Hi,

I think that Wright Books put out a book about buying commercial property recently. I heard it was quite good too.

After some research at Wright Books…

quote:

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How Investing in Commercial Property Really Works
By Martin Roth
0 701638087 Price: $34.95

Studies have also shown that commercial property investments often perform well when other asset classes are weak. Well, the stock market is at a four year low, there are fears that residential property prices may have peaked, and with a range of new investment opportunities, the spotlight has moved onto the numerous benefits of commercial property. These attractions include high yields – generally far higher than for residential property or the stock market, security of income, tax benefits and the chance of capital gain.

Best-selling finance journalist and author of Top Stocks 2003, Martin Roth has exhaustively researched this area of investment and his findings are written up in this comprehensive new book.

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As for my tips… commercial is all about yield in comparison to tenant risk. A 10% return isn’t that hard, but you want to make sure you get a quality long-term tenant as commercial is usually harder to relet.

Watch out for GST too… it is applicable to commercial but not (as a rule) residential.

Perhaps I’ll try to cover this in an upcoming newsletter.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi Pin,

No – I don’t want to open it as:

1. I want to show respect for Richmond’s decision to lock it; and
2. It contained discussion which is now redundant.

Still, your and Mini’s discussion remains relevant and as such, I have copied and pasted her post below for you to reply to (I hope this is adequate):

quote:

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hey pin,

in reply to –
“Also the thing with +ve geared properties they ONLY put something like $1,000. PER ANNUM in your pocket. (i.e. peanuts.) WHY?? because this is eaten up so fast by EXTRA expenses that you forgot to put into the equation.”

I agree you probably shouldn’t just rush out and buy property if you ‘forgot’ about strata fees, property management fees, mortgage application costs, mortgage insurance, loan repayments, closing costs, maintenance costs, insurance, rates, vacancy rates, letting fees, or any other expense to do with buying or owning a property. All that calculation stuff is the kind of thing I learned at the seminar I went to with Steve,
(I actually went twice just to cement some stuff!) along with the ability to work out what that all means in terms of the bottom line.

Yes, the yearly surplus might not be large if you are (like me) buying ‘baby-deal’ properties around the 30K mark which rent for 115 per week. but the important thing is that there IS a surplus. And the yearly surplus is the bit that makes me feel secure that i won’t have to put any money into that house – I have a buffer. it’s also the thing that means that i can start looking for another property straight away ….and then keep on going. As the years go by the repayments seem less in relation to the rent – which goes up each year. The property manager should ensure that you have regular rent -increases which at least are in line with inflation.

After analysing a good many deals this year, three of which i bought, I’m at the point where i’m pretty bloody confident that I know what I’m doing numbers-wise (PS – I had to be – my Dad is an accountant and initially was not convinced…until i showed him the numbers!!!) – and I’ve built enough buffer into my calculations to allow for rising interest rates – which also means I’m going to keep my borrowing to a point where I am comfortable. This means I will keep more equity in the deal than a lot of people would. I am happy to go a bit slower in order to be a bit safer. but that’s just me. Also I am freelance so the ‘not digging in to earned income’ thing is quite important to me.

So I agree that the numbers aren’t big on the small deals but like when you play Robert kiyosaki ‘cashflow’, you start with a bunch of small deals that increase your cashflow, and over time, you can ‘get there’ by just doing lots of small deals, or you can eventually move into the bigger deals. either way it has a cumulative effect and the principal of the thing means you can replicate it. with no loss of lifestyle (other than the time taken to set up the deals, which i am in no way underestimating! However now they are set up, all I do is check my bank statements!!

>For Steve this is a completely different story. He has the >money and the backing. I am thinking about your average >Mum and Dad here, who don’t know what they are getting >into to. “

Steve didn’t have the money when he started. Didn’t you read the book? Read it! You’ll never guess where they got finance when they were starting out!!! The ‘zero’ in the title of his book means none, zip, zilch. They had NO properties when they started and 130 3.5 years later. They didn’t start with any backing, other than finance.

