Forum Replies Created
Hi,
To date I have used Metropole finance to refinance my existing PPOR and set up my LOC's. I am a newbie at investing and this will be my first IP I will be buying.
The refinancing process was handled a little unprofessionally only because of the inexperience of the account manager I was assigned. However, we got there in the end.
As for obtaining property strategy advice to help formulate an action plan as stated on their website – don't hold your breathe!
I have been asking alot of specific questions based on my particular circumstances so that I can understand and formulate an investment plan where all risks are highlighted as they apply to me and exactly how I am going to manage these risks.
All I am getting is a reharsh of the basic principals as described in Michaels books. Nothing specific as these principals would apply to me. It feels like the information I require will only be forthcoming if I purchase further products, which are in the thousand of dollars. I am disapointed with this outcome.
Having said all that,I will be using metropole as a buyers agent because I know for a fact I do not have the knowledge at this time to safely select the correct property. I believe the first two IP's are critical to your long term success and is a major risk factor. My time also is limited, so I will be engaging them to act on my behalf to find and secure my first IP. Hopefully, this decision will prove to be a good one.
The Metropole system is based on buying high growth properties with the ability to add value and manufacture further capital growth. This is great for building your portfolio assuming you can get access to the capital.
Given your business partner in this equation is the bank the fundamental flaw for the average joe is beating the servicability test. Your buffer funds will take you so far before you need to top them up. If you cannot refinance because of servicability you're stuffed no matter how much equity you have.You are forced to sell. Which defeats the 'Hold' part of the Buy & Hold principal
Trying to get an action plan to deal with this major risk, other than "You need to make more money" has been very frustrating. It feels more like speaking to a realestate agent interested in making a sale as opposed to speaking to a property strategist interested in formulating a decent investment plan.
Ultimately we are all responsible for our own actions.
Hi all,
Thanks for the fantastic insight.
My question stems from my search for an overall strategy that will get me to my goal.
Reno's may be part of the equation that gives me control over CG. Manufacturing it rather than waiting for it. I am looking at other 'add-value' techniques also. The overall strategy needs to give me control of a property with a CFN environment within 12 months.
Knowing where you can get the biggest bang for your buck will make the process (time and stress) more viable.
PJ
I have been looking in the data banks of API.
How do I go about finding out past sales in a particluar suburb / street?
I would like to start getting a feel for what is the average sale price for a particular suburb. So that I may recognise an below intrinsic value when it crosses my eyes.
Also, the length of time those houses spent on the market.
PJ
Thanks Kaylah,
I'll take a look.
PJ
Hi all,
When we say
"……split it into separate sub-accounts"
are we saying there will be totally separate bank accounts each with their own fees etc?
Is this purely a bookkeeping thing? If it is, my wife is a book-keeper and could easily set up a set of boks for the LOC account within which would exist a number of transactions attributable to specific properties. These properties wthin the books would have their own assignment numbers. The LOC account would be run as if it was a business in itself.
PJ
Thanks guys for the confirmation.
It is always appreciated.
PJ
Hi MrFairGo,
Thanks for the excellent insight.
I am attracted to vendor financing as a business model that directly compliments my investment activities.
Having been burnt by past business ventures, I am just wary of claims about the ease of running a business.
Nothing like old school experience!
I am currently weighing up my options based on my particular starting point (equity,cashflow,time,patience level)
Vendor financing has not been struck of my list just yet.
PJ
Dockster,
I would have thought the purchase price is the purchase price. Why should this effect the performance?
I am led to believe residential properties within the 5 – 10km zone of any CBD should always perform better than the averages. On all fronts.
Why would a 'middle of nowhere' suburb with no obvious economic driver (mine etc.) out perform a dress circle suburb?
See, now this where I get 'analysis paralysis'. When, what I am being told does not reflect what I am seeing in the numbers. Sending me into a tail spin.
So, what are the figures I should be focusing on when deciding on a purchase?
PJ
Grinmar,
Is subdivision the only way to inject cash into the initial debt of the IP?
I have looked at vendor financing from the angle of improving cashflow instead of reducing debt. Thus allowing me to keep control of the prime asset. However, vendor financing is more difficult than it is described. not to mention tying up equity.
I have the technical skills to design, document and gain approvals for developing properties (my day job) however, I do not have the cashflow to support the process. Potentially a 2 year time frame.
Can you think of any strategy that will help me achieve my goal (replace my active income with a passive one in 15 years) which keeps my cashflow pressure very low? Or is what we have talked about pretty much it?
Would love to hear from others also who have walked the path?
PJ
Thanks grimnar for your time effort in discussing my questions with me. It is appreciated.
Your persepctives have all crossed my mind. I have created a few spreadsheets to help run the numbers in a realistic way.
What I am begining to see though, you can talk about different strategies until the cows come home. If you do not have the cashflow to service the debt a particular strategy will produce, then your options a limited.
The strategy that will win me over is the one that will allow me to quickly (within 12 months) reduce the initial debt loading on the IP purchase to about neautral gear. CG will take care of itself in the long run. Keeping it for the long run is the catch.
PJ
Thanks grimnar,
I appreciate the perspective and the brainstorming. It makes forums such as this worth while.
I will take a look at this angle as part of my thinking through how I should tackle property investment.
