how did Steve McNight finance his properties?

hi mike – with regards to using no equity form your own home – i'm certain this CANT be done as the financier – whoever it may be – would want some security of some sort – especially on 100% borrowings for another property? this is why there are LVR'S in place – as others who read this may confirm.

cheers
pete7

Hi there…

I also read Steve's book a long time ago and thought it was .. basically, crap. Sorry Steve….

I understand that Steve probably uses a lot trusts like Trakka said. But isn't that illegal? I mean, he gets lots of loans without declaring all his financial liabilities. Way too risky / daring for somebody like me. So while this method works for him, I think it is not for me… hence there's very little new knowledge I got from the book.

For property valuation, gearing, etc… I already know as I'm an accountant. The thing I need to know is financing. And given the suggested way is, prima facie, dishonest and could back fire… I dismissed this as crap and passed his book to another friend.

For all out there… if what I think is wrong, please enlighten me. Any input is greatly appreciated.

Regards,
Cattleya.

Steve; get out here and answer this question.

I can tell you one thing about TRUSTS though; they are good for sheltering the properties and you from litigation, but there are limited tax breaks from them, unless you already have other income going into them from other sources; a business etc..

If you have earned income, which you will be paying tax on, you cannot offset the tax deductions against this earned income tax if the properties are owned through a trust – I think. Correct me if I'm wrong other knowledgeable persons. Terry?

So, if you have lots of taxable income, it is probably better to hold the IP's in your own name to minimise this tax, and take out suitalble insurances to protect yourself.

Oh well…. that's it, Steve has left the room.

From Steve's post, I think what he says is:
1. Steve gets his deposit from selling his existing property(ies) that's ripe for harvesting. Well, my properties are still far far away from being ripe. And the ones already ripe I don't want to sell because the exit costs are too high.
Steve obviously has other tips in his bag to minimise these costs.

2. Steve tells everything to his financiers. Meaning he has a few mortgage brokers and the likes (eg. private investors?) who regularly deal with him and are comfortable with financing structures. So there are types of transactions that are mutually beneficial for Steve and his financiers. 

If we want to do this as well, we have to:
a.  find a financier(s) who believes in us (Steve obviously has built and proven his knowledge, reliability and proficiency in these things for the financiers to come to the party).
b.  find a financing structure that's serviceable to us and also profitable to the financiers.
c. I think it is safe to say that should Steve have to go through the banks' hoops he wouldn't be able to do his 130 properties in… how many months? 3 months? Hence the thing is: you have to be creative to find an affordable sources of funding and these sources are not the conventional mortgage products currently available on the market.
d. Steve is unwilling to explore this side, because after all it's a trade secret. Just like the Soup Nazi (Seinfeld series) never shares his recipes.

Any comments anybody? Will be greatly appreciated.

Cattleya.

Hi Cattleya,

If you are a small residential investor, the experience you would have had with your banks servicing criteria will have been very different to, for example, a commercial investor. Most large commercial loans are assessed via an interest coverage ratio, determined solely by the income from the property.  Given the stated returns Steve was receiving from the properties mentioned in his first book, it would be fairly safe to assume that his financier was using a similer criteria despite the properties being residential.

Regards
Alistair

Steve,
thanks for that.
I hope you didn't think I was DEMANDING the answer; it was a tongue-in-cheek job.
Sorry to here about your wife; I hope she gets well soon.

While we are trying to know how exactly he did it, do not expect to copy his method on today practice and still achieve the yesterday result.

The forum is free and the book cost doesn't include a tutorial session. Still trying to learn from him and calling his book crap is not a very good method of learning.

It is too good to be true to invest in a book then having yourself 130 property in 1 year. When it is too good to be true most likely it is too good to be true. So believe me there is more to it.

So while we are learning the basic of it, Remember that success comes from doing things differently. It would be no different things if everyone knows everyone else's methods. However the forum is for you to share the community as much as the community has given you.

Good luck with your situation, Steve.

hey all, just following on from mikeking's question on the benefits of trust, what about incorporating say using a Ltd. company structure, wouldn't that have more flexibility than the trust structure and at the same time giving you more control if ur the sole director?

Hi All,

I think you will find that Steve along with his business partner developed a plan of buying properties that were either basically cash flow positive, were bargains that could be easily be resold quickly after minor renos etc.

They used what could be considered a very small deposit by todays standards and both their modest incomes to the best of their advantage.

You will find out that interest rates were quite low and the market was picking up when Steve first started to do this.

Steve has never said his plan was the best or perfect but quite a few people have followed what he said and are now quite successful property wise.  People who have attended Steve's seminars etc have received more detailed information regarding his plans and methods. 

People read 130 properties and automatically think all these properties much be really expensive etc but you will find that a lot of them were in regional areas, were very cheap but returning good weekly/monthly figures.  This coupled with either bank managers who understood what they wanted to do made the process easier for them.

If you read posts from when this site was first set up you will a lot of the information that has covered how Steve did things etc.

My suggestion to those who didn't find the answers they wanted in his book is to start using the search function here and read early posts from when this site was first set up.   I've been a member here and haven't bought any of his products etc but have received information from this site and fellow members that has enabled me to become reasonably successful  in property investing.

Cheers