From Virtually Zero To $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.
5 Million in My First 18 Month in Real Estate
From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

Dymphna Boholt
www.knowledgesource.com.au/dymphna
Introduction ........................................................................ 4 Asset Protection & Tax ...................................................... 13

W hat is Asset Protection? ........................................................................ 13 Types of Asset Protection; ....................................................................... 18 Insurance ...................................................................................................... 18 Debt.............................................................................................................. 18 Structures..................................................................................................... 20 Sole Trader ................................................................................................... 20 Partnership ................................................................................................... 20 Company....................................................................................................... 20 Trusts ............................................................................................................. 22 Unit Trust ..................................................................................................... 22 Discretionary Trust....................................................................................... 22 Trustees ....................................................................................................... 25 Hybrid Trusts................................................................................................ 26 Succession Planning .................................................................................... 33 What name do I put on the title? ................................................................. 36 How many properties and trusts do I need? ................................................ 37 What if I find a great deal and I do not have to structure yet? ................... 37 Tax .................................................................................................................. 38 Home Offices ................................................................................................ 38 Travel Expenses............................................................................................ 39 Travel Allowances ......................................................................................... 39 Inheritances .................................................................................................. 40 GST ............................................................................................................... 40 Other deductions.......................................................................................... 41
Income Properties .............................................................. 42

Cash Cows ..................................................................................................... 42 The Rule of Two ........................................................................................... 44 Characteristics of direct cash cows ............................................................. 47
Multiple or dual occupancy or multiple incomes stream properties ............. 51 Commercial ................................................................................................... 53 Under market rental ..................................................................................... 54 Leases and subleases ................................................................................... 56 Lease options ............................................................................................... 57 Buying sight unseen ..................................................................................... 76 Maximum return............................................................................................ 80 Business Cash Cow s .................................................................................... 84 Overseas investing ....................................................................................... 86 Characteristics of a manufactured cash cow ............................................... 88 Equity down deals ........................................................................................ 90 Discount buying............................................................................................ 92
Finance ............................................................................. 94
Debt ................................................................................................................ 98
Growth ............................................................................ 104

The Rule of 72 ........................................................................................... 106 Analysis paralysis ...................................................................................... 108 W here to look for grow th ........................................................................ 111 Transition zones ......................................................................................... 111 Lag effects ................................................................................................. 113 Fundamental analysis.................................................................................. 114 Adverse public perception.......................................................................... 117 Renovations and rehabilitations.................................................................. 125 Characteristics of a chunk deal ............................................................. 128 Buying grow th ............................................................................................ 130 Negotiation skills ....................................................................................... 136 Sharing Knowledge .................................................................................... 136
Introduction
Congratulations for beginning. It puts you in the minority. It puts you in the percentile that actually gets out there and does something to actually succeed. So congratulations for making the effort to be interested to learn a little bit more, pick up a few tips that you might be able to implement. It was not that long ago that I was in a situation that was very, very different from the situation that I am in now. At that time, I was really stuck in my job. Even though I owned my own accountancy practice, I was still working 40-60 hours a week. While working those 40-60 hours a week I did not have a lot of time to bring up my children to whom I was a single mother to. I moved up to the Sunshine Coast in the mid 1990s. I moved there in the midst of a very messy divorce. I was pregnant and had a small baby as well. At that point I went into survival mode, because for me survival mode was accounting. That was what I knew. It was the easiest thing for me to fall back on. In my earlier career, I had been a financial controller; I had been a financial adviser; I had run a very large mining company from a financial standpoint; I had worked in the banking industry; I had created my own practice. I have done a lot of different things, but when I found myself going through a divorce, I found myself in a situation where I had $40,000 out of 10 years of earning an exorbitant amount of money and that was not very much to start with. After 10 years of earning really good money, I only ended up with $40,000 out of the property settlement from my divorce. The fact was, I spent a lot of money, and I wasted a lot of money on my first husband. All things aside, you are a product of your past. So that means you can learn from it to move forward. For me, reality set in and at some point everyone will have a trigger. For some people, that trigger comes slowly while for other people it may be a major catastrophe such as an illness, or an event like a divorce or similar.
For me the divorce was not actually my trigger. My trigger came very slowly. It came very slowly as my reality started to set in. This reality was single parenting, looking after two kids and doing it all on my own and what this actually meant. I remember my little kids would say Mommy, can you come to read aloud? or Can you come to the sports day? and all of these things and I had to say no because I had to work. If I did not work, we did not eat. It is as simple as that. We did not have a place to live, and it was those little things were what niggled at me. I realized that even though I was in my own business, I was still trading time for money and thought there was something that had to give here. There was a defining moment when giving a talk on asset protection and taxes as I do, where after my speech I listened to the next speaker and he said something about trading time for money. I realized that that is exactly what I was still doing even though I was doing all the right things. Even though I had savings. Even though I was able to fix up the house that I lived in so that it no longer leaked when it rained and all of those things, and had the office which from which I ran the accountancy practice. I had this plan. But the plan was like a 25 30 year plan, as most people do, because that is what the books says you are able to do. That is how it says that reality works. Even though I was an accountant and an economist and had worked in the finance industry for a long, long time and I understood things from a technical perspective easily, it was actually a disadvantage to me. Being an accountant, an economist, an entrepreneur, all of that stuff, was actually a disadvantage to being wealthy. I had to unlearn so much stuff. The reason I had to unlearn it was because I expected everybody to fit into this box. Everybody I had spoken to at select points in time, I expected to fit into this box because that is how things were. But I didnt want to fit things into these boxes, these 20, 30, or 40-year timeframe boxes where I would end up spending time with my grandkids, rather than my kids. So I had to redefine the boundaries to those boxes and for me that took a lot of effort. It took a lot of trust in my own intuition and all of those sorts of things. When I decided that things would have to change I looked at my home and then my business. I thought that because I was in business I could
leverage myself out of that business and work on it rather than in it. As time progressed, I did do that but it did not happen quickly enough for me at that point in time. I looked for what else that I could do to change my position, but more quickly. I looked at my clients: I had some clients that were doing really, well through the internet and thought that this could be my thing, but it wasnt. I looked at clients who were network marketers or multi-level marketers and thought that maybe I can do that but again it was not my thing. I looked at other models that worked but they were all not my thing. I looked at shares and options, all not my thing. All of these things just did not suite me. I needed something a little bit more secure that would as a conservative accountant suit me. If you look at the traditional model of property investing where you buy a property and it costs you money while the house grows in value (negative gearing) it still ties you to a job. It continues to keep you in the rat race that you are trying to get out of. Multiple negative flowing properties will just worsen the situation, but that was the only model that anybody ever talked about at the time and I couldnt help thinking that there had to be something else. I really started to research and study, learning and absorbing as much as I possibly could and it took me six months until I put a plan in place that I thought would work for me. During that time I decided that if I could buy a piece of real estate that could bring in more money than it cost me, then at least I would be heading in the right direction. I did not have a lot of money at this point. I had made my $40,000 property settlement stretch a fair way, but I needed a lot more money to be able to do what I want to do and replace my income. I had to find some more creative ways that I could actually buy these properties in the first place because I did not have any money. When I started to look at the characteristics of what I now call a cash cow, where it brings in more money than it costs, they had certain characteristics. So that is what I looked for. I managed to buy some properties in the early stages without it costing me any money to get into
the deal and that gave me a bit of a leg up. But when I just focused on cash cows I eventually ran out of equity so I could not keep using this strategy. I had to do some growth strategies as well and that was the key. It was not about one or the other. It was about balance and balancing your portfolio and knowing what you need next. The market today is different but in many ways is very much the same. I love the real estate marketers as it is at the moment. We have a market that is dynamic and changing and in economic terms what we call an imperfect market place. Whenever you have an imperfect market place with imperfect knowledge and imperfect scenario, you have got opportunities to make profit. Fundamental economics and an imperfect market place = Opportunity to make profit. That is the market phase that we are in right now and I believe that over the next two to three years will be the opportunistic time to be getting out there and manufacturing income through cash cows and manufacturing growth. It does not matter what the market is going to do. You have the perfect opportunity right now to make your own little money machine in the property market. I will start with some fundamentals so that you can get an idea on where you should be starting and the type of things that you should be starting with such as asset protection and tax issues. I know it is bit heavy to begin with but it is one of those things that you just have to do. To do business in this society, it needs to be done under existing laws and regulations and that means that you have got to know as much as you can about how things work so that you can optimize your position. You can put yourself in a position where you are tax efficient, where you are not paying too much tax and that your assets, as you accumulate them, are actually protected. We live in a very litigated society. In fact, New South Wales is the third most litigated State in the world. Compare that to America and all of the litigations that goes on over there, it is not surprising that the first and the second place go to California and Texas, but New South Wales as
third is ridiculous. Queensland and Victoria rank in the top ten. So it is a fact, a reality as we see it right now. So we have got to do what we can using the laws that we have available to us to protect what we have and what we are going to create in the future as well as what we have bought previously. Let us start with some statistics: 82.6% of property investors only buy one property. That is really sad. One property is not going to cut it. If you are serious about changing your paradigm and serious about changing where your life is right now, one property is not going to be enough. So, number one, you should be deciding if you are committed to this process or not? If you are, recognize that fact and also recognize that there is going to be more than one property that you are going to put into your portfolio. Another statistic: Approximately 13% of investors only own between two and four properties. I am a straight shooter and if you dont want to own more than four properties then you are not going to cut it, because in this game, in any game, to be successful in absolutely anything that you can possibly think about, you have to be committed, you have to be focused, and you have to be determined and you have to participate. If you do not participate and sit on the sidelines then that is exactly what you will be doing the day you die; you will be sitting on the sidelines. You actually have to take action. One of the things that you have to be to be successful is a decision maker. You have to put yourself in positions where you make decisions. Because the very worst thing you can do is not make a decision. If you make a bad decision then at least you got the opportunity to learn from that, you get the opportunity to look at what you did and analyze the circumstances. You will know what should have happened and what
course of action that should have been taken and you can repeat it from happening again. I have made some mistakes. Not every decision that I ever made has been fantastic, but it has never been lost. If it has not been lost it means that I learned from it, which means, that I am highly unlikely to ever make that same mistake again. Everyday millions of innocent people are forced from their homes by a disaster called work. No matter how you feel about what you do now, no matter whether you love your job or whether you hate your job or whether you do it because it puts bread on the table or you do it because you have fun doing it, you still have to do it. Real estate and investing is your vehicle to change this situation, if you love your work, fantastic! Use it, keep doing what you are doing, but at the same time, build yourself portfolio, a wealth asset on the side. This way if for any reason at any point in time, you cannot do what you love doing in your work, as it stands now; you have got something to fall back on. When you look out sound economic models, you have always got a buffer and you have always got a Plan B. Real estate is your Plan B every single time because it is the thing that grows your wealth, it is the thing that is solid behind you, and it is the thing that is going to always be there. It is the thing that you can choose when you continue doing whatever you are doing now to earn income and when you build enough passive income and wealth on the side it is the most euphoric feeling you will ever feel. You have your basic needs covered but you are choosing build an additional base. It is going to be hard, but it is not impossible and the climate we have in the market right now is so opportune to do exactly that. Eight out of 10 Australians will retire with less than $14,000 a year. That is $269 a week! The baby boom explosion that we had post war, in the 1950s and 60s, when there were 18 taxpayers for every pensioner now means that in the 1990s, there was six taxpayers for every pensioner. By 2020, they expect there will be only one taxpayer for every pensioner.
If you are the taxpayer do you feel like supporting somebody else totally? The reality of this has hit our government. This is why they are focusing so much on superannuation and self-funded retirees and trying to create laws and tax efficient structures that can be investment vehicles. They are not necessarily achieving it but they are trying and this is why. There are a number of things that you can do to help change this situation. 1. Protect what assets you do have and those you may accumulate in the future You have got to protect your assets. This means the assets that you already have as well as those that you are going to accumulate in the future. This is what you have got to do. As an astute successful investor, it could be anything, whether it is properties or a business, this is something that you have to know because you are the one that has to stand up and take responsibility. You have to be the one who takes control of this situation and be the one that knows enough to ask the right questions and know enough to know whether the answers are you getting are good enough for you or not. Acting in ignorance will not help you or the problems that we have in society. Dealing with people whether they are professionals or not, you need to know enough to know whether you are getting the right advice from the right people or not even if they are specialists in their fields.
2. Be Tax smart and Tax efficient in your investing You have got to be tax smart and tax efficient in investing. I call it being street smart. You can read books but the reality is you do know it until you have experienced it, you do not know it until you are street smart. There are lots of ways of doing things. The tax act would probably stand about two meters high if you piled it on top of each other. I am not going to try and teach you all of it; I do not even know all of it myself but I do know the stuff that I deal in.
