cheers-
Mini

joy to the world

Hey Dan,
what a coincidence,

I emailed you from Sydney a while ago and you wrote back. It’s so cool that you are posting here.

thanks for the links.

cheers-
Mini

joy to the world