Hi,

I imagine that this is a question that you need to ask your lender as all we would be doing is second guessing what s/he might say.

As for what to be aware of… it’s just like anywhere else in that you need to do your due diligence over:

1. The area
2. The property (numbers)
3. The property (structure)
4. The tenant

Cheers,

Steve McKnight

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Hi,

Never let hype stand in the way of good sense.

And… if everyone is fishing in one market, go and find another.

And… frenzy preceeds market correction.

Well, that’s what I think anyway.

Bye,

Steve McKnight

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Hi!

I’m back in the office for a day and then off to Mackay tomorrow for some R & R.

This is a very interesting post for a few reasons.

I actually believe making offers without seeing the property is not necessarily a bad thing, provided that you know what you are doing.

That is to say that there must be some due diligence over the property, which means an inspection by someone who knows what to look out for.

This may (and usually should) be a builder – however, once you’ve looked through a thousand or so properties then you get some idea of the danger signs yourself.

As for crazy prices… for +ve cashflow investors the yield is the most critical thing to review.

As for time… the less you do at the beginning the more you’ll have to do later when things go wrong.

If you are going to gamble… buy a lottery ticket. It’s a lot less expensive when you lose, and a lot more exciting when you win.

Happy investing!

Steve McKnight

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Greetings [8D]

Thanks for all your positive feedback.

I’m about to make a new post titled… “What the game was all about”. See: https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=1565

Hopefully this will clear up any confusion.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hey…

I might come along too… but only if you’re nice []!

Bye,

Steve McKnight

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Hi Polaris (and Insider),

I had a spare half hour so I thought I’d come online and answer a few posts. [:0)]

quote:

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Why would someone give me control of their property for 5 years ie. lease/option it to me. Make no cashflow out of the property other than my premium and unable to sell the property for another 5 years because of my option?

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In a lease-option there are two ways that you stand to make money as an investor.

Capital Gain

First you make (and lock in) a potential capital gain, which is the difference between your nett purchase price and the nett option exercise price you offer your client.

So, using Insider’s example of a $220k house, you might offer to sell it for say $250k on a lease option. This is the price struck at day one, and as such it doesn’t matter if the option is exercised day 1 or day 1,300 – the base remains $250k.

Positive Cashflow

The second way to make money in a lease-option is the positive cashflow arising when your rent received is greater than outgoings.

In the case of a $220k property, you’d probably be looking to receive about $330 – $360 per week as a rental in order to earn a decent positive cashflow return.

Limitations

The limitation in all this is the market rent. If the rents in the area you invest are say $250 per week, then trying to make paying $330 per week under a lease-option come out in a win-win way might be tough.

quote:

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You find house worth 220K.

You then not buy the house but LO it paying the owner a premium 2-5K and pay him payments each week. Now how is the vendor winning. If he doesn’t own the house he has negative cash-flow and doesn’t win as you have a 5 year option which cuts him out of the appreciation. If does own it he may only recieve 5-6% PA which is not a hole lot better then a bank account.

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The vendor ‘wins’ as such if s/he earns a +ve cashflow return. I agree, with a -ve cashflow outcome and a locked in capital appreciation, it makes no sense to use a lease-option in these circumstances.

That’s why it’s important to let the circumstances of the deal set the strategy that you adopt, rather than trying to adopt one strategy for all circumstances.

Has this helped?

Have a great night,

Steve McKnight

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Hi,

That sounds like about $130k more than we had when Dave and I started!

Bye,

Steve McKnight

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Ah,

Welcome to the problem of trying to organise finance. It has been a consstant source of frustration for me that financiers tell you one thing and end up doing something different at the 11th hour.

I can’t give you a recommendation as such, as I think that any lender will have trouble will stuggle inside one week (they need to get loan docs signed etc.).

As such, I’d be tempted to go with the I/O variable loan (the interest should be cheaper than it’s fixed cousin), but on the basis of understanding the payout costs should I refinance at a later date when you have more time up your sleeve.

That will mean you can still setlle on time but can also refinance later with hopefully no/low penalities.

Also – make sure your broker refunds any application costs for stuffing you around.

Good luck,

Steve McKnight

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Hi,

What you wrote about your astrologer is one of the funniest things I’ve read all year [].

I am a little concerned that you are looking for a magic answer that means you can continue to live your life as you know it now and end up rich.

Let me be clear – that is about as realistic as believing the Seekers will have another #1 hit.

It’s disappointing that while you seem open to the idea of creative options, you’ve asked two people and now seem to think the idea is destined for the bin.

Whatever your approach this much is certain, unless you control your spending then you’re in BIG trouble. You’ve lived off your equity and when inevitability hits you will be in poor financial shape.

Your journey will need to begin with either spending less so that you income matches your salary, or alternative earning more.

But it’s a huge mistake to use investment income to fund the gap because you are not addressing the real problem. As I wrote in my book… that’s a band aid solution to a massive haemorrhage.

If you haven’t yet understood what I’m writing… the lifestyle you have now is probably the lifestyle you’d like if you were financially independent – yet you are living on borrowed time.

If you want to get out of the rat race in three years, then make a plan rather than looking for a quick fix or magic solution.

Bye,

Steve McKnight

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Hmmm…

I’ve never been to his seminar but I’ve heard enough on the radio to know this guy flogs -ve geared property to the masses.

quote:

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He accesses your financial situation and work out a strategy for you to go into Negative Gearing properties.

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…and probab;ly earns a commission for doing so off the developer, financial institution, insurance coy etc.

As such, it’s not something I’m interested in.

Bye,

Steve McKnight

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