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Do I know about corporate international mergers? No! It is not my area of passion but do I know what the maximum tax reduction of property investment is? Yes! Do I know enough to get individuals to a point that they know more about their field than potential professionals? Yes, because you have got to know enough to know whether you are getting the maximum out of your professionals. Professionals are very, very important but they specialize in all different things. Some specialize in corporate mergers, some specialize in double tax agreements across the country, some specialize in just GST, some specialize in personal income tax deductions for plumbers. Everyone has areas of specialty. Some specialize in criminal laws and some specialize in property law. You have to align yourself with the professionals who specialize in the area that you are in and want to be in and at the end of the day it is your responsibility.
3. Always be market ready The next thing is that you have to be market ready. The last thing you want to do is have a fantastic deal to be offered to you and you are not in a position to be able to take it up. I see this all the time where people have not done their tax returns for the last two years and are not market ready. Market ready means getting your financial position in order and tidying up your loans and reorganizing your finances. It means having your structures ready to go into the market and buy. Without all of this you are not in a financially strong position to be able to act; you can only act if you are market ready so you always want to be market ready. When you are always market ready, you are able to do a deal so when the right deal comes along, you can actually act.
4. Focus on sound investment strategies - Cash flow Properties (Cash Cows) - Growth Properties - Property Money Machine (Chunk Deals) - Balanced Portfolio I am not one size fits all kind of girl. This is where you need to step up to the mark and take responsibility for not only where you are at right now, but where you are going to go in the future. This is where you need to be
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looking at your situation and saying, what do I need next? Am I going to go out there and buy myself a cash cow? Is that what I am really looking for? How does that affect me? Or is it a gross deal or what I call a chunk deal, a deal that makes you a chunk of money, that I need? Where is the balance? This is a factor of you, your personality, the size of your portfolio and what the mix of your portfolio is. For instance, if you are heavily into negatively geared investment properties, then you might be looking for a cash cow to help fund or support that activity. Or you could also be looking for a chunk deal that you can turn over relatively quickly, pay down the debt on those core negatively geared investment properties that you want to hold for the long term because debt and the negative gearing is only a factor of the level of debts. If you are negative gearing, it means you have got debt if it is rent or not. The lower the level of debt, the higher the level of income from that property, so debt can be a factor with that.
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Asset Protection & Tax

What is Asset Protection?
1. Protecting assets if successfully sued. 2. Minimising the risk of being sued. Firstly, prevention is better than cure. You should be looking to put walls around you and your assets. Put yourself in a situation where you are protecting your assets by putting legal walls around your assets and to alienate your liabilities by putting legal walls around those liabilities. If a lawyer who is litigating looks at one person who has everything on their own name and another person who has got lots of trusts and companies and these structures have mortgages, they have more of a chance at winning a lawsuit with the person who everything under their own name. Which one you think they are going to sue first? The person with everything under their own name - every single time. We are definitely one of the most litigated countries in the world. We really do follow in the footsteps of America in so many ways and our legal system is no different. Yes, our legal system has come from predominantly England, with our law being passed down through prime ministers over the generations, but our influence today is not England. Our influence today is very much what is happening in America even though their legal system is different and comes from different kind of structure. An article I found in the Courier Mail a number of years ago talks about some products and product warrantees that show how we are really following in the footsteps of America. It tells of lawsuits that have happened that now result in certain products needing to have a warning sticker put on them so you can imagine what some of the legal lawsuits were.
The first example was on a baby stroller: Warning: Remove child before folding. Public toilets: Warning: Recycled water, unsafe for drinking.
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An electric router: Warning: Not intended as a dental drill. A laser ink cartridge: Warning: Toner not intended to be consumed. Sleeping pills: Warning: May cause drowsiness, duh An electric iron: Warning: Never iron clothes while being worn. You think with a wheelbarrow, you would be relatively safe: Warning: Not intended for the highway use An electric hair dyer: Warning: Never use hair dyer while sleeping.
I was in Auckland and I was flipping through the newspaper and it had a very similar article about products and how these warning stickers have now have to be placed on them and one that really stuck with me was one was for a multiple pronged fishing lure! You can imagine the fishing lure harmful if swallowed was the warning on the lure and another, a digital thermometer, read Warning: Once used rectally, should not be used orally. So you can get lawsuits from anything! I would like to tell you about Mark Shanahan. He lives in Townsville, he has come to a number of my seminars and I consulted for him to see what we could do for him. In 1994, imagine this, Mark is sitting his the office on a Thursday afternoon. He gets a phone call from his bank manager asking what he was doing on the following Saturday. He went on to invite him to take part in a charity golf game on Magnetic Island to which Mark agreed. So he turned up for the charity game and teed off as the third player in his group. It was a really good shot right down the fairway but the golf ball hit a man in the head right down the other end. The gentleman that the ball hit was obviously hurt he played on, it wasnt until after the
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game, when he still wasnt feeling that well, that he went to the hospital and discovered that he has a fractured skull and was really hurt. Mark of course was really sorry about what had happened because he sincerely did not see him down the other end of the green. A couple of months later Mark had a lawsuit delivered and they were suing him for what he thought was a bit over a million dollars. He was not sure what to do and sought legal advice where he was told not to worry; he was not negligent, it would go away. But for 10 years it continued to drag and he had built up a legal bill in excess of $500,000. Now at the time he went off to go and play golf with his bank manager he was happily married, had a couple of kids, owned a business, owned a couple of investment companies and was in quite a good financial position but by the end of the 10 years of legal wrangling his marriage had collapsed, he had lost his company and all of his assets; he had become totally penniless and the high court awarded against him to the sum of $2.6 million which he did not have. Ten years of his life had been put on hold. Now, on top of the legal bill and the $2.6 million in debt, he is now on hold again for a further 12 years because they have 12 years to recruit the $2.6 million. So 10 years plus 12 years equals 22 years of your life where you are unable to accumulate wealth, unable to do anything yet, unable to know where your life is going or anything else. He lost everything he had for playing a game of golf. Many weeks after the incident back in 1994, because somebody told him it was a good idea, Mark went to his local insurance broker and got his insurances reviewed. They changed a few things and one of the things that the broker said was that if they had reviewed this policy three weeks ago his golf clubs would have been covered on the home and contents insurance but as it was the insurance he had then does not cover them even though the insurance they were putting in place would. It was too late for Mark. It is a very sad story but a true story. In Australia the three main areas of litigation come from owning civil business, owning real estate, and personal actions involving motor vehicles.
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Most people understand that if you are going to go into business you hold yourself liable etc. for your business. So you take out public insurance and you do your best to cover everything, but if something should happen whether it is bad credit or a legal issue, if it is upheld, they can access not only the assets of the business but any assets that you own in that same name. So if you have your business under your own name or if you are sole proprietor or in a partnership, they can then go after your assets as the individuals of the partnership or the individual. Then there is property ownership. A few years ago in Bridgeton, a young couple invested in a property. They went in a little bit negative because it was a good idea for tax and rather than pay to set up a structure, they just bought under their own name. They got the building inspection report which said that the back step was an illegal item that had to be fixed. They decided that they could fix that themselves but it never ended up getting done. The inevitable happened someone slipped on the back step. They got sued because of the illegal step and they lost because they knew about the problem and they did not fix it; it was informed knowledge. It was considered criminal negligence and therefore not covered under their insurance policy. They now lost their house; their investment house and their own house, because they had it all in their own name all to save a little bit of tax. Another similar case was with a balcony down in Victoria a couple of years ago. This is the type of thing that can happen. I had a case on the Sunshine Coast where there was a fire in a warehouse. He was insured for $300,000 and he put a claim for $80,000. You would think this would be fine, but an assessor came out to look at the damage his assessment implied that he was underinsured. The insurance company believed that he should have been insured for $500,000 not $300,000 so according to the assessor they were definitely underinsured. Because of this the insurance company was required to only going pay out three fifths of his $80,000 claim, he would have to pay the remaining two-fifths that he was underinsured himself. That is how insurance companies work. Unfortunately this was not the end of the story. There was also some damage to the property that he was renting so his landlord was wanting reimbursement for the two-fifths which the insurance company did not
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pay. There was also damage to the next door neighbors property. So again, the next door neighbors landlord wanted reimbursing for the twofifths that the insurance company did not pay. The tenant next door had some smoke damage to his stock so he requested reimbursement of the two fifths for the smoke damage that the insurance did not pay. All in all it up ended up costing him an additional $120,000. Fortunately he had a good business and he was able pay this and to move on. If that fire had burnt down a house in the street, he would have gone bankrupt. Number one priority, have a look at your insurance policy reconfirm what you are covered for and make sure that you are not actually underinsured. Another case on the Sunshine Coast is a gentleman I know. His wife had recently died from cancer. A foundation on the coast had really looked after his wife during her treatment so he was very committed to the foundation. He was quite wealthy and had a nice home, a couple of canal properties and businesses and he wanted to give something back to those who had helped his wife. He decided he would build this very unusual house on his land behind the Sunshine Coast and he would give it back to the Sunshine Coast as a rehabilitation retreat for people while they were healing. One of the young builders that was working on the job was so excited about the work he took his girlfriend and her three year old to look at the house while it was still being built. Building sites are no place for a three year old and the three year old fell over the edge of a platform onto a concrete slab three meters below and is seriously injured. This gentleman was quite old school so he owned everything in his own name so his assets were left wide open when the mother and the daughter sued him for damages, health care and legal bills. He went to every barrister in Queensland and they all told him the same thing; settle out of court because if you go to court you will lose everything. He was told to give her anything that she wanted to make it go away. It is a very sad case on both sides where the only person who really wins is the lawyer. So yes, we are following in the footsteps of America when it comes to litigation.
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Types of Asset Protection;

Insurance Debt Structure
Insurance A quote that I love is one by Robert Kiyosaki:
Insurance is a very important product in anyones life plan. The trouble with insurance is that you can never buy it when you need it. So you have to anticipate what you need and buy it hoping youll never need it. Insurance is simply peace of mind.
Insurance is usually piece of mind. It is very important to be reading your insurance policies because there is every likelihood that you will have an insurance policy that does not cover uninvited guests. Some of you will be covered but if there are uninvited guests and something happens, as in the story of the three year old girl, you may lose your house. Please look at your insurance policies and these types of clauses and exactly what it covers. Have a look at your home and contents insurance and your lifestyle - things like the golf club would it be covered in that kind of circumstance.
Debt There are two types of debt: friendly debt and non-friendly debt. Friendly debt is a debt that is tax deductible; the interest is a tax deduction. Nonfriendly debt is debt incurred through credit cards or a store card or the debt on your own home. It is non tax-deductible. That is not necessarily my definition. My definition for asset protection purposes is that an unfriendly debt is a debt that you have with the third party. It is a debt that you have with banker or financial institution who lends you the money. A friendly debt is a debt that you have with yourself or one of your other structures.
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A friendly debt could be all sorts of things but it would still be a legally binding debt. For instance, if you have a home and it is worth $500,000 and it has a debt of $200,000 but you may also have a $300,000 registered mortgage with one of your other companies. If somebody tried to sue your company they would get nothing. That is where internal mortgages can start to be a form of asset protection but it is important to have it set up.
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Structures Sole Trader Partnership Company Trusts Unit, Hybrid, Discretionary Superannuation Funds
Sole Trader If you sole trade, it means that you trade in your own name, you are doing business in your own name and own assets in your own name. If anything goes wrong, you can lose the whole lot.
Partnership Derrick and I go into business together. Derrick pinches everybodys money and runs off to the Bahamas. Because we are in partnership together, I will be equally liable for the actions of Derrick even though I may not have known about it, had nothing to do with it, and did not benefit from all the money he took off to the Bahamas. I would be equally liable for that debt. So partnership, as far as an asset protection vehicle is concerned is worse than doing something in your own name because you will be holding yourself responsible for the other persons actions as well.
Company Now, the previous example is that of the partnership of individuals, but you can have partnership with companies where this is not the case. You can have partnerships of trust which come under a different category. They come under the same category as if you did it directly in that structure. Companies are a separate legal entity. A company is a structure that has directors and it has shareholders. The shareholders are limited, they have a limited liability. That part comes from a limited liability. So if you have gone and bought $10,000 worth of shares in BHP and BHP goes down, all you can do is lose your $10,000. You will not lose any more than that. Any credit that BHP has, belongs to them, they cannot come after you as a shareholder and ask that you pay their debt.
