Forum Replies Created
Hi,
It’s time to attack the fatal flaw… I’d be offering a discount on the price for a few thousand to cover professional cleaning, new carpets and a repaint.
In the meantime, I’d be pointing out what a great tenant this person was and while we may have problems with the condition of the property, if it isn’t bothering him then it shouldn’t bother us.
Serious investors shouldn’t be too worried about such issues as they will see the opportunity rather than the problem in this situation (afterall, I buy houses for other people to live in which means after the clean up it should be fine). Convincing a home owner may be a different matter.
Finally, I’d be having a serious word to your rental manager and asking why this issue has never been brought to your attention and seeking a discount off the rental fee to keep the business with them in the future.
Best regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Interesting post – thanks for making it.
It raises the issue about what is the best way to create money, through a job or other means.
Personally, I see taking a job as the easy way out as it trades time for money. Yes, the reality is that we all need money to live and have to trade some time for money, but the key is to try and think to create wealth rather than working to create wealth.
For example, time is an investors most precious asset, and if you want to be a property investor but are too tired after working two jobs then you may have more money but not have the time or energy to achieve your goals.
Also, the pizza delivery job – that’s great for Uni goers, but if you work out the true cost of driving around (wear and tear on your car) and then calculate how much per hour your time is worth… there has to be a better way.
Still, it’s a personal decision and as such there is no right or wrong answer.
Nevertheless, success comes from doing things differently so I’d be encouraging you to look for other investing ways to create wealth rather than trading time for money.
Good luck with your decision.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
An option you may like to consider is buying the property ‘and/or nominee’. The rules are different in each state, but, if you want to buy in your husband’s name, then you buy as Mrs. Smith And/Or Nominee’ and then you are allowed a certain period of time to substitute your husband without paying double stamp duty.
It is essential for you to obtain legal advice though as the rules are different in each state and the timing is critical.
Failing that, yes, you could think about using another entity or even getting a power of attorney. Again, legal advice will be needed.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Sorry guys. No plans for a repeat Perth Masterclass any time soon, and I doubt there will be one in 2006 either.
You best bet would be to use the discount code in the back of the second book to reduce the price to $495 and then use the savings to pay for the airfare cost.
Otherwise, I am now scoping out a formal mentoring program which should be due for release later on in the year. I don’t have much information about it as yet, so stay tuned to the newsletters for more information. This would be a pay-for-service arrangement though rather than a second MAP.
Regards,
– Steve McKnight
P.S. If you did want to get over for the Melbourne MasterClass then be quick as there is only about 8 seats left.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Yes, it is true that we recently bought a large amount of real estate in the US.
Some more information to the story is as follows:
1. We bought it as a joint venture with another investor, so there are two parties (Dave and me as one party and the other person as the second party). A joint venture was needed to solve the finance issue as we saw ut as the best way to get started in the US.
2. It was Dave more so than me that has the US experience in that he has been over there a few times in the recent past to set up the business, inspect properties, meet financiers etc.
3. The property is positive cashflow. Values up to $60,000 that rent for around $150+ per week. Most of the dwellings are multi-family properties and therefore have more than one income stream.
4. We have ventured into the States as part of a strategy to identify high yielding properties. Naturally, when you invest overseas there are many issues to consider and I am in the process of writing an article about these issues. The biggest issue to solve is finance.
I hope this has helped to provide more information.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
A free seminar can be an excellent way to start your property investing as the information is usually okay but it’s the bending of the facts to suit a sales purpose that is questionable.
You can protect yourself against this by identifying the key assumption(s) in the financial model presented and then asking yourself how likely is it that those assumptions will be achieved.
For example, assumptions are normally made in respect to:
1. Your ability to borrow and usually at 100% (i.e. you have equity to secure against)
2. Interest rates may be low as the finance can be arranged via a back door. Watch out for this as there may be a commission paid back to the developer. That is, you may be able to get a better deal shopping around.
3. Certain rents can be achieved (usually best case scenario)
4. Low rental vacancy periods
5. The strength of a rental guarantee
6. Capital gains forecasts (about property doubling every X or Y years)
7. Depreciation expectations
8. Tax savings based on highest tax rate, which now kicks in at a much higher level.That’s a start anyway. Good luck with it.
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
The REIA has data for sale that may meet your needs.