This will be my first time venturing into property investment and I do not want to storm down a path only to find I have wasted my time and money and need to start again.
Money I can get back. Time is gone forever!
If selling the battleaxe is difficult, should I be building on the subdivided land straight up and selling?
PJ
The strategy I am looking to adopt is to purchase quality properties with an existing house on a large land parcel. Subdivide the land solely for the purpose of generating cash to reduce the debt. Later on, I will renovate the house I retained to increase rental returns. I will not be building units on the subdivisions. No time or equity for that.
I do not make a riduculous salary so have no need to use property for -ve gearing. I am solely looking to control enough property for long enough to produce cashflow equal to what I am making in a 9-5 salary.
If the value of the remaining house and land has devalued less than what the sale of the subdivision has contributed to reducing the initial debt, then I am infront. I suspect the rental return on the remaining house will not be effected by much at all.
The goal in the begining is to remove the -ve gearing factor. This gives me maximum ability to retain the property and repeat the process. Do this 15 or 20 times. 15 years from now I sell the first bunch of properties and use the CG to pay off the remainder. Hopefully removing all debt on a small collection of IPs producing +ve cashflow.
Well, that's the idea!
PJ
It's a hard one!
I am looking for B&H properties I can value add to (mainly subdivide to reduce -ve gearing) and retain a portion for long term growth and eventually +ve cashflow as rents develop.
Suburb 'X' I mention above is mainly high end housing (PPOR) that have been designed to maximise their blocks of land. Suburb 'Y' which flanks it (acually closer to infrastructure) has larger blocks with older houses (20yrs +). The only difference is the current inhabitants.
I think I need to look a little more closely and see if (as 'fword' has suggested above) there are currently any developments happening in the area and in particular whether subdivision is happening and whether these blocks of land are selling.
I am willing to bet that these types of areas will change purely as a natural progression of population in and around infrastructure. What is fringe today will be inner-circle tommorrow.
PJ
Now I am puzzled?
In my scenario above (which is based on actual suburbs) suburb 'X' is further away from infrastructure than suburb 'Y'. That is. schools,shops,transport. They both enjoy coastal proximity (within 1km). Suburb 'Y' offers larger blocks and excellent opportunities to value add.
What we are saying is, location and structure of your rare piece of land is not the driving force of its value! It is the occupants who live there.
They determine whether the streets are well kept, no anti-social behaviour occurs and their homes are maintained. Or not!
Who cares if the suburb ticks all the boxes regarding location, valur add opportunities. If undesirables inhabit the suburb descent rent paying families will not what want to be amongst them. This will kill your investment short and long term.
Sorry if I sound a little harsh, but that is reality right?
PJ
Hi all,
I can see the opportunities in doing Reno's
It is the time that kills it for me. I work long and stressful hours just so that I can secure property and service -ve gearing.
What little time I have left is spent with my family and sleeping.
The numbers need to work without me being on the tools.
Mario
Hi all,
Thanks for the perspective.
I believe I have a clear vision of where I would like to be in 5,10 and 15 years from now and the reasons for these goals.
In investment terms, I have quantified these milestones, giving me a target.
Applying residential property to achieve these targets from my particular starting point and personal circumstances is what i am nutting out.
Although I have spoken to specific technichians (Account, Mortgage broker), bouncing my thoughts and scenario in detail with an experienced property investor who is already where I would like to be will confirm my thinking or offer insight into areas I have not thought of.
This will hopefully focus my efforts on what is realistically available to me based on my starting point and circumstances.
Should I be contacting Metropole to assist in formulating the big picture?
PJ
Would it be fair to say then, buying/developing cheap housing in new suburbs where these things (infrastructure etc) are being created would place at the ground floor when it comes CG?
I am pretty sure a house will never be as cheap (at least in Oz) as when it was first built. Wouldn't this effectively reduce your exposure in the long run?
PJ
I think that article is great news!
We are in a correction which means bargins are more realistic. Negotiating power of the investor has increased.
This is why I need to sort out what my game plan is. Specific to my present circumstances, my starting point and what I need to do to achieve my goal.
I need to sit down with a seasoned investor, lay out the pieces of my jigsaw and discuss which piece goes where and why.
Should I be sitting down with the likes of Metropole? who are this 'MyPortfolio' crowd currently hammering the radio waves at the moment ?(which raises alarm bells for me)
I have spoken to a few mortgage brokers and my accountant has been with me for a while. These guys I would expect have a narrow view on the process, specific to their expertise.
How should I handle the next stage in creating and understanding my game plan? BEFORE I jump in and start spending?
PJ
Thanks Terry for taking the time to explain this to me.
I appreciate the effort.
PJ
OK now I am confused.
My vocation is subject to litigation. Because of this my accountant has advised, any property I buy should be purchased under the umbrella of a family discretionary trust. The owner of the property is the name of the trust.
At present, I am the trustee of this trust with my family as beneficeries. That is to say the entity known as PJ.
I only became aware of using a further 'arms length' method of ensuring the trustee is a pty ltd company. The sole share holder being myself. This still gives me administrative control as trustee but with an added layer of protection.
If it is the company(trustee) that owns the property and not the trust, how does the trust hand out income to its beneficeries if it owns nothing?
I was under the impression the role of the trustee (company or not) is simply administrative.
PJ
Please excuse the ignorance. Everyone has to start somewhere.