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There are some rules governing the directors. Primarily the major rule is whether or not the directors were trading insolvently or illegally in any way. Now if they were trading insolvently, meaning that they continued to trade when they knew the company could not pay its bills, that is where most of them come unstuck. So, when you are trading in a business, what you might want to do is not actually have the company directly doing the trading but a trust underneath it
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Trusts
Unit Trust The first trust that I want to explain is a unit trust. In a unit trust, you have a trustee; the trustee is the one that controls the trust. They are the manager of the trust. A trust is basically is just a book of rules, it is a book of rules that says things have to be dealt with this way. The trustee is given the job to manage that book of rules. As an example for a unit trust, as in the case earlier, the unit holders, Derrick and I, if we went into this business and he owned 50% and I owned 50% and he took off to the Bahamas leaving debts that had nothing to do with the business; maybe he embezzled money or was a major bankrupt, it would not affect my half of the business per se. A trustee in bankruptcy would be appointed on his side, but not mine. It would affect me from the perspective that now I am in business with a trustee in bankruptcy and that might not be very nice either. So what I would insist on doing if I was going into business with Derrick is to make sure he didnt own the units in his own name in this instance the vehicle that you would be using would probably be a discretionary trust. If you have units in your own name, even if you have unit trust but you own units in your own name, you basically do not have any asset protection because should you get sued and you lose, those units can be taken away from you just as easily as market shares will be taken away from you. So, if you are in a trust on its own, it is an outdated vehicle. The reason it is an outdated vehicle is because there are some capital gains tax changes and some depreciation changes that have made this an ineffective trust. There are others that are better.
Discretionary Trust So let us have a look at a discretionary trust. Again, we have got a trustee but instead of having unit holders, we have actually got beneficiaries. Now, we can have a trust where for instance an item is the asset of the trust and because I am a control freak, I am the trustee and I have a number of beneficiaries of the trust. Now, because Derrick did the dirty on me, I do not want to give him any of the income from that item and because I am the trustee and I have
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total discretion, I can do that. I can share the return of that item amongst anybody I chose except Derrick; it is the ultimate discretion of the trustee. Once the trustee does not own the assets of the trust, it controls them, it says who does what. A trustee can be an individual or it could be a company where I could be the director or the corporate trustee or a company that is the trustee. Either way, I will be the one making the decision to distribute any of the income or capital or the assets of the trust. Now, if someone else that is a beneficiary gets sued they also cannot be sued for the assets of the trust in the same way Derrick cant. Derrick would only be entitled to what was distributed to him because he does not have any present legal entitlement to the assets of the trust, because at that point in time, it is up to me whether he gets any of that trust or not, now or at any time in the future. This is the best structure that we have from an asset protection perspective in Australia particularly for ownership of property. There is a better structure for ownership of business but for the ownership of property, this is probably the best structure. Now, the beneficiary group in most family trusts will be, the individual and their spouse and three generations all around them. The individual and the spouse would be named as the primary beneficiaries. Never, ever, ever, ever, ever put the kids in there, for a number of reasons. You might have more kids later on, or when you go to get a loan, the primary beneficiary has to sign the loan documents; you do not want a five-yearold signing a loan document. They cant anyway, so it is problem. Your children will be automatically included anyway because in a family trust, it will be the individual, the spouse and three generations all around; the kids are already included, so are the parents, the sister, the grandkids etc. So the trustee at any point could distribute any income to anybody in that family group, and they can specifically exclude people too, like a exhusbands, if you so wish. One important thing that you do need to understand is that of the role of an settlor. The settlor needs to be somebody totally independent that could never, ever, ever, now or in the future be a potential beneficiary of the trust.
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I had a case where I had a trust brought to me when I was in the accountancy practice. The settlor of the trust was the boyfriend soon to be husband of the primary beneficiary. As soon as they are in a relationship that trust is now invalid. It loses all of its asset protection quality and is useless having it. So the settlor is normally somebody in the accountancy office, somebody in the legal firm, your grandmothers mate or someone or other that settles the trust. It is an old, outdated way of doing things that came from the 12th century that was handed down through the generations when trusts were originally setup to protect the landholders and assets of the family from future frivolous generations. That is what it was originally setup for although they have changed their uses at they came down the generations. A settlement fee cannot be charged. There was a case in the 1970s where they subpoenaed the records to prove that the accountant who set up the trust charged the $20 settlement fee. The invoice for that year showed $1020 whereas every other year, it was a $1000. This proved that a settlement fee was charged which meant that 15 years later, assets that had built up in that trust to the value of $1.5 million were now up for grabs. The trust was void. These things may seem insignificant but are important so make sure that the settler does not charge a settlement fee and they are totally removed from any part of the beneficiary group and do not benefit from the trust. The important position is that of the appointer. The appointer is sometimes also called the guardian or protector or sometimes the guarantor. This the position of real control. It is the position which is the one that gets to appoint or sack the trustee. Recently I spoke to a friend who is an accountant. She married this gentleman who is a grazier, who owns a property in New South Wales with his family (two brothers, her husbands father and his uncle) that is worth some $20 million. The two brothers bought the property years ago. One brother (my friends husbands uncle) owned a third and her husbands father owned two thirds. As the uncle got older, my girlfriends husband bought out the uncle (with real money) so he now owned a third of the property and his parents owned the two thirds. They both lived on the farm but there
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are also two other daughters and the other daughters thought that they were entitled to their share of the family farm now! They felt that because their brother was living on the property that he was already getting his benefit, they wanted their share now rather than when the parents died, not taking into consideration that he had actually purchased his third of the farm. They sisters wanted the property sold and they convinced their parents that it was a good idea. When my friends husband bought out his uncle, he went to the solicitors, as you do when you are a younger entrepreneur. He got the solicitors that his father used and set up the trust, which was the right thing to do, put it in the trust to own his third of the family farm. Now, all of this transpired some 10 years later and what has happened is that his father, who was the appointer of trust, sacked my friends husbands company as trustee and appointed his own company as trustee, and forced the sale of the property. They are now in court. My friends husband is not only suing his father but he is suing the solicitors who set the trust up in the first place for giving him the wrong advice. A very, very sad case. That is the importance of the appointership; you have got to understand it and get that right. It is okay to have a couple of appointers and if an appointer goes bankrupt and this was such a case in 1975 where the trustee in bankruptcy tried to take over the job of being an appointer so he could sack the trustee, appoint himself the trustee of bankruptcy and distribute all income and assets to the bankrupt estate and distribute it amongst the creditors. The high court upheld that the appointership was a job and not an asset and therefore could not be taken as part of the estate. But for safe guarding that, it is probably better to have a couple of people as appointers so that you can resign your job as an appointer if need be. The other thing you must do is make sure that you take care of it in your will, to pass that job down to the next generation.
Trustees The appointer could be mum and dad and they could be the beneficiaries. Mum and dad were also the trustees. Now, let us say we have got a million dollars worth of assets in this trust and it builds up over a number
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of years and this trust actually owned the house in Brisbane that had the illegal step height that I mentioned earlier. If lawsuits took place and they sued the owner of the property and the owner of the property is now the trust, so they sue the trust directly, they wont get any of that million dollars. This is because now the lawsuit would be suing the trust not the beneficiaries. It will protect their principal place of residence or anything else that they may have in any other structures. The lawsuit is going to the trust directly which is why you are only able to put one property in one trust because at any point in time, you then only expose yourself to losing one property, not the rest of your empire. So, let us say they win the lawsuit and they are awarded $1.5 million. What are they going to do about the outstanding $500,000? They cant go to the beneficiaries so they go up the line and if the trustee is an individual, guess what? All the personal assets of the trustee are now up for grabs. So again, this structure is useless unless you use specific wording in your trust to guard against that, but the best strategy is to not be there as an individual at all and appoint a company as trustee. The company is a $2 shop company that does not trade. It does not do anything; it does not have any assets and cannot trade insolvently because it does not trade. So that is the end of the line. They cannot go to the directors because they are not doing anything wrong.
Hybrid Trusts A hybrid trust is a combination of a discretionary trust and a unit trust. Again you have got trustees, individual or corporate. I am recommending corporate all the time and this is ideal as a hybrid trust for a business, because you have fixed entitlement to ownership. To illustrate this; I am not in business with Derrick anymore. I am now in business with someone else. We own this business 50/50, so it is clear ownership of this business. As soon as anything happens to this person, their spouse can step in and it goes to their estate. They can sell their half independently from my half because I only own half the company. It gets taken into my will and all the rest of it. But, I am not going to go into business with someone else unless they protect their side. They should own their shares in a personal family
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discretionary trust as would I, my own, but as well as the units, we have also got beneficiaries. So for tax purposes and income purposes, we can put money anywhere we want which is fantastic for reducing tax. We can put it into superannuation or into one of those companies and your trustee should have the ability to distribute to any associated entity. That means that you can put money into any of your companys trusts or anywhere else you see fit. For business purposes, because of the beneficiary group and the discretionary side of things, it does meet the requirements for distribution of capital with the exceptions for capital gains tax purposes and it does get around some of the issues with depreciation as well. Superannuation is basically a form of a trust.
Example: We have got a company and directors of the company and we are going to buy three properties. We are going to buy one in Sydney, one in Dubbo and one on the Gold Coast. The one in Sydney is negatively geared. It will cost us $30,000 a year to keep. The one in Dubbo gives us $10,000 positive cash flow so is a positively geared investment property. The one on the Gold Coast is mutually geared, so it does nothing at the moment; it is net zero for tax purposes. We have protected the properties by putting them in different structures so if anything happens on any one of the properties, it would affect the other properties, the only thing that is exposed is whatever you own in that particular trust. It does not affect your principle place of residence or anything else that you own elsewhere.
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There is a school of thought that says in this structure, having only one trustee company that you cannot determine at any point in time which trust the company is actually operating for or making decisions for so it could compromise the integrity of that structure although this has not been tested in court up to this point. But to get around this, you would put a company on top of each one because your company is your separate legal entity, therefore it is clearly divided from the others and there is no overlapping.
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It is a practicality thing as to why you might choose the earlier one to this one. Companies cost more money to keep however trusts do not cost money to keep other what it costs to do their tax returns. It is a registration thing.
They could also be set up as hybrid trusts, but that is overkill and unless there were three separate businesses, I would not go that way.
Let us have a look at a typical business and investment structure:
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Going back to those three properties that were purchased (Sydney $30,000, Dubbo + $10,000 and Gold Coast 0) now we have directors that through a trustee company goes out and buys the three properties. For tax purposes, we know what income each of those trusts have. The income is passed through these vehicles, but rather than pay tax in their own right, they pass the income through to the beneficiaries. Then we could also have a piggy bank trust that would be the ultimate owner of everything. This trust would be the one that owns the shares in the trustee company. It is the trust that if you have two children where you can split the trust and divide your assets between the children while you are still alive rather than being passed on through a will or estate or anything else. It is the ultimate; through it you can own shares, gold, a coin collection, shares in other companies, units in other businesses, etc. It is the ultimate owner. It does not interact with the public, does not do business, does not own a car, has no employees. It is protected. If there is a business, the business would not be under the same structure as our investments. It gets kept separate entirely with a separate corporate trustee and the shares in that corporate trustee would be put across into the piggy bank trust.