As far as the average mum and dad, they probably spend 105 percent of what they earn. ( I read that somewhere. that’s what the average Aussie does. Scary or what?? Credit cards are a growing sector….) They probably own their own home. Negatively geared of course, because own homes always are.

You won’t see them here.

The UN-average people are the ones who learned to spend less than they earn, eliminate consumer debt, and maybe think about investing the surplus. That is SOOO not average. The average in debt to the eyeballs Aussie mum and dad take the kids on holiday if they have a bit to spare (read: room on the credit card.) That’s why only 8 percent of people that own property own an investment property. And only 6 percent of THEM own three or more. That’s 0.5 percent of property investors. Not the average mum and dad, for sure. Why can’t there be more? Because negative gearing is so prevalent.
Because most people want to invest in their own homw first, because of many emotional (amongst other) reasons. because properties that will be cashflow positive are a bit thin on the ground. because a lot of people are way out of their comfort zone buying outside where they live. because most couldn’t be bothered to learn to understand it anyway.

A lot of my friends and family are impressed/bedazzled/confused/overwhelmed/challenged with what i’m doing with property. Most are interested enough to have me explain it. Some have borrowed my CD sets or bought the book. Fewer have read it. But a couple of friends
who borrowed the CD set, listened to it, made their partner listen to it, rang me up lots and asked me stuff, looked for deals, analysed them with me, and made offers have now bought cashflow positive properties….they are not average people though….

cheers-
Mini

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Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

The good thing about the forum is you can always go back and edit or delete what you say and change the official record.

That way you can feel just like a politician and having the chance to edit what you said after saying it but before it is entered into Hansard.

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi Ben,

I’m not making any promises.

Let’s finish what’s been started and reassess.

Still, I can say that it will those that have attended seminars and contribute on this forum that have the best chance of being selected IF I do anything in the future.

Interesting… some people have said they’d do anything to be mentored. Anything? Well, we have said to quite a few that attending the eminar would be a great platform to launch your success and have a chance to network with our organisation.

“How much?”, they ask.

“$1,190.”

Oh, no… I don’t want to pay that.

Ah, then you won’t do anything will you?

I’m not saying that being at the seminar is the be all and end all. But, if you want to network with Dave, me and some of my closest friends and advisers (who regularly attend as my guests)… then you’ll need to come along.

I definitely subscribe to the theory that hanging around successful people rubs off. And trust me… I’ve paid a lot of money to learn and hang around successful people!

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

In the book I mentioned that time rich but money poor people can look to do JVs and share the profits.

Or else you can sell the deal to another investor, cash up and then buy your own property next time around.

In your case, start slow. Look to buy say 2 properties per annum at the beginning while you find your feet.

Terry raises some good points, but just be sure about your risk profile before doing 90%+ LVR loans. Too many may leave you open to credit risk (ie. a rise in r/i).

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

This reminds me of the old accounting joke.

There is an economist, engineer and accountant all going for a job. They are all worthy applicants.

The interviewer asks the same question of all three… “what is two plus two”.

The engineer thinks and replies “Well, the answer to 2.00000 + 2.00000 = 4.00000.”

The economist thinks and replies “Well, assuming that inflation and taxation are nil, the answer is 4.0.”

The accountant smiles, winks and says “I can make it equal whatever you want.”

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

Thanks for taking the time to write this.

It just goes to show that at least some (and perhaps most!) of the techniques that worked 3 years still work today.

Good luck with the rental.

Perhaps you can now get the word around the Cop Shop and see if some coppers want to share a property that’s local to the station too!

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi Peter,

Thanks for your post and welcome to the forum community.

Re: /2 and * 1000… this is just the equation that always results in a 10.4% return.

Re: Interest…

Purchase Price = $250,000
Loan @ 70% = $175,000.
Interest on loan @ 8% p.a. = $14,000

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

Not that I know of… I pay my rental managers out of my cashflow profits.

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
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