Our First Step

It all depends on where you start and what you end up with.

I'm prepared to take on LMI if i know that its not going to impact on my end price result that I want to achieve. In fact .. I started in Sale buying units at 65-70k because they were too cheap not to take advantage of. (same units now resell at 105-120k). The point is .. where they were .. and what they were .. they were too cheap not to be good renters. I paid my 5% per property (pre GFC) and borrowed the rest including payment for LMI. In other words i bought 7 units at about 5000 a unit (3500 for 5% deposit Stamp Duty and Transfer 1800) and made a stack on the Capital gains (about 40k a unit)

My initial assessment with purchasing in country areas .. was not to expect Capital Gains at all, just build up a bank and an asset you can borrow against (meaning extra contributions either from me or from the excess above the loan liability).

The one thing people tend to forget about low value property is .. its a lot easier to achieve a significant gain because the initial amount is a lot smaller. In dollar terms it might not be much but in percentile terms it can be huge !

Adjust your mindset to allow for what can be done .. not for what you are going to be TOLD should be able to be done. Once you know what can be genuinely achieved with doing the right things in property .. you can achieve amazing results in a very short space of time.

Grab a couple of property magazines. Grab Steve's books (free plug there). Inspire yourself and learn what works.

Hi,

I'm trying to contain my anger… trying… trying hard!

So, you went to an adviser to talk about real estate, eh? Seems smart, except how much direct property experience has this adviser had? How many city or regional properties have the bought? How wealthy are they? How did they build their wealth?

To be fair, people can only advise out of:

1. What they've heard (studied)

2. What they've seen (experienced)

Now, I don't know about you, but I think there is a lot of danger (of getting misinformation) by getting advice from people who think they know it based on what they've heard (from another source). I'd much prefer to learn from someone who had experience.

So, let me advise you (for free) based on my experience:

1. Regional properties DO appreciate in value, often at higher % amounts than city areas

2. Regional properties DO have higher returns than comparable city properties because rents are higher compared to values

3. Owning a city property, which is negatively geared, might (and I mean might) be a good strategy in a market that is appreciating, but won't earn you a cent when prices are flat or down

4. Every negatively geared city property you own means you need your job more

5. Sure, you are going to need maybe 15 +ve cashflow regional properties do be financially free, but how many -ve cash flow properties do you need?  Trick question… you can't because they are -ve cash flow

I could go on and on and on and on… and I did (in the books I wrote). So, perhaps I'll just point you to the books I wrote to give you encouragement and helpful hints about how to build your portfolio.

Okay… I'm off to book an appointment with an anger management therapist.

– Steve

P.S. BEWARE THE DREAM STEALERS!

All I can say is I have now stepped in a couple of times in other people's situations to assist them.

And like you, they made a choice of financial control and risk that led them to the inevitable conclusion.

In 2006 I had a friend who was nearing retirement and inherited from her mother. I suggested a block of units in a reasonable area of 4 units .. total cost at the time .. 440k (you can only laugh now at the old prices) estimated income about 23k gross. So all in all .. a very reasonable deal. She refused .. stating that it was too much of a risk.

The places are now worth about 260k a unit which pushes the price of the block over a million. And the income is more like 44k gross. And my friend? She's now retired .. and living off the dwindling remainder of the inheritance.

Thats a poor outcome off what would have left her a nice nest egg.

The other was my cousin. She wasnt given much of a solution .. but having previously talked about it I will just state the basics. She was laid out with an inheritance of about 100k in Jan 2010. Since her previous ventures have all involved spending money i camped on her back until she capitulated and allowed me to train her up in how to recognise a good investment deal. NOTE: For the same reason that Steve wouldnt just offload possibles to a client .. i decided she needed the SKILLS to pick a good property rather than just a selection from my knowledge. I trained her up and allowed her to quiz me on possible selections. We eventually arrived at several possibles. Then we enquired about one property and the owner needed to sell quick. Reducing the price for TWO units to 186k for the pair (a 50k reduction). Having got the news I told her to rush up and check them out (do all whats necessary to check its a good buy, even on a rushed sale). She borrowed from her family for the remainder (not a bank) and purchased two places .. returning about 15k gross for the pair. Not much i know .. but this was at 100% equity, full ownership. Once she was familiar with the places she could go back to the bank for more. And she did.

The outcome as of 2012? She now has 4 units .. a return of about 35k, a loan from the bank (she couldnt borrow before) and overall assets of just under 500k. Thats in just over 13 months.

And most importantly for her .. a belief in her own future success.

The point is … in the long run .. regardless of what a pessimist will tell you .. you will need to be steering the ship of your  own financial future. This financial freedom is YOUR dream, and your actions will bear heavily on what your future will look like. Dont be afraid of taking the risk, be afraid of never having lived in the first place. Balance your risk level with your knowledge base .. and you should do just fine.

LMI is great….Like Xdrew I'm currently buying relatively cheap regional/metro properties and wouldn't have being able to expand had it not being for LMI. I can see why people view it as a unnessecary tool/fee but with every passing day things are getting more and more expensive why not try and get as many properties while they are cheaper and focus on paying them off in the future. Every day you hold a property it comes closer to making a profit. I used my PPOR equity to invest as long as you use the equity for very stable properties i wouldn't be using it for a property that loses buckets of money i'd want it to be cash flow positive or neutral. Another thing i forgot to add I'm very big on aggressive money mangaement. I like to put all of my money savings etc into one home loan and all the rent goes through the homeloan. The more money you have coming through your accounts the more money you can save on interest repayments on your PPOR. Hope this helps

i wonder if the financial advisor sold his properties because they were negativlely geared and costing him too much, I know he said that it was to open accounting firm but i'm just negative about negative gearing.

i thought your original idea of buying lower end houses in regional areas a good one ( it's what we do and it works).as long as you do your research and buy right.

good luck and keep the dream alive as it will pay off in the long run.