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To add to the example, let us say that in this business that we have, which is going well, we pay ourselves a maximum salary. So we have maxed ourselves out, so that if we take any more income, we are going to be in the top tax bracket. We put the maximum amount we can into superannuation which can also be a tax deduction and we pay the kids. We give our children that are under the age of 18, with no earned income, $772 because that will be tax free. At this point we have done everything that we can possibly do to minimize our tax payable in the business. The company is the corporate trustee. We still make $100,000. So now, we have got that plus we still have the properties (- $30,000, + $10,000 and 0). Let us have a look at the flow if this income for tax purposes. First of all we write the -$30,000 off against one of the others so we distribute the $10,000 out of one trust and into the other so we now have two trusts with zero and the trust with -$30,000 becomes $20,000. Then we take $20,000 from our $100,000 business trust which now becomes $80,000 and distribute the $20,000 to the $-20,000 so that trust also becomes zero. The three property trusts now all have a zero tax implication but we have still another $80,000 to do something with. We could invest or buy property with the $80,000 but we would still have to pay tax on it before we do. It cannot be given to the piggy bank trust because the piggy bank trust is purely a pass through vehicle. It also cant go into the corporate trustee as if it trades it will compromise the asset protection aspect of it nor can it be given to the beneficiaries, as they have already been paid salaries and dont need any more. So the best that you can really do from there is form a bucket company to put the remaining money in which pays taxes at $0.30 to the dollar and the piggy bank trust becomes the ultimate owner of the shares in the bucket company Once we have got the bucket company we give it the $80,000 and it pays the tax on it. Tax would be about $24,000, so that leaves $56,000
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sitting in the bucket company which can be used to invest and buy more property. The $56,000 would be enough for a deposit on another property. To purchase this new property we would form another trust and use our $56,000 as a deposit in that trust to buy that property. The rest of the money would be lent from a bank or a financial institute. Now we have run out of money so if we were to purchase more properties we would need take out a registered mortgage through the company. The companys sole job is to pay tax, lend money in the structure, and take out mortgages for protection, for tax purposes. It is the perfect vehicle, but like the piggy bank trust do not ever, ever, ever let anything hold you in there. Do not buy a car, do not buy any asset directly, do not interact with the public, do not have employee, and do not do anything else in that company because it compromises this integrity. Its sole purpose is to pay tax and lend money in the structure, tighten out further registered mortgages for asset protection purposes. Let us say, you did not really want another property this point in time but you wanted an extension on your PPR (Principal Place of Residence), so you lend the money to yourself to build a big extension on your PPR and take out a registered mortgage for the loaning of that second loan of money. Because your debt is going up as your property goes up your protection is going up also; it has friendly debt. In a newspaper article a few years back, it talks about some high-profile business crashes. It tells of one of the founding directors of One.Tel who transferred the $6 million family mansion solely into his wifes name. It also talks about Rodney Adler and Ray Williams, former directors of HIH Insurance, transferring the Rolls Royce, Mercedes and the $7 million family home into the wifes name, through a company and trusts name, etc. They would have had full recognition and knowledge of pending litigation, which means that in light of the four year callback period that applies to bankruptcy those transfers could have been called back because they had knowledge of pending litigation.
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The article also goes on to talk about other failed entrepreneurs in Australia. One in particular was Mr. Allan Bond. who divested $60 million into trust at the height of his power, well before any bankruptcy proceedings. These assets probably still exist and are protected today even though he went through the Bankruptcy and Criminal Law Court. This is why it is so important to do it early not when it is nearly too late. Get it right from the beginning and grow your tax efficiency accordingly.
Succession Planning

Wills Intestacy Enduring Power of Attorney What renders a Will invalid?
Do you have a legal will and how long ago was it since you have had it reviewed? Wills need to be reviewed regularly, if you havent reviewed your Will for a number of years, it needs to be reviewed. Another important thing that is usually taken care of when you do your will is an Enduring Power of Attorney. An Enduring Power of Attorney is basically a single page document, that in most cases says, that if you are incapacitated, but not dead, somebody else can act on your behalf. Now, this is really close to my heart, because my father (he was 51 when I was born, so I did not know much about his financial situation) who in his early 80s, had a stroke and became incapacitated. He could not speak or communicate in any way. He was pretty old school, where the man in the family controls all of the finances and he owned all of the assets, the bank accounts, pretty much everything and my mother was very reluctant to take over that role. But she was not only reluctant from an educational perspective she also had great difficulty from a legal perspective because everything was in his name. The car registration was in his name, the bank accounts were frozen because she had no authorization, because they were in his name. At the time of his stroke, Dad was in the middle of selling one property and buying another so the family incurred $25,000 worth of interest and
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penalty taxes because the property could not settle on the due date because Mum was not authorized to sign. I cant stress enough the importance of having an Enduring Power of Attorney in place. That whole experience cost my family an exorbitant amount of money simply because that was the way things were always done. Now here are some statistics for you:
48% of all marriages are likely to end in divorce:9% within the first five years, 19% within 10 years, 22% within 20 years and 39% within 30 years.
Asset protection is effective for our current society with all litigation and legal issues. There are a lot of second marriages where kids from previous relationships as well as a range of other things need to be taken into consideration. Succession planning and the ownership of an asset is very, very important as is how you structure entering into a new relationship where you retain the integrity of any assets that you had built up previously. We talked about Australia following the footsteps of America. Prenuptial Agreements never previously held up in Australia, but they do now straight out of the American courts, so a Prenuptial Agreement can be very important. Most of family law courts see through most structures although there is consideration given to structures that among other reasons may have been set up for the future benefit of children, rather than you or how much interaction the new spouse might have. You need to be aware of how these things play out so that you can protect yourself at all levels. The other thing is that it not might be you that creates the area of concern. Imagine passing your assets down to your child who is relatively young, who hooks up with some guy that you may not approve of and they strip the assets from the trust and move on. You can safeguard against this by establishing a Bloodline trust where the beneficiaries are required to remain within the bloodline, as in direct descendants or a
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blood connection depending on what you specify of the primary beneficiary. You can also have a testamentary Bloodline trust, so that upon your death, the assets that are put into a testamentary state, the trustees formed and from there a Bloodline trust created. The family asset that you have at that point in time can then only be passed within the bloodline. While you are alive you could be the discretionary trustee or a director of corporate trust, so you actually have control. Although it is not really relevant while you are alive, but if you want to have a little bit of say as to what is going on after you have gone, it is worth thinking about. Now, we do not have C-Corporations in Australia. They have SCorporations and C-Corporations in America whereas we only have companies. So substitute the word company in the following extract.
A C-Corporation is another you. It is not just an extension of you. A C-Corporation has the ability to be a clone of you. If you are serious about doing business, then you do not want to do business as a private citizen. That is too risky, especially in this day and age of lawsuits. When you do business, you want a clone of you actually doing the business. You do not want to do business or own anything as a private citizen. If you want to be a rich private citizen, you need be as poor and penniless as possible on paper.. The poor and the middle class, on the other hand, want to own everything in their name. Pride of ownership, they call it. I call anything with your name on it a target for predators and lawyers. Extract from Rich Dads Guide to Investing by Robert Kiyosaki
It is a beautiful statement and never a truer one. Primarily, you would still have your home in your name, the reason being that if you give up your principal price of residency you will lose your capital gains tax exemption and have to pay tax on your property when
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you sell it. Look to have your property protected through internal debt, external debt, and insurance and potentially through structures but only as last resort. With assets that you already have sometimes it is worth while transferring them into another structure; you will have to pay stamp duty to do this but may be a worthwhile option. Think about why you are doing something first. What is your primary motivation here? Is it to change your life? Is it to get a serious of wealth portfolio? Is it to create a passive income? Make decisions because it is a right investment decision, not just because you want to save $2000 or $3000 tax. Once you have decided that the investment decision is right, then decide how you are going to structure it for asset protection and make it the most tax efficient. Do not do it the other way around. Do it because it is the right thing to do from an investment perspective first.
What name do I put on the title? The name that you should put on the contract can vary from state to state. New South Wales and Victoria are a little bit different to some of the other states. If you are putting something in to a company with a trust underneath it for instance, in New South Wales, the titles office only accepts the legal entity. So for example the title on the deed will say ABC Pty Ltd for instance; it will not say ABC Pty Ltd as Trustee for the Wombat Trust. What we then need to do is to determine that in New South Wales, your company at that point of signing the contract and entering into that agreement and settling on the property, is acting on behalf of the Wombat Trust not the Alpha Omega Trust or any other trust that you might have. If it is acting on behalf of the Wombat Trust, you will need to do a company unit that essentially says, on that present day, ABC Pty Ltd entered into a contract on behalf of the Wombat Trust to buy XYZ Property. In other states, you can actually put ABC Proprietor Pty Ltd as Trustee for the Wombat Trust on the contract, and it clearly identifies the trust from which you are acting. Whichever state you purchase in, just make sure that one way or another you identify the trustees that are buying
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the property. It is the trust that lodges the tax return, but it is the company that is the legal entity.
How many properties and trusts do I need? How many properties do you want to have? How many businesses do you want to have? My own personal structures are rather complicated and include a myriad of companies and trusts in this country, but also legal entities that are appropriate in the other countries such as America; LLCs predominantly. So, it depends on what you want to do. What you are primarily doing is separating all of your properties from each other, all of your properties from your businesses and all of your endeavors from each other to reduce their exposure to risk. Having employees is exposes you to risk so you might want to own them in a separate company and pay them out of a separate trust. Having plant and equipment, the ownership of which is an asset, is something you also might want to keep separate. There was a construction case in Sydney a number of years ago where this construction company was digging on some land. The company had contractors and employees and in the process of the excavation, they dug up some fiber optic cables which resulted in a lawsuit for $22 million! Fortunately the land was not owned by the same company and trust that did the construction. It was owned by a separate company and trust. The company that was actually doing the construction did not own anything nor did they employ anybody. The equipment that it was using was owned by another structure and the people who drove those machines were employed by another structure still that hired its services to the operational company. So it was the operational company that was sued and after a series of searches it was found that it was all too hard and didnt progress any further.
What if I find a great deal and I do not have to structure yet? Well, you should have. One of the most important things in property investing is being market ready. Being market ready is so much more
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than just deciding that you are going to start investing. It is finances, structuring, getting your tax returns up to date, saving and lots of other things; so much more than just being ready to invest.
Tax
There are a number of tax laws that you should know if you are going to be a property investor or in business. First of all, depreciation is a tax deduction for not spending any money. It is the tax deduction on your properties, for the depreciating value of the building or fixtures and fittings that might be inside that particular building. To claim any depreciation on your tax return you will need a qualified quantity surveyors report. On July 18, 1985, a law was introduced that said that you can now depreciate or get a tax deduction for the decreasing value of your building if it is used for income producing purposes. When the law was first introduced, the rate you could claim was 4%, but in July of 1987, they reduced it to 2.5% and that is where it has remained ever since. So if your building that you bought as an investment property was built after that date, you will be able to claim some depreciation as a tax deduction regardless of whether you have spent any money or not. If you had a property that has had a major renovation since July 1985, then you could claim the depreciation on that renovation but you need a quantity surveyor to assess the costings for the depreciation in order to claim any deductions. Although depreciation is fantastic you do need to be aware that when you sell the property, those deductions that you have been claiming will get added back into the profit and you will have to pay capital gains tax on that.
Home Offices Another tax deduction is if you are running a home office, for instance if you are a teacher and you mark papers or prepare classes at home. If you have a separate office that is one-tenth of the size of the house that you live in then you can basically claim one-tenth of the electricity as well as the depreciation on the carpeting in that office, the filing cabinets, desks, the professional library, the computer, even the brief case that is use to carry all of those kids papers to and from school. If you are renting your
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home you could claim one-tenth of your rent but, if you own the property, you cannot claim one-tenth of your interest bill. These are the sorts of things that you can claim for a home office. However, if you are an IT consultant and you actually work or conduct your business from home, it becomes your place of business rather than a home office even if it is the same one-tenth office size. A place of business is different in that it means that you can claim all the same things as a home office, but additionally, if you own your property, you can also claim one-tenth of the interest that you pay on your mortgage and rates and everything else associated with the ownership of that property. But again, when you sell that property, one-tenth of the gain that you make on your own home, which would normally have been exempt, will be subject to capital gains tax on the same percentage as what was claimed. Let us say you are a property investor or you take it a step further and are a developer, your business now is property. So you have one structure that is subdividing, or building units, whatever, the tax deductions for that entity are suddenly now much broader.
Travel Expenses Firstly, if you visit the construction site to things, all of your travel would be tax deductible. However, if you were an employee of that entity that owned this development and as an employee, went to check on this site, and you needed to be away for 5 days because this site is some distance away then you could get a travel allowance to cover all of the travel expenses. If the travel allowance is paid in accordance with what the tax officer has set down to be a reasonable rate for rural Queensland, it includes set amounts for accommodation, breakfast, lunch and dinner and an additional amount for incidentals (the tables can be downloaded from the Australian Tax Office website).
Travel Allowances If your employer agrees to pay you an allowance, then regardless of how much money you actually pay for your accommodation, the amount will go on your employment summary (or group certificate) and you can claim
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that entire amount on your taxable income without requiring any substantiation, because it is paying within the accorded limits. You received it as a travel allowance for doing that amount of work, so you claim it as a fully expanded amount in your tax return. You can do that for up to 21 days away. It also applies to international travel and the rates are all set down depending on what country you are in etc. These are the types of things that you start to bring in to your reality. You need to be doing this stuff automatically.
Inheritances If you inherit a property because your great Aunt Bertha died and left her house to you and you do not know whether you should sell it or whether you should keep it. If you decide to sell it one day after the two years since great Aunt Bertha died you will have just made a fatal mistake. This is because you now have to pay capital gains tax on that property from the value of what it was on the day Aunt Bertha died to the day you sold it. However, had you sold it two days earlier inside that two-year timeframe, you would not have had to pay any capital gains tax at all. So there are all of those types of things that you need to become aware of so that you are not ignorantly selling Aunt Berthas property two years and one day later and having to pay capital gains tax. That can be thousands of dollars unnecessarily.
