Benny wrote:

4. From what I hear, Perth might have “bottomed out” – although I believe we never know “bottom” until it has already passed. Thinking though that future Growth is more likely to come from Perth than Glastone, look at buying something far better in Perth once you have your DSR sorted once more.

Perth has been performing well for the past 18 months, and is continuing to perform well for the moment despite all the interest rate rise.

Of course, nobody has a crystal ball to say if this will continue and if so for how long.

This is a very old thread that got brought alive!!!

I came across one of their webinars years ago. While the content discussed by the presenters were OK (eg: don’t buy negatively geared properties, focus on good cash flow, etc…), however, it was after I spoke to their consultants as well as being offered some of the products that I decided to ditch them.

1. They were selling house and land packages

2. One of the consultants I spoke with even said (back then) something along the lines of “there are too much information out there that can confuse you, so you should let <quote> let us do the due diligence for you <end of quote>”….. my reaction was like “no, thank you!”.

Benny wrote:

With Covid19 starting in earnest in early 2020, the winds of optimism were cold at first – but since Sep2020 to current day (Dec21) there have only been upticks in values each month. Each of these were greater than 0.5% per month (6% per year) and have an average above 1% per month (>12% per annum).

I reckon it is a combination of:

1. Money are being massively printed and those money has go to somewhere. They are unlikely to go into things that will lose value over time in the long run. In fact, some even go as far as “if government keeps printing money with no limitation or intention to stop, then just buy” kind of thinking.

2. Pandemic has caused people to spend less, and all of a sudden lots of people found themselves with a big amount of cash in their savings that can be used as a deposit (Whereas previously those cash saving wouldn’t be there due to they would have spent that money on — including but not exhaustive list of activities — holidays, entertainment, eating, etc….

Both are important.

Without high yield you don’t get serviceability to apply for more borrowing (unless you have an insane amount of cash that you don’t need to borrow)

Without high growth, then you don’t get enough deposit to buy the next one

Instead, it is also important to think which one will break you.

Lack of growth may make things stagnate, but is unlikely to break you.

Lack of cash flow will kill.

I think the idea of buying under value is to be able to add your own values. As the likes of Steve McKnight and many investors on this forum would point out “don’t buy a solution, but instead implement your own solution and then sell your solution”.

Where you make money is not when everything is done for you, but instead for yourself to overcome difficulties yourself and sell the final product to the others.

My real life case.

I bought a 3 bedroom house in Traralgon not too long ago for low 200K (with existing tenant), it is structurally sound with good bones but very very under renovated. Only in the past 2-3 weeks, the next door house across the road, being averagely renovated (3 bed house with similar land size and configuration) is listing for low 300K, while the other one also practically next door to mime (well renovated, also 3 bed house with similar land size and configuration) was sold for high 300K.

My tenant has recently vacated and my builder has quoted some 40-50K to renovate to the same quality and standard as the high 300K property. (can probably do it for cheaper if I do it myself, but I am not a professional builder and rather than spending more time than usual and risking not doing it properly, I choose to let a builder to do it for me…)

If I renovate and keep it, then I am looking at an increase of 30% rental.(approx increase of 80-100 per week based on current figure)

If I renovate and sell, then I am looking at selling for approx 70-80K profit (before tax, before agent commission).

So the idea for buying under value is never to “drag up the value”, but instead to “implement my own solution”

• This reply was modified 3 years, 7 months ago by  Steven.

Jeremy Sheppard wrote:

The whole point is the plan an investor has for the property. If an investor’s focus is on making money when they buy, they may not have a plan in place for the property after they buy it. They may simply be trying to buy a bargain. They think they’ve made money when they bought. But they haven’t. By instead focusing on what happens after the property is bought, you’re more likely to realise a profit. E.g. reno, subdiv, dev, cap growth, yield etc. All of those strategies require a plan prior to buying and an implementation of that plan after buying. In the case of cash-flow, the investor will focus on the income vs expenses and vacancy rate and landlords they’re competing with for tenants. In the case of capital growth, the attention is given to supply and demand. In the case of a reno, the investor estimates costs and new value. In the case of … etc. The focus is not on buying cheaply. The focus is not on making money when you buy. The focus in all these cases is on making money after you buy. It’s that focus I’m talking about. Buying cheaply isn’t a feasible strategy. There’s no such strategy as the discount flip because we lose money when we buy.

In this case, then we are talking about the same thing.

In my example:

Instead of buying at standard $250K market value, investors buy at $150K, spend $20-30K adding value and result in property achieving $250K value even though they only spent $180K on that. And as far as from practical application’s point of view, investors considers this as an example of “make the money when you buy” strategy and as far as they are concerned, it works.

Which part of this strategy gives you the impression that the focus is on “buying cheaply?”. None. The whole strategy is well planned and executed in a very logical manner. You are just focusing on the “buy at $150K instead of $250K” part of the strategy while ignoring the rest.

As far as investors are concerned, this whole strategy starts from “buy at $150k”, and ends at “achieving $250k after 1 month”. The strategy over all is loosely described as a “make the money when you buy” strategy. It is not just the buying part, but the entirety of it, and investor just happens to give it a very loose name and the name happens to be called “make the money when you buy”.

Make the money when you buy is not about “you make money now and that’s the end of it”, but rather, it is about “instead of buying a property at standard market value and wait for 2 years before the property makes money, I execute a well thought after plan to something below market value and add value to it, so it can make money for me after 1 month instead of after 2 years and keep making money for me from that point onwards”. The term “make the money when you buy” just happens to be a name or a label we use to describe this type of strategy. There is no point of getting so hung up on “by dictionary definition, this is the wrong term to use”, and this is starting to become a waste of time debate. Especially considering we are talking about exactly the same thing, we just happen to label it differently.

I don’t exactly like the idea of “crystal ball gazing” the market, because expert economists get them wrong all the time, so what makes us think non-expert economists can get them right?

In the Eastern Asian philosophy, they say “you can control the Earth, but you can’t control the Heaven”.

Market is like “Heaven” to my opinion and I have no control of if it will go up or down.

So it is much better to buy something that allows you to add value. Basically, the idea is:

— Because you are adding value to make it profitable (rather than banking on wait for x years for value to increase naturally), it means even if the market growth is 0, you can still make a certain amount of “baseline” money, and you are already happy.

— If market growth is above 0, you make bonus money on top of your “baseline” money and you are even happier.

— If market goes down, you still have a degree of buffer to protect yourself and be able to at least break even rather than lose money.