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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Remember that success comes from doing things differently.
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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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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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OK….

The verdict is in.

I went to the Peter Flanagan event (promoted by Break Free) this afternoon.

The quick answer is that it was well worth what I paid to attend… which was nothing.

Now, the first read of that comment might seem to indicate that I am being negative.

This is not the case. In fact I would recommend attending his free intro on the basis that if you walk away with one good idea then it has been worth the time investment.

Peter’s information is good, although it is unashamedly a preview of a 3-day event that costs a shade under $3,000 per person to attend + airfare and accommodation to the Sunshine Coast.

More Details

Peter is a guy that’s larger than life and was comfortable cracking a few jokes about his weight. He left school at age 15 to get a labouring job that paid next to nicks. He later returned to TAFE and then became a psychologist with his own practice.

At 35 years of age he woke up one morning, realised he was broke and then starting investing in property.

His first deal he bought at 30% below value and then lease optioned it back to the vendor who remains in the property to this very day.

Now he and his wife pocket $200k each per annum from their property business. They live on 37 acres in outer Melbourne.

Peter mentioned that he is not speaking for the money, which is always a cliche as if this was the case you would offer the big seminar for ‘cost’, which would be significantly less.

I’d just prefer presenters to be honest. For example, I run seminars to make money as another source of income to fund property acquisitions. Let’s just call a spade a spade and move on.

All up the seminar contained some good info. His ‘Pyramid of Success’ was worth attending for. Although if you want specifics then you’ll go home disappointed.

Some interesting stats were raised:

50% of retirees will live on less than 33% of their pre-retirement income (PRI)
43% will live on b/w 33% – 53% of their PRI
6% will live on b/w 53% – 99% of their PRI
1% will live on 100%+ of their PRI

As far as negatives… the presentation went on for about 1/2 an hour too long, the presenter tended to shout a little bit and some of the claims were a nonsense… such as “I’ve done all the (property investing) courses” and I charge $1,500 per hour for private consulting.

Overall though, invest the time but weigh up the cost vs. the benefit of attending the seminar.

Bye,

Steve McKnight

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