Hi,

Thanks for your encouraging post.

At 8:41pm I’m feeling like I’m back working in my accounting career as I busily (with my trusty team of Alister, Brent and Eugene) continue to build the new PropertyInvesting.com website.

Nevertheless, reading your post has provided the inspiration to keep going for a few more hours.

You’re right about the taking action comment. Sadly many particiapnts have already allowed the momentum to pass and are back to trying to turn a profit from share trading, having given up on ever finding a +vely geared property (see the post about the 11 sec. solution).

But not you. Congratulations.

Sincerely,

Steve McKnight

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

Thanks for your post and welcome to the PropertyInvesting.com community.

Some comments that I’d make are:

1. Understand the market. Before getting down to business make sure you ring around several r/e firms to gauge what the high and low range is for commissions.

2. Consider the true cost. All agents I know also charge on-costs in addition to commission, either in the form of a marketing levy (for Jenman agents) or specific marketing / advertsing costs (for other agents). Be sure you know what you’re in for b4 you sign.

3. Exclusive listing agreements. You will be asked to sign an exclusive listing agreement that gives the agent sole responsibility for selling the property. I wouldn’t lock in for more than 45 days.

4. Price or service? Personally, I’m happy to pay more for service rather than going for the cheapest option. So what I’d be careful to observe and certainly find out information on is how the various agents plan to market your property. In other words… you want to know who is going set the best strategy to get you the best price.

5. Always Negotiate Everything is negotiable… and while you negotiate observe how your agent reacts / haggles since this is the way that they will act with potential buyers.

I hope this has helped Bruce… pls get back and tell me how you went.

Cheers

Steve McKnight

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

I’ve read the posts here and agree totally with what’s written.

I’d add that in property the way to make money is to match a problem with a solution.

In your case you’d want to make sure that your client could afford the repayments based on a win-win financial model.

If this is a problem then maybe you could lease-option it to them???

Hey… this is starting to sound like what we covered on the week-end [].

Have a great day and keep asking questions.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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Hi Sooshie…

From where I stood I thought that the Sydney seminar was fantastic… and quite different from the Melbourne one too. Different crowd… different dynamics… different focus.

All was going well until I was hit with a migraine on the Saturday morning []. Luckily I was spared a real nasty version and was only K.O’ed for about 4 hours.

Still… I was quite lucky as I finished up my presentation just in time to spend nearly an hour in the toilets being sick.

But I was back for the afternoon session and by Sunday morning I had 2 days of energy to unleash.

Now as for your post… well I’d have to say that it is a pity to see fantastic heritage building’s fall to modern development, however I would also say that “investing” is a lot different to “owning”.

You also want to be careful about emotion when it comes to property investing. And besides… there are authorities at local, State and Federal government who are charged with the responsibility on ensuring appropriate development and retaining our history.

You ask:

quote:

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Is it still worth doing from an investment point of view?

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Well… I’d have to say (as always) that it depends on the numbers.

All property deals (rather than just wraps) can be win-win when done for the right reasons. It’s true that money is just one of a number of factors to consider when investing… BUT… it’s one of the bigger concerns.

Bye

Steve McKnight

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Remember that success comes from doing things differently.
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Lance,

I was in the hotel room after the seminar reading the feedback forms and read with interest that one of the insights you wrote was that you wanted to broaden your strategy from just wraps and also purchase some buy and hold.

Well, no one can call you a tyre kicker! And I’d have to say that your place in “one of the fifteen” has been cemented by your action.

It’s most rewarding to see participants take the information offered at the seminar and then use it to make money.

You’re right… action is the key. And this is just the start!

Congrats and thank-you for your feedback.

Bye

Steve McKnight

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Remember that success comes from doing things differently.

AND

If it’s meant to be, then it’s up to me!
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Hi,

Just a word to clear up the confusion re: the video.

When we did the Wrap Library we did it in two releases.

Version one came with Video and audio (CD and Tape)
Version two came with audio (CD) only

We made the change for two reasons:

Reason #1: The cost of packaging with videos was very high and the caddies that we used were difficult to store easily.

Reason #2: People seem to want the audio more than the video.

Sadly all of the first versions have sold out making them somewhat of a collector’s set. Never thought I’d say that about something I created.

Regards,

Steve McKnight

P.S. As for the numbers… I agree with Darren. Don’t get too hung up about the 11 sec. solution. This is just a filtering tool and not a law unto itself. I’d be asking how you can get a better return from deals close to the line. And that’s what the Master’s seminar is all about.

Hi Wendy,

Thanks for your post… although it seems to bit hard to read.

