Pin’s reply to Mini

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

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Remember that success comes from doing things differently.
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c’mon pinit reply….!!

cheers-
Mini

ok go!