GST If you do a major renovation on a property and you substantially change the nature of your property, you are in effect selling a new property. Therefore, when you sell it, even though you may not have paid GST when you bought the property you have to pay GST because you essentially have changed that nature of that property; it is now a new property and there is a GST charge on new property. What if you bought a house and land package, you contracted the builder to build house and then you decide to sell it after either living in it or renting it, or directly after its completion? You have now, created a new property therefore it is subject to GST and you have to pay GST when you sell it irrelevant of whether you can charge the GST or not. It becomes part of the sale price which affects your profit. Alternatively if
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you actually kept it and rented it for five years you would no longer have to pay GST on it because it is no longer a new property. If you bought the property as house and land package from the builder complete, you do not have to pay GST on the property because the builder was the first sale to you. He is the one that has to pay GST on it. You have to pay more in stamp duty because of the higher value when you bought it, but it is not the first sale.
Other deductions How can you claim a tax deduction for dog food? It is a funny question but it is a valid one. Looking at this, if you needed security for instance and you had a business where you might need a guard dog to guard your property, and this is not going to be a Chihuahua, anything associated with that security would then be a tax deduction including dog food, vet bills etc. Many years ago in my early years in my accountancy practice, I had a lot of clients at Lightning Ridge. In Lighting Ridge they mine opals and a lot of individual people out there have got their own mines in which they mine these opals. A security measure needed for an opal miner to protect their opals is to protect from what they call ratters. Ratters are thieves that go down into the mine at night and mine out the opals and are gone by the time the miners come the next morning. So one of the security measures that miners employ are not dogs, but black snakes. So for an opal miner, you can actually get a tax deduction for these black snakes as well as for the mice which are fed to the black snakes and any other costs to keep them.
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Income Properties
What I would like to cover now is income; income properties or what I call cash cows. Predominantly, there are only two kinds of property. There are income properties or what I call cash cows or there are growth properties. Cash cows are a property that produces more income than they cost you. You buy them to create income; that is your purpose for doing it. The other type of course is growth properties. I call them chunk deals. When I am talking about chunk deals, what I am talking about is having a property that you do something to. Now it might be as simple as shuffling paper, it might be doing some hard yards on it or it might be building something. Changing something, doing something, creating something, whatever. You are doing something to a piece of real estate to make it worth more. This is called a chunk deal because what you do is you create a chunk of money. You create that chunk of money in any economic climate.
Cash Cows
A cash cow is what I am going to cover now and why you would want a cash cow as part of your portfolio. Cash cows give you lifestyle. Cash cows are there to produce an income stream for you. When I was going through my early years, cash cows were the things that made the difference in my portfolio. The first property that put $2,000 a year positive cash flow in my pocket made an enormous difference to me. Then next one that put $5,000 a year in my pocket made an enormous difference. That $100 a week from that second property was $100 a week that I did not have to work for, did not have to get out of bed for. It came in regardless of anything else that I did. In my initial 18 months of property investing, 6 months was of training, learning, gaining experience, getting out there and doing as much as I possibly could to learn, as much as possibly could to try and cement in my head the strategy that was right for me. That meant that following 12 months I then starting investing and in that 12 months that was the time
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that it took to totally replace my accounting income. The income that I was working 40 to 60 hours a week for; 12 months worth of investing, 6 months worth of thinking and learning. What I quickly realized was that what I wanted was income; I needed income coming to me regardless of what else I did. So that those little properties put $20 a week extra in my pocket or $100 extra in my pocket, I just figured that if I could just get out there and accumulate enough of them then I would have my income replaced. Now I did not have a lot to start with so I had to be pretty creative or inventive to get out there and start the ball rolling and make things happen. I am not saying it is impossible, what I am saying is it is hard work. If you are starting with any base at all it is going to be much easier for you. I have had lots of students that have gone through with me, very similar to myself, that started with nothing. Absolutely nothing. Some of them started with less than nothing if you can have less than nothing. They began with negative but have done exceptionally well. When you create that income, let us say, an extra $100 a week, that is $100 you do not have to work for. When you get enough of those that you have got your basic needs covered, then you have got lifestyle. Then you have got choices. Then you can choose what you want to do. The very first thing that you should be doing is working out how much exactly you need to cover your basic needs right here today in the lifestyle that you live right now. How many people can honestly tell me that they are in that position; that they know how much income they need to cover their basic living expenses? Not many. You need to know this because that is your first peg in the sand. This is your first point that you can aim for. Put your peg in the sand and say this is my level of income that I am shooting for first. Because when you can do that, and say okay, this is what I am shooting for then when you get there and you see that you can achieve this and you see yourself accumulating that extra profit, it will make a huge difference on your lifestyle. Put the $100 a week that you have created in your pocket or
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reduce a bit of debt meaning you have got more money available when you need it. When you get to that point where you have got your basic needs covered, then life becomes a choice. If you hate doing what you are doing, effectively, you could stop working and still live the lifestyle that you live. You could choose to go and do anything you want, you could go in and work in a foreign mission. You could go and work part time. You could work full time on your real estate. Or you might love doing what you are doing. Creating that benchmark on the side means that if anything should ever happen, you get an illness, a friend gets an illness, something happens, the job does not exist anymore, the company goes broke, whatever, you are still in a position of security because it does not affect your lifestyle. Anything that you do on the side is a bonus. You have got your basic needs covered. It may not be a grandiose kind of figure that covers I want to live here and I want a trip over there and I want this kind of car and I want this kind of property and whatever else. That can be a secondary issue. What you need to maintain your lifestyle as it is right now is passive income. This should be your starting point, your shooting point that you are going to go for. This gives you lifestyle, this gives you choices. This gives you your freedom. It does not give you wealth. What gives you wealth are growth properties, growth properties that continue to grow and expand and build into much bigger, greater portfolios the longer you have them. Creating chunk deals, creating equity, getting out there and manufacturing and making it happen. That is what gives you wealth. You need a combination of the two. Neither can happen in isolation. I do not care how big your pocket is right now, if you only focus on cash cows, you are going to run out of equity or the ability to continue to invest. If you only focus on growth deals, you are going to run out of cash flow. You are going to run out of the ability to continue to exist because if you only focus on growth deals, what you are doing is you are tying yourself to an alternate income stream to support it. Mostly, growth properties do not cash flow, not in the short term so it is that balancing act that you have to put into place.
The Rule of Two
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Let us have a look at some income deals. A cash cow basically is all of your income less all of the expenses related to that property and if you end up with a positive amount, you have got yourself a cash cow. There are a few things you can do to assist in working out this process. I have a rule called the Rule of Two and if you have not heard of it, it does not matter because I made it up. But this is how it works. The Rule of Two says this; if you have the purchase price and you divide it by 1,000 (for those of you who are mathematically challenged, you take off three zeros and you are done). Then you multiply this figure by two. The figure that you are left with has to be equal to or greater than the weekly rate for that property to be positively cash flowed. Eg. Purchase Price 1,000 x 2 = Weekly Rent
So if you buy at $200,000 property, you have got $200,000 divided by 1,000 is $200 multiplied by two is $400.You need to be getting $400 a week or more from that property to make it positively cash flowed. Eg. $200,000 x 2 1,000 = $400 p/w rent (or more)
If you are looking at a property in a certain area and it does not meet the Rule of Two it does not mean you cannot buy one. This is just the rule of thumb. The final figure will vary depending on how much the rates are, how much you pay in management fees and a whole group of other things but it is a really handy guide when you are talking about the residential market to give you an indication of the ballpark figure you need to be thinking about to make this property positively cash flowed. When I talk about the Rule of Two I am talking about pre-tax. If you are buying a property that has a large degree of depreciation deductions against it and if you are in a structure that you can claim these tax deductions against any other income then that Rule of Two ceases to be a Rule of Two. It will come in as a rule of about 1.6 to 1.7 because it takes into account the depreciation of the tax deduction, for not spending any money and being able to get a tax credit back on that.
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The Rule of Two is also based on paying interest on 100% of the mortgage so if the mortgage is $200,000, we are talking about paying interest on $200,000. My philosophy is that unless you have got $40,000 (in this case 20% of the property) sitting around in cash, you have paid off your house, you have no debts and you have got $40,000 in savings, you will be borrowing $200,000. If you are taking your $200,000 out of equity out of another property to go and buy this particular property, the $40,000, you are still paying interest on 100%. $160,000 of that will be secured on the property that you are buying and $40,000 will be secured on your other property. Either way, it is still 100% borrowing. This is a rule of thumb only. This is an ad that was in a newspaper a number of years ago when I was speaking up in central Queensland. I was speaking to an audience of 175 people on a Monday night. I come from central Queensland so I was up there visiting family and stuff and I read the little local paper which is called the Morning Bulletin. I did not get to read it until after lunch and this is one of the ads in the property section: House divided into four units. All returning $100 per week. Urgent sale - $135,000 Cash Positive $11,400 Does this make the rule of two? Yes, it does. Immediately you have now got a reference point to say I am in the money. I have got a cash cow in my hands. On the Monday night, I spoke to the group and I pulled out the paper and read the ad and I said who saw this ad? About 75% of the room put their hand up. Fantastic, which one of you bought it? All the hands went down. They could have been like me. I did ring up about it but that was after lunch on a Saturday and they had already gone. Too slow. I said who actually rang up about it? 10 people put up their hands. 10 out of the 75% that saw the ad. I said what happened to the rest of you why did you not ring up about it? It sounded too good to be true. I acknowledged the ones that rang up and were too slow. I was one of them. But those that did not even try were giving up a pension. A
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pension for life for as long as they wanted to own that property. An index pension because it will continue to increase in value because the rents will ultimately go up from $11,400. To buy an $11,400 index pension not only for life but for generations ahead would cost you in excess of half a million dollars. So those people who did not even try were giving up a lump sum benefit of half a million dollars. Why wouldnt you be excited about an $11,400 pension. That would be the equivalent to you investing that money and getting that as a pension for life through the generations but with index? It does not make sense to ignore an opportunity like this and the fact is that I reckon everybody in that room had the potential to buy that property - everybody. For some of them, it would just be shuffling paper, nothing more. There are two types of cash cows. There is the direct cash cow and there is the indirect cash cow. When I say a direct cash cow, it is like the one I just explained. From the day you buy it, it puts money in your pocket. That is what a direct cash cow is.
Characteristics of direct cash cows Regional Areas Dual / Multiple Occupancy Multiple Streams of Income High Rental Demand Commercial Under market rental Lease/Sub-Leases Rent to Buy / Lease Options
There are certain characteristics to look for if you are looking for a direct cash cow but there are also indirect cash cows. These are the ones that are harder to see. They do not fit the Rule of Two. They are going to be muddled in amongst everything else and maybe it is your own ignorance that stops you from identifying the opportunity. Quite likely that will be the case. I have seen literally hundreds of these deals go by under peoples noses. Properties that they have driven past everyday for the
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last 10 years on the way to work but never identified that it was a possibility. Never identified that it was a potential indirect cash cow. One of the programs that I run is called a Platinum Program and one of the people in this program admitted to driving past this particular property on their way to work every day for the last 10 years and never took any notice of it. The opportunity to buy it was there at any point in time but he never recognized this property as an indirect cash cow. Let me describe this deal to you. When he first started to drive past that property, it was a very old, really ugly factory. It was more of an old shed; you could not really call it a factory. It was on a busy road and one day when he was driving past he saw a sign on it. He thought it was interesting that anybody would want to buy what he thought was a piece of rubbish. A week or so went past and he saw a sold sign. Some idiot did, he thought. Then some three months later, he noticed that there was a sign on it again. He thought, he knew it was a piece of rubbish, they are selling it again. But this time it had an architectural designed picture on the sign and what it might look like if you built something there. It was sold again a week later. Then about nine months later, after continuing to drive past this same building every day, that picture had now become a completed building with a for sale sign up again; there were now beautiful new commercial buildings. The sign was up there and it said nine for sale and then eight remaining, five remaining, last one available and finally all sold. What he drove past everyday was an opportunity at a number of levels. He had an opportunity to get in there and buy it initially and get what we call a DA on the property. A Development Approval which is an approval to get a building or a type of building or possibly a zoning depending on what the zone is, but this is zoning to build a certain style. Getting that through the council to say that you can build that particular building there, increased the value of the property immediately. So that was a chunk deal.