But let’s break it down into components…

quote:

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Basically an investor would L/O a prop from selling party, request a delayed down, (if any)with a SPM in 5-10 years or small payments plus a balloon at the end, and then L/O the house to another party and then turn around and sell the mortgage payments at a discount to generate the down payment plus pocket cash.

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Step One

In your model above you would act as a lease option client. That is, instead of being the investor at this point you’d be the client. You need to find someone who offers a lease option system within the parameters that you’d make money. This may or may not be easy depending on the market in your area.

I understand that things in the US will be more advanced than here in Australia, so you’ll need to decide how viable this would be.

Step Two

Once you’ve found an investor who’ll provide you with the lease option service then you need to negotiate the terms. Getting a low-down deal and asking for small payments (SPM = single payment mortgage but I’m not sure how these work) protects your cash / equity input which will allow you to do multiple deals or get started without a lot of money to begin with.

Step Three

The next step is to onsell your lease option to another party on more profitable terms to what you have negotiated. By doing this you create your profit margin for acting as a broker in the deal. This is very similar to a wrap situation in that you effectively leverage from your reputation. That is, you will have to make the repayment even if your client does not… so by underwriting their risk you make a profit.

So far so good, although it is a little complicated and you’ll need to find a market of people who will buy at inflated terms rather than deal with the original investor to begin with.

Step Four

OK, here’s where it gets a bit tricky. Once you’ve got the deal to this point you look to sell the mortgage payments at a discount. Well, my first question is that in a lease option here in Australia there is no mortgage… just a residential lease with an option to buy. Perhaps things are different in the US?

But let’s assume that with the lease option model you’re talking about there is a mortgage. In fact ther would need to be two mortgages… one for you (in the original lease option) and one for the person you onsell to.

In step four you look to sell your interest in the deal for a profit. This is essentially being cashed out and given that the notes market in the US is well developed I’m sure there are people out there whop would buy such a thing.

The discount relates to the difference between the price you receive now and the present value of the future interest payments in the mortgage.

Other Questions…

Is this right and can you do it? I don’t know as I don’t know the market. But if I can understand it then I’m sure that it can be done (subject to legal restrictions).

I don’t want to discourage you from trying, but to me it sounds a little complicated so unless I could source and buy a pre-existing system for this, then I’d be reluctant to pioneer it.

Still, you must have heard of the concept from somewhere so it would be sensible to follow through and see where you end up.

If you can I’d like you to outline two things for me…

1. How a single payment mortgage works; and
2. Why you need a mortgage (other than what the investor would need to acquire the property to begin with) in the lease option model you mention here.

Finding out these two bits of information will be critical to analysing the proposal further.

Please make a reply post with this information so we can discuss it further.

Thanks

Steve McKnight

Hi Davlyn,

Welcome to the Property Investing.com community and thank-you for your post.

In respect to your questions…

Q1 – Banks and wrapping

You’d have to ask the bank yourself, although I suspect that since I started my wrap empire the dynamics have changed. One of the big banks lent me $0.5m and then changed their policy once I’d maxed out.

Nevertheless there are lenders out there who will source and write vendor finance loans on a full disclosure basis. You just have to find them.

The loan market is such that all tastes are catered for. Just because a big bank does / does not offer a certain type of facility isn’t sufficient to make a judgement on its legitimacy since banks are very anal when it comes to actually ever taking a risk.

Q2- Case study

Wow that’s quite a lot of info in one small paragraph. I’m happy to provide my opinion, but before I do I’d like to see you try to work out what you would think might happen and what you can do to steer the outcome in the direction that you want.

Just make a reply to this post and I’ll get back to you soon.

Regards,

Steve McKnight

Hi,

I’m not sure about the tenants in common issue and being deemed to have an equal interest. This seems a little bit odd to me as just recently I inspected a property here in Victoria where the title showed three tenants in common with a 60:20:20 split.

This seems to be confirmed by a NSW specific web site I found when doing a search which says:

quote:

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as “tenants in common”. This doesn’t mean that you are tenants, it means that you each own a certain percentage of the property (usually 50%) and you can deal with your percentage however you want to.

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Still – it would be wise to get some legal advice on this before making a final conclusion.

Now as to superannuation funds. It is true that Superannuation Funds cannot borrow, which generally makes them an unattractive vehicle in which to buy direct property since the cash on cash returns are so low.

However listed property trusts (and indeed options in listed property trusts) are an acceptable investment option for super funds that allow exposure to property with some degree of leverage.

Bye

Steve McKnight

Andrew,

What… it actually works?

Shhhh – keep it quiet or else everybody will want it too

Seriously – well done on the follow through. It irks me the number of people who try once and then conclude that it’s too hard.

You have shown the dedication needed to get results, now it’s a matter of leveraging off that knowledge and experience to get through your next few deals too.

Regards

Steve McKnight