Taking the Plunge

Hi Zucan

These are just my thoughts on the questions you have asked. I have been investing for about 18 months and have only residential properties to date.

Commercial property has higher returns but also higher risks. I have found that the location of commercial property makes all the difference in assessing risk management. Unless you know an area inside out, I would avoid commercial because it could sit untenanted for a very long time – meaning that its not a very good investment!

There are lots of trick and traps involved in commercial property. I do not yet feel comfortable brancing out, which is why I stick with residential at the moment. My aim is to buy commercial property in the future though.

Also, most banks will only lend 70% on a commercial property. So unless you have equity elsewhere, $40k will not get you very far.

One of the most valuable things we purchased (apart from Steve’s first book) was his Buyer Beware package. We use the property analysis template for every property we look at. If we have looked at a stack of properties over a very short time, it is an excellent way to remember the strengths and weaknesses of every property (because it is easy to be emotionally swayed by a property!). Jarad fills out each of the reports for consistency and it makes sure that we are comparing apples with apples.

Congratulations. It’s an exciting journey.

Karen

I’m constantly amazed and quietly encouraged by the number of investors who have no experience in, yet claim that commercial property investing is somehow riskier that RIP’s.

None are risk free…if you want that…bank accounts are your ticket…

I believe all props have different risks, you just need to slot them into your risk profile and knowledge / comfort base and see how they fit.

I first heard / read about the big bad nasty risk theories about CIP’s from a Jan Somers book back in the early 90’s, (and for the next 10 years foolishly swallowed it all) but then she qualified her statement by saying that she did know quite a few people who made money from them, but felt she was successful with her RIP fruit cake strategy and saw no need to change her recipe. I have no problem with that statement other than she has little to no practical investing basis on which to claim these risks eventuate – specifically relating to her owning CIP’s.

Hopefully everyone that reads her books also follows her advice, and leaves all of the great CIP’s for me.

For me it’s quite clear, choosing between Mr and Mrs Low Income, signed up for 6 months on a 3% gross yield vs Fed / State Govt / National tenant signed up for 10 yrs on a 9% nett yield…hmmm, I’ve already decided which one is riskier to my overall financial well being.

It was painful (time studying, planning / and educating myself – debunking 10 years of ingrained baseless beliefs) expanding my comfort zone to incorporate the different ‘ballgame’, but with sensible risk strategies in place, extremely thorough due diligence process on both the particular details of the lease and the tenant, I believe the pain was well worth it.

Releasing myself from the shackles of the RTA has been very refreshing, and eliminated alot of the general risks associated with RIP’s, which regularly appear on this forum as questions from the residential only forumites.

I’ll never go back to RIP’s. Each to his own though. CIP’s may not be your cup of tea…and that’s fine too.

Cheers,

Dazzling

“No point having a cake if you can’t eat it.”

[biggrin][biggrin][biggrin]Now there’s a challenge…but then the reward is so alluring and attractive how could any reasonable person refuse.

The only insurmountable problem is Rob, your opinion will be the sole judge…and therefore doomed before it starts.[biggrin][biggrin][biggrin]

Thanks but no thanks.

Rather than talk generalities though about risk / reward, I would however enjoy to hear your specific CIP experiences.

Cheers,

Dazzling

“No point having a cake if you can’t eat it.”

zucan,

You could also try real estate agencies and scouring websites like domain.com.au for the right property for your circumstances.

I say be wary of spotters. A licenced real estate agent should be well trained and is bound by law to provide a fair professional service.

Good luck!

Luke Woollard
Licensee
Pacific Lifestyle Property
http://www.plproperty.com.au

Do have an existing property ? We`have just done an equity loan to put down as deposits on 2 more properties. Our existing property valued at 209k, we owe 90k, now borrowing another 50k in equity. We are using someone this time as it is the first time we will have more than one property. His fees are tax deductible, so go for it and use someone to help. If you can find someone who will explain the do’s, don’ts, why’s and why nots cos there is so much to learn when you are starting out.

Hi Zucan

There are some great buyers agents around like Nigel Kibel of Property Know How or Karin MacKay of Australian Property Buyers (both in Melbourne but they buy all over Australia and Nigel in NZ). These two are reputable and will tell you upfront whether they han help you.

Whilst research and due diligence are incredibly important so is your need to identify your investment goals. Have you thought about these?

Are you looking for capital growth or yield? If yield, what percent is your minimum requirement? If capital growth is your aim, then how much over what period of time?

If both then what conbination?

Is this a long term or short term investment for you? Do you want to Buy and Hold, Buy and rennovate, etc.

How are you buying? In your own name, company or trust structure? What are the tax implications of doing this if you make a profit? What if you make a loss?

So, I’m not trying to freak you out here just saying that your investment criteria is an incredibly important foundation to you making the best investment decision for you in order to reach your goals.

Wishing you good luck and happy investing (although luck BTW is only where prior preparation meets opportunity!).

Sigrid de Castella & Antony Anderson

http://www.kiwiproperty.biz
New book “The Guide to New Zealand Property Investing – Australian Edition”
Available at our web site along with other NZ Resources for Australian Investors