Forum Replies Created
I've had a go at buying a few in SW Florida over the past few years.
Things seem a heck of a lot better now than my first visit in Nov 08. Prices are firmer and inventory is moving in days (sometimes hours) rather than weeks.
It will be interesting to see if the momentum can be sustained.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Margaret,
Thanks for the post. It's wise to seek referrals, especially when dealing in a foregin investment market.
I have not personally heard of either group. Perhaps if I could ask you a couple of questions:
a) What are you looking for (by way of service)?
b) What are you prepared to pay for it?I am not solicitoring business, just interested to hear your expectations. As you outline them, someone else may be able to help you with a recommendation.
Have a super day,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi and sorry for the delay in replying,
The team and PropertyInvesting.com and I have been working on a nationally recognised property investor training course for nearly three years now. It's been a heck of a journey, but I am pleased to say we have received the necessary ticks and will soon have a course ready to market.
So, please hang on for a month or so while I dot the i's and cross the t's. Those of you who signed up at Conference to be the 'Foundation Members'… we're still on track to get the material to you by the end of the month (July) as promised.
Sincerely,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Dan,
I think much of the budget pain is yet to be felt, but it will bite when electricity prices increase as welfare payments dip. It will be fascinating to see what happens with the carbon tax, and whether the government brings this in as the carrot to make amends for the welfare reductions.
You can see the political incentive… giving back what was taken away is still perceived as giving.
I agree that there weren't much visionary changes, which is why a lot of people are saying it is an uninspiring budget from a government in its first year. It's fair to say that the budgets in 2012 and 2013 are unlikely to be worse since Laor will want to remain in power.
Thanks for joining in the discussion.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Adam,
I'm sorry to read your account of financial deception. It's difficult to imagine the emotional journey you've been through, and are going through.
Sadly, I can't see an easy way out. If you sell for less than the mortgage value, you will need to arrange a loan with the lender to cover the shortfall. Assuming there is no other security to offer, the best you can hope for is a personal loan.
If you can, give me a call in the office during business hours and let's have a quick chat. 03 8892 3800.
– Stev
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
I notice in the news today that Buffett is noted as saying he has loaded his elephant gun and has an itchy trigger finger. Is it rabbit season, or duck season? Hang on a second, I'll go ask Elmer Fudd.
http://www.news.com.au/business/warren-buffett-ready-for-more-takeovers/story-e6frfm1i-1226012749416
It is interesting though that he believes that this year will be "possessing a general business climate somewhat better than that of 2010, but weaker than that of 2005 or 2006"
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi team,
It looks like this has been a very beneficial forum topic with lots of robust discussion.
In regards to sustainable / affordable housing, it may actually be a little too late for that. I can't see the situation changing while the taxation laws encourage investors to make a loss by investing in expensive housing.
Personally, I would like to see the tax laws changed so that tax offsets from -ve cashflow are capped to the income (to create a cashflow neutral position), and thereafter the excess losses need to be pooled and carried fwd to be offset against the capital gain on eventual sale.
Part of the problem causing price growth is the lack of supply, so this policy would take away the incentive of holding indefinitely, since the losses could only be accessed on sale. Furthermore, I think the idea of refinancing capital gains 'tax free' needs to be potentially reconsidered. That's a much bigger issue, but there are no easy answers.
I doubt either of these options would be politically attractive.
In summary, the government has a choice… affordable housing, or increased household wealth and happy voters. I'm not sure you can have both.
Cheers,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
I think 50% is a crash. 20% is still in 'serious' correction territory. Not sure if there is a technical definition.
In any event, a 20% fall would have serious consequences for our banking system and household balance sheets.
In Australia, people use lines of credit to tap their home equity like ATMs. That's okay, but only so long as values keep going up.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
G'day again team.
Sell up some stock? I'm always buying and selling, so I guess I'm doing both.
I want to reiterate a point though… it's because we think a property crash can't happen that it actually (a crash) can.