See: http://www.reia.com.au (I think it is in the publications area)
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Dale,
Thanks for your contribution, and to others too for sharing their ideas.
The purpose of my newsletter was not saying ‘don’t do it’, but rather, if you do then you need to know the nature of the investment and specifically, the dangers that aren’t always properly explained.
Thanks for your input too Rob. I’m sorry you wouldn’t rate it as one of my better newsletter efforts, but the goal was to get people thinking so hopefully it does that.
Thanks again for everyone’s input, especially Wizardfromoz for his/her alternative view.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Sure,
I use Mark Unwin. You can get his details from http://www.wp.com.au
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Stargazer,
Thanks for your post. I have quickly run your details into Investment Detective on the following basis:
Purchase Price: $200k
Closing Costs: $10k
Loan: $21k @ 7% P&I over 30 years
Rent: $290 p/week (no vacancy)
Rental management: 8%
Rates: $1k
Insurance: $300
Repairs: $500On these assumptions, the software has come back with:
> A gross return of 7.18%
> Budgeted cashflow loss of $4,691.96 p.a.Therefore, this property is better placed for a growth focus rather than a cashflow return. This is particularly true given you are doing 100% financing.
Interesting, if you put down a 20% cash deposit then the negative cashflow remains, but it falls to a shade under $1,500 per annum. Changing the repayment basis to interest only will result in a positive cashflow outcome.
The great power of Investment Detective is that it took me less than 5 mins to do these calcs and what-ifs. Beats mucking around with a financial caluclator. It doesn’t factor in your personal tax situation though.
Have a great day!
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Thanks to everyone who has contributed ideas thus far.
You know, I have had something of a revelation about my newsletters in the last week. It seems I have gradually become more focussed on the theory and have sacrificed the practical stories that used to be such a feature.
So, one change that you’ll see is a return to some practical tips and insights that have come from ‘the field’ of investing.
Naturally, I’ll also take on board all your valuable and much appreciated suggestions.
Please keep your ideas coming in! Thanks heaps!
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
That’s a lot of !!!!!… you must need some serious help [biggrin]
The decision to keep vs. sell is always hard, but here are some issues to think through.
1. Personal vs. Investment?
How emotionally attached to your Ballarat apartment are you? That is, do you plan to move back there on day, or, at the other extreme, is it only about what return you can achieve?
For example, you may like to keep the apartment if you have a child who may like to live there while studying…???…
2. What can you do with the money?
It is a relatively emotionless exercise to work through what is the best financial decision as you can compare the result of one outcome against another. For example, you may find that you earn a good return using your after-tax investment profits to pay down your personal mortgage on your Melbourne apartment due to the impact of pre-tax and after tax dollars.
Seek the help of a professional accountant if you aren’t sure what to do.
3. Tax consequences
There could be some reasonably complicated tax issues associated with selling a home that has been previously rented out, so, before you enter this realm, it would be wise to seek some advance-tax planning advise about your options.
Well, that’s a few points to note to get you started. Does anyone else have words of wisdom to add?
Thanks for your post and have a great day.
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi there Cabo Wabo,
Welcome to the forum and thanks for your post!
What you’ve outlined is commonly known as buying wholesale, that is, (usually) before an agent is engaged and a commission payable. The reverse side of things, where the vendor sells privately, is called ‘For Sale By Owner’ (FSBO).
I have tried this in the past to mixed success. My first point would be to suggest being careful about the wording you use as my attempt nearly had me being sued for defamation by the local real estate agents who thought my words about avoiding agent’s commission were a little strong.
Another knock-out factor in my case was the increasingly hot r/e market. I mean, why would someone sell to me for < market price when properties were selling themselves for top dollar?
The way around this problem is not to focus on what you can’t do, but to instead focus on what you can do. For exmaple, you may be able to settle very fast, provide a higher deposit etc. In business terms, what is your sustainable competitive advantage?
The masters of the system that you are seeking to adopt are without doubt based in the US. Do a search in google for ‘We Buy Houses’ and get some ideas from the wording on other sites.
Finally, a good book I can recommend is from Ron Le Grand. It seems the latest version looks like this. You will probably need to pick it up from Amazon.
Hope this has helped!
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Ron,
Sorry – today has been a busy one for me.
When evaluating the numbers I work through four questions:
1. How much down
2. How much back
3. How much risk
4. For how longAs many people know, I am not so much a capital gains investor as I am a cashflow investor. Nevertheless, by working through these numbers you can work out how much you need each year in capital gains to make your invetsment profitable.