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The person who got the DA could have continued on with that but in this instance they actually took their money and ran at this point in time. The next person who came in had the opportunity to manufacture a cash cow. He went in and he produced nine commercial premises. In this particular case, that person that sold all nine of premises but that person did have the opportunity to sell only seven or six and keep the remainder. By doing this they could take their profit from those properties, take the money that they made and pay down the debt that remained on the remaining premises that they decided to keep. If they did that, they could have had a piece of commercial real estate in a prime location that is worth more than it was when started so they have manufactured growth. But they would also have created a passive income stream because the debt on that property would now be so low because they used the profit from the others to pay down the debt on the remaining premises. This is a complicated structure and it is a little bit more advanced but this kind of deal could have been a little house. This kind of deal could be a subdivision. This could be anything and this is where the opportunity to make a cash cow is now. It might be buying something that is really old and ugly and run down and making it beautiful and then renting it out and now because it is beautiful, not only have you increased the value of the property but you have increased the rent and now it might be a cash cow. These are the hidden ones that you would not necessarily pick up on unless you tune yourself into them. This is where I want you to start tuning yourself; in the indirect cash cow market, but first there are characteristics that you are going to have to start to look for. Let us have a look at some of these characteristics. First of all, in some cases, a direct cash cow could be in a regional area. Some of you may not be comfortable with that. I get a lot of that particularly from people who live in the city. I grew up in a bush so I have no bias but I have some mates who have grown up in the city and live in the city and their attitude towards buying something not in their own suburb is very strong. They have the attitude that they are good people so good people must live in the same suburbs that they do so it will be safe to own an investment property in their suburb.
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Take that a step further, when you go out of your own suburb, just down the road, that will be okay too. It is safe to do that because you will have good tenants there as well and that is nice and safe from an investment perspective. But they have this idea that just because you might buy in a rural area, that you are going to get a rat bag tenant. Rat bag tenants live in rural areas, but they live right around the corner from you no matter where you live. You can get a rat bag tenant anywhere. The issue is not your tenant. The issue is your management agency. You should be managing your management agency, not your tenants, in my opinion. The reason I say that is because when I see people who manage their own properties, typically, those properties are under market rental. Typically, they are not managed as well as they could be. Typically, particularly if the owner is a little bit soft like I am, I let the tenant get away with blue murder. I will not manage any of my properties. I always manage my properties through a property manager and I manage my managers. If you have got a rat bag tenant, you are not managing your manager efficiently. It is not a product of where that property is this can happen anywhere. Regional areas generally do have a high yield. Some more so than others. What you have got to do when you look at any regional area, whether it be a mining area, a rural area or whatever, you have got to look at the fundamentals and this is where the economic model and the microeconomic model or a region really starts to become apparent. I think you have to be little economists because what you have to look at is what is going on at a micro economic level. Is the town or suburb sustainable? Is it reliant on any one particular industry and if anything should ever happen to that industry, are we going to be in trouble? What drives the town, what drives employment in the town, what drives the wealth in the town? Where is it coming from and is it diverse enough and strong enough not to be totally reliant on any one thing in particular? I remember in my early days, I actually gave up a property. It was a property that I was offered which was a block of seven units and it was in a mining town that had one mine of a medium to small size and it was totally reliant on the nickel industry. This is pre-resource boom. It is also
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pre-me being very financially strong. At the time, that property had a positive cash flow of $38,000 a year. Do you know how much difference that would have made to my life back then? Enormous. I refused to buy the property. The reason I refused to buy the property is because in my financial state at that point, I could not afford any lack of rent. That property was for sale for $320,000 and I could not afford if that property was not rented, to pay the repayment on that property and the property was supported by one small to medium industry. In previous years, I had known that town, when the nickel price was not so high, not to reduce the rent so that you get a tenant. It is a case of board up your windows and wait till the nickel price comes up and the mine reopens. That was the potential of this particular property. I could not withstand that and I said no. The property is worth a whole lot more now, probably a whole lot more income comes in from it, but I still maintain I made the right decision then because my financial situation at that point in time could not withstand anything to go wrong. I always look at risk profile when I am making a decision. You should to. Had that property come to me today, I could not sign the contract quick enough. I could not sign it quick enough now but back then it was too risky for me. So that is where you have got to look to the fundamentals. Is it always going to be a town or have the potential to be a ghost town?
Multiple or dual occupancy or multiple incomes stream properties The more income you have coming in from the one purchase, the more likelihood that the property is going to be a positively cash flowed property. I am talking about a duplex, a triplex, a fourplex or then you go to a six pack. Multiple income stream properties could be blocks of units and things in the residential market but it could also be in the commercial market, strip of shops, etc. Strips of shops, is where you have two or three shops in a row so you have more income coming in from the one purchase. You might be able to buy something that will you can turn into multiple income streams. Upstairs / downstairs rented out separately. Houses that you can turn into multiple flats; something that you can turn into a duplex or triplex or a fourplex etc. Something that you could put another
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residence on. Something that you could potentially strata title or subdivide or build some storage facilities or rent out the shed for parking. One on my properties in America gets rented out for storage. The garage gets rented out for storage for $100 a month. So have a look at how you can maximize your income streams. What else can you do to make this thing positively cash flowed? You have got to start thinking outside the box. In the beginning my reality of how I thought things should be hindered my wealth, hindered my success, hindered my progress. Most of you will be thinking in traditional mindsets. One of my students bought a block of four units in a pretty sizeable regional town supported by number different industries. It was a block of four for $230,000 and each of the units was rented out for $100 a week. It is not quite a cash cow but it is getting there. If my student shares the opportunity to renovate it and increase the rental on the property, then it could become a manufactured cash cow. By renovating you will increase the value of a property. It becomes a bit of a chunk deal on the side and then you may have something that is positively cash flowed. But this student did a bit more than that. As part of her renovation she took this little lean-to in the backyard and cleaned out all of the rubbish that was being stored in it. She then put a bit of a carpet down, a splash of paint, put in four washing machines, four dryers, a coke machine, a pinball machine, a chocolate machine and one of those space invader machines. In all she put in six slot machines. The students who predominantly rented these units invited all of their mates around. They put in a lounge and a TV and this room became this little social Mecca where everyone used to hang out. While she increased the yield on the property for the traditional rental model that she had, on average, from those vending machines, she cleared an extra $500 a week in coins! Do not think that you have to think inside the box. Think of what else you can do to create income streams, multiple income streams. Always
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look for areas where there is a higher rental demand. Whilst most of you may be just thinking mining areas, and there is a high rental demand in mining areas at the moment, but what about in the suburbs that are close to universities? What about in suburbs that are close to shopping centers? What about in suburbs that are close to universities? What about in the surrounding areas of major transport hubs? What about where you have got a transport hub, where they do what I call infill housing. They are allowing multiple income stream properties so that you get most people living around where the transport hub. This is so that they can easily commute to town so that the local councils do not have a problem with cars and traffic and whatever else in the major city centers. What makes people live in an area? Is it employment, is it transport, it is lifestyle, it is all of those things? Think about what markets you are targeting so know what you are targeting and think about what makes that economy tick. How secure is it, what is happening from fundamental perspective? That affects your yield. It affects your growth.
Commercial Commercial is a little bit different. Remember how we talked about the Rule of Two. Commercial generally has a higher yield on it than residential so the Rule of Two does not apply to commercial. If you are talking about commercial throw the Rule of Two out the window. It does not apply. I have got a new rule for you. It is called the Percentage Point Split. In commercial, what happens is the tenant normally pays for all of the outgoings. They pay for the rates, they pay for the body corporate, they sometimes pay for the insurance. The lease has been set up and they pay for the maintenance and everything else on the property. They pay for all that stuff. What you end up paying for as the owner of the property is the interest on the mortgage. So if you look at the Percentage Point Split between the yield that you are getting on the property and the interest rate that you are paying on the property that is your positive cash flow or negative, as the case may be. So if you have a property that has got a 10% yield on it, you are returning 10% on the commercial property and you are paying 8%
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interest, what is your Percentage Point Split? Two percent. So if the property was worth one million dollars, how much possible income have you got? $20,000. Now, that is the rule that you should be thinking about when you are out in the field or on the internet, or talking to somebody on the phone when you are talking about commercial. The other thing that affects our cash cows in the commercial market is the business environment. So you are not only thinking about the economic environment of the surrounding areas and all of those other factors that we are going to spend some more time on. But, you have got to think about your tenant. If your tenant is losing money, it is not their problem, it is your problem because you would not have that tenant for very long. They are going broke; they are going to go out of business. Now, you have got a vacant piece of real estate. So, you have got to pay a lot of attention to the well being of your tenant. You can improve the well being of your tenant even if they do not seem to know what they are doing. You can help their business and thereby, strengthen the position of your tenant, strengthen your ability and be able to keep the market rentals, and have a more enduring positively cash flow property.
Under market rental Under market rental, this is now. There are, literally heaps of properties around at the moment that are under market rental. First lets look at the residential market. Primarily, they are going to be properties that have been owned by the one owner for a long period of time. Because, typically, what happens is, particularly if they are managing the property themselves, that is even worse. For example: You have little Mr. Smith, he manages his property. He has been doing it for 20 years. He is got a number of properties, and he is got Derrick living in one of them and Derrick has hurt his arm. Derrick is out of work. He has hurt his arm, poor Derrick. He will keep his rental at a $100 a week which is what he has being paying for the last 10 years. Mr. Smith would not want to increase his rent because, he has been a good tenant and he looks after things and he does this and does that and whatever else. But, if Derrick went somewhere else, he would have to pay current market rentals.
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I had a property that I bought with exactly this situation. It was a block of five units on the Sunshine Coast. I inherited one tenant, her name was Mona. It was so appropriate. Dear old Mona, she would wince at everything. Now, the current market rental at that time was about $220 a week. Mona was paying a $140. Mona had paid a $140 since she moved into the block some six or more odd years ago. It was managed by an agency, but Mona had it all over this agent. No one in the agency was going to say wait a minute, how come she is getting to pay $140 a week and everybody else is at the market rental? It was because she is in this situation... Hang on a minute! I do not care what situation she is in. Mona, if she goes somewhere else, has to pay $220 for that unit somewhere else. So, if I am a charity, I want the choice to be able to give, in this case, $80 a week, nearly $4,000 a year to who I consider to be the most needy and to me Mona was not that person. So why would I let that situation continue? There were other more needy causes that I could choose to give my $4,000 a year that I was not getting from Mona, than Mona. Now, the agents did not want to go and see Mona and tell her this news so I did and I bought it up to market rental. Mona moaned, and she carried on for so long. She started to pay the rental but would moan that she was going to leave, that she would find somewhere else, and that this was not fair at all etc. But Mona found it very difficult, not only to find a property that she could pay $140 a week for, but a property of similar ilk that she could pay $220 a week for, but she eventually moved on. So bring things up to micro financial if the rents are lower than they should be. You are not a charity in that regard. If you want to be charitable and you want to give money, fantastic, go and do it. I absolutely support it, but choose where you put that money. In the same way as residential, there are opportunities in the commercial market with under market rentals. In the commercial market it is more apparent because their leases may often be longer. Typically, commercial tenants may have a three or a five year lease or even a 10 year lease or longer and the clauses in that lease can vary greatly. Some of the clauses may be increases to market rental or have a review periodically to make sure they come up to market rental, but a lot do not. They may have a
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fixed 3% increases and over time you will end up with 3% not being enough to keep up with the actual market rental. Market rentals might have been going up at 6%. You compound that over a number of years and what you are doing is being a charity all over again. Have a look for these opportunities. Have a look for when leases come up and how much the difference between current market rental on the leasing market and what they are being charged right now. There may be an opportunity to buy in because in the commercial market, commercial prices are set by the yield. It is a factor of yield, a factor of your rent. That is how the price is set, unlike in the residential market where it is set by comparable sales analysis and things like that. It is set on how much are you getting on the property. The cap rate in that area is x percentage therefore the value of that property is x. Let us say you had the opportunity to buy a piece of commercial real estate for $200,000 and it was being rented for $20,000 a year at a 10% return. But what happens if that property really should have been bringing in $30,000 - $200 a week but they are just not paying because they are on to this long lease and whatever else? When the market review comes or rather, when the lease comes, you renegotiate the lease up to $30,000. Guess what the property is worth now? $300,000. You just made $100,000 by doing nothing other than bring your rental up to market value and getting what the property is really worth. There are opportunities like that everywhere so look out for that in the commercial market.
Leases and subleases Leases and subleases is where you have a great opportunity to look at the leases. I will not go into this in a great detail because it is a little bit risky. It is where you have an opportunity to take out a master lease and then sublease the same property out. It is risky in that you are signing a contract where you will be liable for that lease and therefore responsible for it. It is a way in which you can get passive income quickly but it is a way in which you can also go broke very, very quickly.
