Well, I greatly respect Terry as a lawyer, but to be fair to me, 0 to 130 is not a text book on trusts.

Instead, it explains the concept of how I have used (and continue to use) a multi trust structure to leverage my personal borrowing capacity.

Everything written in the book is both factual, and accurate.

Oh, and for the record, NOTHING that Terry has said is at odds with what was outlined in the book.

– Steve
BA Bus (Acc), CA, 30+ years accounting experience, 20+ years investing experience, 1000+ property transactions, borrowed millions using multi-entity structures.

• This reply was modified 3 years, 11 months ago by  Steve McKnight.
• This reply was modified 3 years, 11 months ago by  Steve McKnight.

Sorry for the delay in replying…

Absolutely, positive or negative, the result is the result.

The -22% means that for every dollar invested in the deal (your cash down), you will need to find an extra 22 cents per annum to feed the deal and keep it alive.

Be aware that percentages are really for comparison, but as my friend Marty Ayles says, you bank dollars, not percentages.

With that in mind, the bigger question in my mind is where will the $46k needed to plug the hole come from?

Finally, be mindful that any deal with negative cashflow (that is not temproary, such as curing a vacancy), must be a growth deal. And to be effective, the investment’s unrealised growth must exceed realised cash outflow. And even if it is, it will be profitable on paper, and a cash crocodile in real life.

Hey mate,

This isn’t advice in any way, but some things to think about.

I’d start with thinking about whether you want to use the money for a home (lifestyle asset), or for return (investment asset). Seems to me that maybe you are looking for some stability given your circumstances? If so, maybe a home first?

If you want to invest, then you need a plan for where you’ll rent to live. If you have low income, then maybe some of that capital needs to be set aside as ’emergency money’, as once it is invested it may not be easy to get in a hurry. If so, how much of the money is for ‘at risk’ assets, and how much for ‘risk-free’?

Then you need to consider your borrowing ability. Without much income, you are probably going to struggle to borrow. That means you will need to invest using your capital, which won’t allow you to take advantage of leverage and hence you cash-on-cash return will be quite low.

Maybe a better option is some kind of listed REIT – one that offers return, diversification and internal leverage, that matches your risk profile. Do your homework. There are a few around.

Safe travels interstate!

Ha ha :-)

I must get around to writing an update to 0 to 130 one of these days too.

– Steve

Hello Alan. Welcome to the community.

You raise good questions, and I’ll do my best to try and help point out the issues.

But first, which option seems best to you? And why? Do you prefer profit potential (Option A), or convenience (Option B)?

At the start of my investing career, I would have gone with Option A all day long. Being an accountant, I would have been wooed by the return, and having more time than money, would not have minded the additional travel burden.

Now though, being somewhat older, and hopefully wiser, and with more money than time, I would gravitate to Option B – happy to earn less, but more easily.

But there may be even another option… properties even closer to home, which are income earners, but with more growth upside.

After many years, I have discovered that the cashflow gains made by purchasing in higher-income lower-growth areas tend to be less than the capital growth by purchasing in areas which have higher-growth, lower-income.

So, applying the above, my approach is to invest in residential for growth, and commercial for income.

And the McKnight mantra about which property to target? The one that will make you the most money, in the quickest time, for the least risk and lowest aggravation.

All the best,

Hey Scott,

Thanks for your post, and welcome to the forum. Thanks too for your encouraging words; I’m glad you liked the books.

It’s interesting to read through your logic. I agree you are in a good position, but to be honest I don’t like the idea of buying a 1Br anything. That is usually the bottom of the market – cheap to buy, cheap rent, cheap sales price.

What you seem to be doing is picking the investment first, and the profit second. I’d prefer to see you:

1. Work out the profit you want to earn (how much down, how much back, how much time, how much risk). I call this the ‘outputs’.

2. Work out the amount of money, time, risk and skill you have to contribute (I call this your ‘inputs’).

3. Find the property where the output is congruent (i.e. aligns) with the inputs.

Did you manage to join in the webinar I did last Saturday?

Bye,

– Steve

Hi there,

Some investors I know swear by NDIS, but in my opinion, any investment that is only ‘made good’ by tax incentives needs to be examined suspiciously. One of my rules is: don’t let the tax tail wag the investing dog.

Specifically in respect to NDIS, I wonder what impact the requirements may have on your ability to exit – to whom, and how much.

You can find out more about NDIS investing here:
https://www.ndis.gov.au/providers/housing-and-living-supports-and-services/housing/specialist-disability-accommodation/sda-provider-and-investor-brief

Bye,

• This reply was modified 4 years, 5 months ago by  Steve McKnight.

Worth a try Tony, and I wish you all the best. Sadly, I think I can hear the sound of silence from here though.

I wrote to my local member, Josh F – the Treasurer – about my concerns with the NCMCC, and his reply – more than a month later – was stock standard “refer to the legislation”. Slightly more than useless.

I think your better option is to lobby someone like the Property Council of Australia to take up the cause. They have professional lobbists and links into government. A petition is usually a ‘notice me’ alert, but doesn’t carry much weight as they tend to be fractous in nature rather than united.

It seems to be that governments have made property owners the sacrificial lambs to preserve tenants (voter base) and big business (donation base).

– Steve

G’day Pascoe2.

Yeah, this is one of the many, many, many complexities that the, IMHO, poorly thought out NCMCC has constructed.

Have you read what I wrote at the link below? There is also a very handy flow diagram I constructed at the same link.

https://www.propertyinvesting.com/covid19/

It seems to me the following principles would apply re: the option:

1. Leasing principle (LP) 2: The tenants needs to comply with the terms and conditions of the lease

2. LP12: Tenants given the opportunity of a rental extension equal to the waiver/deferral period

3. LP13: The rent has to be frozen.

Together with the above, you will need to consult with the state legislation as it may be more or less onerous than the NCMCC.

Now to praticalities…

Your current lease will have language about the timing and protocol of how/when the option has to be exercised. This will almost certainly be at the tenant’s instigation, so aside from alerting them, I wouldn’t do much else other than watch and wait. Perhaps their business is not viable, or they will seek to renegotiate the option, my point is, the ball is in their court more so yours.

Note: if they don’t extend, then the principles of the NCMCC still apply, so you might be ‘stuck’ with that – but remember they are points to negotiation, not law. The law is made at the state level, which is why you need to consult more closely with the legislation in your jurisdiction.

Some legal advice might be well worth the investment.

– Steve

P.S. You might also consider the merits of a letter say that you note the tenant has not yet exercised their option per the lease, and that if they don’t, your position is that the lease terminates on 15 July. That may prompt them into action.