Let’s take a look at the numbers then (Qns 1 & 2 of the 4 above).
How much down
Purchase Price: $80k
Deposit (say 20%): $16k
Closing Costs (say 5%): $4kCash Needed: $20k
How Much Back
Rent: $6,500
Interest (assume 7% IO): ($4,480)
Rates: ($!,100)
Management: ?
Body Corporate: ?
Repairs: ?
Insurance: ?
Other: ?Cashback: ?
I can’t tell based on your info, but it is likely to be negative cashflow.
Growth Prospects
You mention that the prospects for capital growth are minimal based on location so I’ll take your word. But you need to look at what is unique about this property as poorly located deals can still appreciate in value if there is an element of scarcity about some of the features.
Also, you need to consider the opportunity cost of what your $20k would earn (i.e. deposit and closing costs) should you just leave it in the bank. If we assume 5%, then the positive cashflow (or capital gains) would have to be more than $1,000 per annum for the investment to make sense.
I hope this has helped but by all means ask questions.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Perhaps if you could provide some sketchy numbers I could help you with the analysis. Things such as purchase price, likely rent, likely costs etc. The more you can give me the less I have to assume and the more accurate your answer will be.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Even with some softening of the property market, it is still very hard to buy positive cashflow residential property in a major regional or metro area of Australia.
Therefore, the name of the game is to think value-add. For example, buying a property, sub-dividing the back and then selling it and using the profits to pay down the front dwelling making it positive cashflow.
Of course, there are many thoughtful ways of creating the outcome that you desire. Scan the forums here as there have been some great ideas over the recent months.
Just be careful about properties that are +ve cashflow because of tax/depreciation adjustments. Be extra cautious to properly crunch the numbers to ensure you know what you are getting yourself in for. The danger is that you buy a property that requires that you earn an income to soak up the tax losses which therefore requires you to work harder.
Thanks for your post.
Best wishes,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
I think the best research is done on the ground rather than on the internet.
By that I mean that it can be useful to look at postcode profiles to gain a basic understanding of an area, but beyond this the best research is done in person on the ground.
For example, recently Dave and I have begun investing in the US (little cheap houses that are high yielding). However, before we invested $1 we decided to go and have a look for ourselves as we knew that the house advertised on the internet may look good at first glance, but you can’t see the other houses around it nor gain a feel for the area.
Sure, later down the track you can form a system to buy property sight-unseen, but in the meantime be sure to invest time and money gaining an accurate feel for an area by pounding the pavements.
Thanks for your post and all the best with your investing!
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
A $2 company is one with little capital (i.e. $2). It is done this way so that there is very few assets to sue for in the event of legal action.
That’s why trustee companies are usually asset-bare, as accountants use this ploy to maximise asset protection.
Dave, you may like to look at a video I recorded yesterday which gives some more information about structuring. You can view it for free at: http://www.propertyinvesting.com/resources/11.html
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Luke,
Thanks for your post. I am regularly asked to what extent I use research services, so I’m sure your question is a common one.
Personally, I think that research can be beneficial to gain a context for an area. In particular, to gain a snapshot of the demographics and to then compare it to recent trends.
For example, factors I do pay attention to include:
1. Population movements in that I look to invest in areas with increasing population as this adds to housing pressure (i.e. capital appreciation)
2. Rental vacancies / statistics… what I’m looking for is how much rental demand there is in the area. This data can be found from the REIA (for a fee) or by doing some on the ground research by going into real estate agent’s offices and looking at how many properties are currently for rent.
What I do not pay much attention to is what a potential property sold for several years ago as I see this as largely irrelevant. If you think you can make money then that’s the important issue, not what the previous purchaser bought it for in a different market.
The danger in all this is to avoid, at all costs, analysis-paralysis as this will only lead to confusion and difficulty in pulling the investment trigger.
I’d be interested to know what data do you look at and how you use the information you collect.
Have a great day.
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Michael,
Your point is well made in that there are advantages and disadvantages of using equity.
My experience is that the advantages are often given without a full explaination of the risks, hence the newsletter. Also discussed is the deductibility of interest payments in general.
Maximus, how much money is needed for retirement is a matter for each person depending on their planned lifestyle costs and age when they want to retire.
A helpful analysis is provided at this link.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