If we said 'okay – a property crash can happen if…', then that would be a much better dialogue than simply shutting our eyes and imagining that Aussies are somehow different.
In regards to the US, rents and prices both dropped. That said, I think rents and prices have firmed over the last six months. Too early to be sure, but we may have seen the bottom (or at least the bottom of this cycle down).
'ave a good weekend.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi team,
Nice to see the discussion about the book.
I guess it is still theoretical to buy 130 properties in 3.5 years. In fact, I am on track to do so buying in the States about 18 months ago.
But, the real questions is not the number of properties you own, but what the portfolio delivers. You may be able to achieve your investment objective owing 5 properties. Or 2. Or even 1 (think office building!).
Indeed, the premise of book is not about owning 130 properties. It is about looking at real estate a different way: cashflow rather than capital gains.
So, to answer your question… could a person on an average income in a full time job own 130 median priced Aussie properties in 3.5 years (based on 2011 values) – and contributing 20% deposits along the way. Yes – but not on a buy and hold basis. They would need to do something creative and have a team behind them. Also, it is unlikely they could all be held at once, but, then again, I never did.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for the discussion so far.
Be careful not to make this an 'Australian vs US' issue. It's not, and that's the point Buffett is making. No one saw it coming because there was no concept that it could happen.
We tell ourselves the same things in Australia and argue how and why we are different. The simple truth is that it could, but that until some event happens (which does not currently exist), in all likelihood it won't. Instead, the expectations of people will mean that property prices will keep going up.
Let me tell you a story of a situation that proved me awfully wrong. Driving home some years ago, it struck me that the stock market couldn't ever crash again. Why? Because each month there will billions of dollars that had to be placed 'in the market' via superannuation contributions. In other words, there was mandated government supply of new money into financial markets that had to keep flowing in, and so long as more money came in than went out, prices had to increase.
Clearly, I was wrong. But why? It's true that more money keeps coming in, but values dipped suddenly. This was not because of economic factors. It was because of psychological factors.
So the same point could be made for the property market. The economics of a housing shortage, strong Asian demand, etc. all point to a continued strong market. But… if people no longer perceive value, then it doesn't matter a cracker about the economics, prices will drop.
In many ways, that's the state of play with the Aussie market now. Without the psychological drivers in full force, values have stagnated.
I guess what I am saying is that the economics are used to justify the outcome, but because people are random rather than predictable, the future is anything but certain. That said, investors still need to piece all the variables together as best as possible in order to make informed decisions.
More food for thought…
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
I have been to Lehigh Acres on my trips to the US, and had a good look around.
I think the name says it all… 'acres' implies land, and lots of it – and so there is in Lehigh.
With the lack of scarcity, land prices are extremely low. No one is building on it either because falling property values mean that it is far cheaper to buy second hand than build new. There are also many foreclosures keeping a lid on prices (both short sales, REOs and mortgage foreclosures). It is doubtful whether there will be any capital growth in Lehigh in 2011.
So, as is often the case in real estate, there is opportunity… but you need to have the time, money and skill to access it. The opportunity is cash flow (rentals), flips, vendor finance etc.
I would NOT buy in Lehigh without going to see it first hand, nor would I buy unless I had my management team there to look over my investment.
To date I have bought (with my business partners) around 60 properties in the Ft Myers area. None of them are in Lehigh though.
– Steve
P.S. Further information on Lehigh at: http://en.wikipedia.org/wiki/Lehigh_Acres,_Florida
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi guys,
The point I am trying to make is that a developer with pre-sales will find the going smoother. That is s/he will be able to get finance and there is relatively little risk provide they know what they're doing.
On the other hand, speculating is going ahead with a development without finance or pre-sales. This is done in better markets because there is extra return.
What I'm saying is that:
a) When the market turns there will be comparatively fewer new developments coming on to the market that have not been presold, because by its nature, fewer are started earlier when times were tougher.
b) Because demand will exceed supply at that time (when the market improves), prices will be set to jump up rather than float up.
c) Once price moves, developers will be happy to take extra risk and so 18 or so months later, more supply hits the market.