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Lease options Rent demise and lease options are your typical wrap deals. They come under the three different forms primarily and they each have right ways and wrong ways of doing them. This is not really a strategy that I personally use. The only way I will go into a wrap deal is with somebody else who wants to do the work. I have nothing against this strategy, absolutely works; it is just not for me. My personal bias is that I want to own a property. I do not want to be leasing it up to somebody else. The rents go up and you end up paying more than you would have if you just rented the property in the first place. If I am the owner then I am the keeper and this strategy requires a certain amount of personal interaction and my personality is such that I am too soft. I am not tough enough to do it. So the only way I will use this strategy is with somebody else.
Example 1: Block of 6x2 Bedroom Units $430,000 Currently returning $57,500 per year. Zero Vacancy A block of six units at $430,000. The income on the property is $57,500 a year. It has 0 vacancies. Is this cash cow? It is. This property puts about $15,000 to $20,000 a year into your pocket. They are ugly units but they are in an area that is a good, strong, solid little town. It has been supported predominantly by rural industry but they are always going to be rented, so does it really matter if it is in whoop, whoop? Probably not. Are you are going to get much growth out of it? Probably not. Does it matter? Absolutely not. I once bought a property and it probably looked worst than this. It was in a mining town and that it was the ugliest thing you could possibly imagine. It was a block of five units but that property put $27,500 a year into my pocket year after year after year. Did that property ever go
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up in value? Not a lot. I paid $250,000 for it. It could have bought properties that would have quadrupled in value with the same money but did I care. I bought this property for cash flow.
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Example 2: $945 plus per week represents 18.00% gross returns. This is based on a $290,000 purchase price and there are some left from $265,000 so the yields would be even higher. The $945 per week is based on $180 per night with a 25% vacancy rate (the cheapest room rate is now $200 per night and the Hotel is close to 100% occupancy until Christmas). This property returns $945 plus per week, representing an 18% gross return (gross not net). Its purchase price was $290,000. Over Christmas it has100% occupancy. The figures are based on a 25% vacancy rate and $180 a week. That does not mean that this is going to be what you get because there is a big chunk that is going to come out for the management of this property. To finance it you may need a little more equity because it is a more of a hotel style property but the type of property that it is does compromise its value or its potential value in the future.
Example 3: Price: $950,000 Rent (p/wk): $110-$120 p/wk per unit. 20 UNIT ACCOMMODATION VILLIAGE KAWANA Features: A/C, Games room. Entertainment room and spare land on this block. Only 3 blocks away from Central Queensland University and set on 4834 m2 allotment in a quality residential location this modern 11 year old 4 unit blocks consisting of 20 rooms comes complete with a recreation room, covered entertainment-BBQ area. Laundry, secure fencing and a car-park for car accommodation. This investors reality returns $110-$120 p/wk per unit.
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This one here, is in a university campus 20 unit accommodation village. 20 units priced at $950,000 all rented between $110 and $120 a week. Is that a cash cow? Yes it is. How much money would we need to buy this property? How much equity will we have to have? 30% at least. That would be almost $300,000 that you would need to look at in equity from somewhere else to be able to buy this property. But this property puts in excess of $20,000 a year in its owners pocket. Do you think over time that rents probably go up? Do you think over time these rents go up and your positive cash flow increases? Yes. So sometimes you have to take the longer view. I mean in this one here it is positively cash flowed from day one but sometimes you have to take the longer view that it may not have positive cash flow the day that you buy it. I will tell you some more stories because many buyers will say to me but you are an accountant, you are an economist, you are different. That is a lot of rubbish. All of those things made it harder for me because I had to desensitize myself to what was normal and acceptable. Someone without the kind of programming that I had will find it a lot easier.
Case Study: Linda & Nick before they met Dymphna I met a lady Linda through one of my coaching programs. Her situation was that she and her husband had credit card debts, a personal loan, a home loan; in total $186,000 worth of debt. So they were in 0; they were minus $186,000. This is what they did.
Credit cards Bank of Qld Visa Commonwealth Visa ANZ Visa Myer Card AGC C/Card American Express Personal Loan Home Loan
$ 15,000 $ 5,000 $ 10,000 $ 2,000 $ 5,000 $ 7,500 $ 30,000 $112,000
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Total Debt
$186,000
Now, this is where I am saying you can start with nothing or less than nothing but your road is not going to be ideal. You may have to do deals that you cannot do on your own that you have to share. You may have to do deals and cut deals with owners or where you bring in a joint venture or enlist strategies that make you gain a property in the first place.
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Deal 1:
Profit $ 78,000 Cash flow $ 48/wk Duplex 2x 2x1 - asking $98,000. Current rent $85 / week x 2 Contract for $78,000. Rent immediately put up to $105 / week x 2 Renovations undertaken. $22 000 Company Set up costs and legals $7,000 TOTAL OUTLAY: $15,600 + $22,000 + $7,000 = $44,600 TOTAL DEBT PROPETY OWES: $78,000+ $22,000 + $7,000 = $107,000 Rent post Renovation: $125 / week x 2 = $250 / week Post Reno Estimates value $185,000
The property involved in this deal was a duplex, a 2x1. The duplex was $98,000 so they contracted it at $78,000. So they had good negotiation skills to bring it down that far. The rent was immediately put up to $105 a week from $85 a week to the market rental. Linda did the renovation with a partner which cost $22,000. They set up their companies and other bits and pieces and after the renovation it was revalued at $185,000 with a post renovation rental of $250 a week. So the positive cash flow at the end of the day was $48 a week and the profit was $78,000 although the profit was shared.
Deal 2:
2 x 2 x 2 Duplexs Asking price $85,000 / duplex Had been rented for $125 / unit (x4) Offered $80,000 / duplex He had to renovate the bathrooms to our specifications. He was to Vendor Finance 20% for 12 months, interest free. He Agreed!!
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Sold one duplex for Re-valued other to
$120,000 $120,000
They still were not able to do a deal by themselves so did another joint venture this time with two duplexes. The asking price was $85,000 and they were rented for $125 a week per unit. They offered $80,000 and asked to be financed for 12 months for 20%. He agreed. So on that day when they settled on the property they only had to pay the owner 80% of the property and they paid him the following 20% in a years time with an agreed interest rate. Okay, so that was the deal that was struck. One of the duplexes was sold within that time for $120,000 which meant that the other one was then worth $120,000 because that is how residential property is valued. It is by comparable sales. So what they did is they set a bench mark for the value of the other property. It was revalued $120,000. This also meant that their equity had gone up, what was left over would have been positively cash flowed so that they can move on.
Deal 3:
House block country town Asking price They bought it! Bought a house for removal Removal costs (Big learning curve) Council, plumbing & electrical Renovation Costs TOTAL COSTS Rent appraisal Valuation PROFIT
$ 2,500 $ 25,000 $ 37,000 $ 8,000 $ 10,000 $ 82,500 $180 / week $150,000 $ 67,500
With the next property they still had to do a joint venture. They still could not quite get out on their own because when they were making money they would reduce their debt. They were trying to get rid of some of that old debt because they were starting from $186,000.00 behind. So the money they were making so far they were taking and paying down
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off their old debts and getting rid of what they had previously accumulated. Their next purchase was a property in a little town in Queensland. The purchase was a residential block for $2,500. Then they bought a removal house, which in my opinion they paid too much for; it was $25,000 for the removal house and another $37,000 for removal and set up and $8,000 for hook up. There are a lot of strategies here that can be used to reduce these kinds of costs but all in all after an additional $10,000 renovation the total cost of the house was $82,500. It was rented for $180 a week and revalued on completion at $150,000. So they made $67,000 profit. I believe that there was probably an additional $20,000 to $30,000 that they could have made if they had had a little more experience but it was still a great result.
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Deal 4:
House block Same small town Asking price $ 3,000 They bought it! Move a 3 bedroom, 1 bath for $60 000 delivered and stumped Small Reno $ 10,000 Revalue $ 175,000 Profit $ 102,000
The next deal they still could not do on their own so they did another joint venture because they were just still paying off their debt. So they did a similar deal in the same town. They purchased some land for $3,000. They moved a three bedroom house for $60,000, delivered on stumps. Sometimes you can also get the house rewired with new electrical in the price as that is often something that needs to be replaced. They completed a small renovation for $10,000 and had the house revalued $175,000 and that is $102,000 profit on that property, thank you very much.
Deal 5:
Price $155,000 Renovated & turned into 5 brm boarding house. Reno costs $ 15,000 Rent $520 / week. Revalue (post reno) for $250,000 Profit $ 80,000
A similar one for $155,000 was renovated into a five bedroom boarding house. Boarding houses can come with complications. It is much harder to get insurances and make sure you get all of the correct licensing in place. You must be very aware of the fire ratings, have fire alarms installed and all other fire requirements that are necessary. It is very important that these things are investigated thoroughly. So they spent $15,000 for the renovations on this one. It was revalued post renovation for $250,000 with a rental return of $27,040 per
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annum. It now had an additional value of $80,000 as well as positive cash flow.
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Deal 6:
Agreed to buy house (under market value) $125,000. Lots of hiccups with this house. Had unconditional approval from non conforming lender - hours before an extremely delayed settlement, Lender Cancelled Settlement. Begged & borrowed settled with cash. Approached bank to finance within hours of settling. Between signing contract and bank valuation another house 4 doors down sold for $160,000 Rent $200 /w Immediate Profit $35,000
Another joint venture; they still could not do one on their own. They agreed to buy a house under market value for $125,000, it was a great deal but they had a lot of hiccups. They could not get the finance by the settlement date as the bank backed out and did not approve their loan. They knew they could not ask the vendor for an extended settlement as by this time the vendor had realized that he was selling the property under market value. Just in time a friend came to the rescue and they did settle and it was immediately revalued at $160,000 with the rent at $200 a week. They made an immediate profit of $35,000.
Deal 7:
Purchase Price New Kitchen Legals Total Cost Re Valuation Profit
$ 15, 000 $ 7,500 $ 1,500 $164,000 $220,000 $ 56,000
Another joint venture. Purchase price was $155,000. They put in a new kitchen for $7,500 a few extras, total cost of $164,000 and revalued it immediately at $220,000, a profit $56,000.
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So it has started to become a little bit boring now because they are using similar kind of strategies but it is what has worked for them. It works for them because they could do the work. They did not have any money. They could do the work and make it happen. Like them, you can make it happen and you can make it happen surprisingly quickly, but it is not going to be easy.
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Deal 8:
3 Bedroom, 1 Bathroom House on large corner block Asking Price $ 67,000 Paid $ 65,000 Desperately needed renovating. New everything except bath tub & Toilet. Painted everything! Reno Cost approx: $ 22,000 Renovation took 3 mths. Rented for $220 / week Re-valued House $130,000
Next they bought a three bedroom and one bathroom house on a large corner block. This was their first own deal. The asking price was $67,000. They paid $65,000. It desperately needed a renovation. They spent $22,500 and renovated over 3 months and then rented it at the end for $220. It was revalued at $130,000.
Deal 9:
Bought a 1 bedroom house for Agent estimated real value at Tenant in place for Profit
$63 000 $75 000 $125 / week. $12,000
The second place they bought on their own was a one bedroom house for $63,000. The agent estimated the real value to be about $75,000 so they put a tenant in place for $125 as it already had a profit of $12,000. It is not a lot but it means that there is a future. They did this all that in 12 months. Joint Venture Summary Property Profit JV 1 $ 78,000 JV 2 $ 80,000 JV 3 $ 67,500 JV 4 $102,000 JV 5 $ 80,000
$ 48 $ 80 $ 49 $ 61 $270
Cash Flow / wk / wk / wk / wk / wk
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JV 6 $ 35,800 $ 11 / wk JV 7 $ 56,000 $-42 / wk JV 8 $ 47,000 $ 82 / wk Own 1 $ 47,000 $ 82 / wk Own 2 $ 12 000 $ 20 / wk Total $557,500 $578 / wk Now, they are the JVs and obviously, that has to be shared but basically, they made over half a million dollars in profit and through that process accumulated $578 a week passive income which is pretty good going considering where they started from.