So, the question we should be asking is… what was the market like 18 months ago. The answer is… coming into the GFC when finance dried up. Therefore, we do not have a supply glut coming on because it has been difficult to finance developments without presales since late 2008.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi guys,
The point I am trying to make is that a developer with pre-sales will find the going smoother. That is s/he will be able to get finance and there is relatively little risk provide they know what they're doing.
On the other hand, speculating is going ahead with a development without finance or pre-sales. This is done in better markets because there is extra return.
What I'm saying is that:
a) When the market turns there will be comparatively fewer new developments coming on to the market that have not been presold, because by its nature, fewer are started earlier when times were tougher.
b) Because demand will exceed supply at that time (when the market improves), prices will be set to jump up rather than float up.
c) Once price moves, developers will be happy to take extra risk and so 18 or so months later, more supply hits the market.
So, the question we should be asking is… what was the market like 18 months ago. The answer is… coming into the GFC when finance dried up. Therefore, we do not have a supply glut coming on because it has been difficult to finance developments without presales since late 2008.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Thanks for your post and welcome to the community.
No – the 1% rule assumes that you are leaving a 20% deposit.
Regards,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
I've written 14 emails to 250k members… one a week leading into April when I needed to refocus for the Conference. I will be returning to writing emails again from this week.
I agree that the dedicated forum is dragging its heals in a big way… but I promise it is still a priority.
In regards to mentoring, there was no promise made here… just a promise to write monthly emails to Club members, and I feel I have more than done that with my efforts to date.
Cheers,
– Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Okay… a couple of thoughts here about equity.
First… how is equity created?
You can create equity by:
1. You repay debt; and / or .
2. Values go upIf you get both then, as you'd expect, your equity will increase faster.
Second… how can you tap into equity?
In Australia, you can tap into your equity without triggering a CGT event. This is seen attractive as you can access (some of) your profit without paying tax on any capital appreciation.
That said, as with any borrowings, there is an up-side and a down-side. The up-side is extra leveraging, the down-side is increased credit risk.
How much equity should you access?
There is no hard and fast rule, except to say you shouldn't finance more than you can comfortably afford to repay.
With that in mind, even if a lender was happy to provide you with a 90%LVR, it may not be in your best interest to access / spend all of it.
In fact, in my opinion, remaining below 80% is more sustainable.
Finally, think carefully about what you use your refinaced equity to buy. If it is lifestyle related (as opposed to investment related) then the interest will not be tax deductible.
All the best,
– Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
You could seek to get the details of the council… I'm not sure if the rate payer roll is public record or not though.
If not, you can always do a title search. That will tell you the owner and a contact address.
All the best,
– Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Yep – the FL auctions are now over for 2010, but those 'sold back' to the county are available for over-the-counter purchase. I will be looking at them.
That said, other States have auctions in other months.
In regards to strategic 'hand back' mortgages, we talked about this at the event when covering the due diligence. In particular, the rule about the maximum amount of all outstanding tax liens being less than 40% of the value of the property.
That way, even if the home owner walks away, if there is a mortgage the lender will want to pay out the lienholder rather than losing their mortgage (which is presumably worth much more than the tax lien).
In fact, properties in this category make excellent liens to hold as they will likely go the distance and will only be redeemed once foreclosure is started. This way you get full value for return, are not kicking anyone out of their house, and will be ultimately repaid.
– Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Yeah… I can remember in the mid 1990's wondering how I could ever afford to buy a $200k house in Melbourne… Alas for those searching for a way to make it work now!
Look, the days of buying a home and working to pay off the mortgage are coming to an end… it's just not possible for your average person to do this as property prices are increasing faster than most people can save. Another model is needed.
In my opinion, this comes from doing reno type projects to build capital (or share trading, property options etc), and then using your profits to fund a bigger deposit on your PPOR so you can have a less humungous mortgage. In my case, I never bought the house but rented and invested in property with my deposit money instead.
Food for thought.
– Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