Another one of my students did a no money down deal as well. I was talking about growth strategies at one of my workshop events spoke about how to actually do a development approval. How to actually submit the paperwork with all the councils, consultants and everything else you need to make a development approval work and there was this young girl in the audience who was about 19 years of age. She came to me after the event and said that although she didnt have any money and it might sound silly but the strategy that she absolutely loved that she learned this weekend is the strategy of the development approval and she thought she had worked out how she can put it into place. She said her best friends parents have a property on the outskirts of a small town in Victoria and all the developers have wanted it. They had been offering them as much as $1.2 million to buy the property to develop it. She said that they wanted subdivide themselves but didnt know how to go about it so she thought that she could maybe do it for them. I said if she was prepared to stick her neck out and make that happen, to speak to me throughout the process and she ran into any difficulties, to let me know. Anyway, she went to her friends parents and told them that she had put together a feasibility study as part of her program and that she had been doing a lot of extra training and that she was learning how to do what the developers actually wanted to do on that land. She said that she could do that work for them and that if she managed to obtain development approval on that land, it would be worth much more. She asked them to give her six months to try and get the development approval for them. The parents agreed and as part of the agreement she did it together with
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her friend, their daughter and through this process she would learn how to do this also. Part of the deal also was that any profit, any extra money that was made over the $1.2 million that they were being offered for their property; any increase in the value, that she could create by doing that development would be split 50/50. But her share would be split with the daughter, her friend so their daughter was getting a quota and learning the process. She got them to sign a few forms that she put through to council but unfortunately she was a bit optimistic with the six month time frame and could not get it done in that time. It took her nine months to do, but she increased the value of the property by $400,000. That meant that she got $100,000 out of the deal - $200,000 went to the parents and the remaining $200,000 got split between her and her best friend. She and her best friend now had $100,000 to start their own property portfolio to buy their very first homes. Would that not be a really good kick start to get into your first property at the age of 19?
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Example:
Reginal, NSW Commercial Office
$175,000
Current Rental $400/wk ROI 11.88% 2 Bedroom Unit Upstairs + Commercial Shop downstairs Analysis: Purchase Income Rates Insurance Interest ($175,000@7.5%) Mgt Fees ( @ 8%) Passive Income
$175,000 $ 20,800 $ $ $ 0 650 $ 13,125 0 $ 7,025
Another story starting with no money. In this instance they used applied knowledge to make it happen. When you start with commercial properties, it does not have to be with millions of dollars. This was a little commercial property in Reginald, New South Wales for $175,000 that was rented for $400 a week, ROI or Return on Investment of 11.88%. Upstairs was actually residential but it was all under a commercial lease and rented together. If you are paying 8% at the bank, the percentage point split is 3.88%. 3.88% of $175,000 is $6790. There was $20,800 income coming in. In this case the tenants paid the rates but they did not pay the insurance and there was no body corporate. It was not management through any agency because the tenants paid it directly and it was on a negotiated contract so there was no getting out of the contract or whatever else. Everything was done through their solicitors. The passive income on this particular property was just over $7,000. $7,025 passive income for a $175,000 spend is not too bad but is it going to cost 30% equity because it is commercial.
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Let us look at those figures. In this case, it would depend on whether the owner is actually registered for GST as to whether that is plus GST. It is $20,000 worth of income but you do not have to be registered in the commercial market for GST and collect GST and pay GST etc, unless your income from your commercial property exceeds $75,000 so in this instance you would not have to be registered for GST so it would not come into it. This does not apply to residential property as you do not have to be registered for GST in residential properties regardless of how much the income is worth over $75,000 or not. To work out the passive income on this property the ROI we are actually working out is based on paying interest on 100% of the mortgage. Your real return on investment is infinite because the entire amount was borrowed but what is important is your opportunity cost ROI. This is a calculation that gives you the ability to be able to compare one investment with another. In this particular case we have got $52,500 (30% of $175,000) that is going to be required in equity or money from somewhere else, to be able buy this property. So $52,500 is required plus approximately 5 % in estimated costs to cover other bits and pieces involved in the purchasing of the property. It is going to cost $58,000 to get into this deal so that is $58,000 that I am choosing to put into this deal that I could be putting somewhere else. This is where your opportunity cost analysis starts to come in. How much return am I getting for the opportunity cost of investing in this deal versus this deal or what else could I be doing with my $58,000 worth of equity? Is this deal good enough? This deal might require $58,000 but the next deal might require $200,000. How do you compare two deals like that? The answer is in the calculation of an opportunity cost analysis, opportunity cost ROI. It is 12%. How do I get 12%? $7,000 which is the passive income that we have got coming in for the opportunity cost of investing $58,000 into this deal as opposed to
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another deal. So $7,000 divided by $58,000, gives you roughly 12%. So it is 12% return investment. Since I have no money to invest, I am actually investing money through borrowing the lot. I need to ask myself if I could a 12% yield somewhere else because really if I am paying 7.5%, my real yield on this property is actually 12% plus 7.5%. I am actually getting a 19.5% yield. But 7.5% is going to pay the interest on the money where I borrowed the $58,000. So you need to think where else could I place that money and get about 19.5% return, 12% after paying interest on my money.
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Analysis Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5%
$175,000 $ 7,025 Infinite?? 12% $ 52,500 $ 5,900 $ 58,400
The place you could get more return would be in another property deal. You are not going to get it anywhere else but I am biased. There was a particular property that was one of those properties that I drove past for 10 years on the way to work. This particular property is a handkerchief sized piece of real estate on the corner of an industrial estate. This little handkerchief piece of real estate used to be just a hedge, but somebody that was thinking out of the box like I obviously wasnt decided that this piece of real estate could be something they could do something with. So they went to the council that owned it and actually negotiated to buy the land free hold. In some instances, you might have been able to buy the lease hold on it but they bought the free hold on it on this handkerchief sized piece of land. Then what they did is they erected signs and went about and started selling signage to the local businesses. They sold enough signage so that in a few years time, I saw an ad to sell their sign business and this little piece of land for $300,000 plus GST promising a 10% return on your money.
UNIQUE INVESTMENT OPPORTUNITY Sale by Negotiation $300,000.00 + GST MAROOCHYDORE Unique investment opportunity on a dedicated signage site located on the Sunshine Coast yielding 10% nett p.a. - $30,050 Positioned at the entrance to a thriving retail/commercial estate. This is a rock solid investment that will continue to perform.
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If you were offered a deal that had 10% return on your money, on something that was totally hands free and you did not really have to do very much with it at all, would you be interested? Yes. There it is: $30,000 worth of income, $300,000 purchase price and it cost you 7.5% or 8% let us say to pay the interest on your $300,000. You would get 2.5% or 3% roughly on your $300,000 return. Passive, not gross. Now, the interesting thing with this one is that it is a business model. It is an opportunity that everybody including me drove past and missed and it is a cash cow in a high growth area. The person who bought this business, I know and he said I can get more out of this. There is nothing on the backs of those signs. People driving the other way can see those signs. I am going to sell signage on the other side particularly the front ones and he actually erected one on the other side. He was able to increase the income on this property by a third, $10,000 a year so it is now $40,000 income coming in. Which now makes that property worth $400,000 - $510 a week return on a $250,000 purchase This is the same amount of money as what it would cost to buy a four bedroom apartment in a university complex. Only in five years time, your property is going to be trashed and you will have to replace everything. You will have a downturn in your yield over the Christmas period and that property will be harder to finance and your management fees are also going to be very high. The same argument can be applied to a retirement village with that of an equivalent value property in a neighboring suburb where anybody can buy and anybody can live in. The property in the neighbouring suburb will go up more than the retirement village property but I have a bit of bias to this style of investment.
Buying sight unseen Always do you due diligence. I am not a great believer in buying a property that I have not seen. Or that somebody that I trust implicitly has not seen. This is a perfect example. There was a lady in one of my mentoring programs who bought a property. She is a New Zealander and this property was actually in New
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Zealand. It was a block of four units that she could buy for $176.000 and the rent on it was really good. It had positive cash flow and sounded fantastic. In the contract she made sure she had a pest, building and finance clause in there. She went over to have a look at it and found that she was no longer that keen on the property for a number of reasons. This property and the other properties on the street had had a gang move in but not only that although at the moment the tenants appeared to be paying their rent but in the adjacent street one street over where the gang had previously resided, it was now burnt out. There had been little fire that burned out the street so naturally she wanted to get out of the contract. She wasnt overly concerned because she thought she could easily get out of the contract due to the finance clause. So she got her solicitor to write a letter saying that she was unable to complete the contract because she was unable to get the finance. The vendor however said that this was not a problem and that he would provide the finance at a 10% interest rate. Unfortunately her contract only said subject to finance - it should have said subject to finance sufficient to complete to buyers satisfaction. It did not so she had no out. She had to legally accept his offer of the finance. There is a happy ending to this story in that she was able to get out of the contract but only because she cried her eyes out and he felt sorry for her. That is the only reason she got out of that contract so worse case scenario, if in doubt, try crying!
Example: Here are some other scenarios. Previously I mentioned under market rentals and things like that. A typical example is 100 km out of Brisbane, a property is for sale for $550,000. Advertisement Block of 4 x 2 x 2 Price $550,000 Brisbane: 105km (direct line) Perfect Investment Both sets are excellently maintained with one block
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undergoing a refurbishment in the last five years. Fully tenanted and showing excellent returns and located in a top class east side location. Unit blocks of this caliber rarely come on the market so act quickly. There is a total return of $1150 per week potential to increase rents to $1320 per week. It is a 4x2x2 which means it is a complex comprised of two sets of four each with two bedrooms which are rented at the moment for $1,150 a week and could probably be increased to $1,320 a week. It does not sound like a lot but when we look at that, first of all, how much money do you think we would need to buy that property? What percentage are we going to have to put in to buy that property? How much are we talking about? Normally it would be 20% for residential, but because it is eight units it is considered a commercial deal. Under six units is normally considered residential depending on which bank you are dealing with but complexes above six, you are definitely going to be paying a commercial rate which means you are going to have to put in 30% to buy that particular property under a commercial deal. However in this instance they did actually only put in 20% which means they have obtained finance as a residential property. The reason for this is because there are two separate titles two blocks of four units which means they were able to negotiate two contracts with two separate banks and able to have an 80% lend on those properties instead of 70%.
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Analysis Purchase Income Rates Insurance Interest ($550,000@7.5%) Mgt Fees ( @ 8%)
$550,000 $ 59,800 $ 3,500 $ 900 $ 41,250 $ 4,784 $ 9,366
Passive Income
This property was $550,000 with the income just under $60,000. Taking out the costs such as the interest rate, rates and management fees leaves $9,366 as passive income. This is pretty good but the property was under market rental.
Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5%
$ 550,000 $ 9,366 Infinite?? 7.4% $ 110,000 $ 17,150 $127,150
First of all, you need to work out what the opportunity cost ROI is. We are going to have to put in 20% plus our costs that we will round off at 5%. Our opportunity cost ROI, is the passive income, $9366 divided by $127,150 which is the equity that you have put in from somewhere else. The opportunity costs of putting $127,150 into this deal as opposed to using that equity somewhere else comes in at 7.4%. The fact that you are paying 7.5% somewhere else means you are going to get a return of around about 14.9% real return on the property. Remember that we have $1,150 a week as the current rent and it could $1,320 so that is $170 a week extra.
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Analysis reworked Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5%
$550,000 $ 17,499 Infinite?? 13.76% $110,000 $ 17,150 $127,150
It does not sound like a lot of money extra but if you do the figures again the same deal with more income now the opportunity cost ROI is 13.76% return. If you add the 7.5% interest you would be actually paying on the deal it makes the return on that property in excess of 20% return. Now it sounds even better and where else are you going to get that kind of yield? In my opinion there is nowhere else except in property.
Maximum return Look for maximum return on your property where ever possible. Consider putting in storage facilities and things like that, to maximize the income from any one property, whether it be a parking facility, a duplex, or by adding extra dwellings. All these things create more income, more cash cows. Advertisement: 438 Creswick Road, Ballarat Central Two Road Frontage Close to Lake and CBD $125,000 What a ripper! This two bedroom with study, weatherboard home in need of a bit of T.L.C is located in a prominent central location within walking distance of Lake Wendouree and the C.B.D. Set to the front of an approximately 825m2 block with two road frontage. Be quick.
Why would I be interested in this ad if it was among thousands I have seen on realestate.com or domain.com or any of the others that are out
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there? Two road frontage absolutely peaks my attention. 800 square meter block; that means it is probably bigger depending on the council requirements in that area. That also gets my attention. Needs TLC (Tender loving care) that means it is a renovators delight. It means that I can fix it up and compound my return. By fixing it up, I can increase the value of the property and I can increase my yield on the property. Because this property has a two lane frontage, the thing that needs to be checked is whether I can actually get across to both sides of the property where I can access the properties. Assuming I can, I can build another residence on the back, assuming that is fitting in with the council guidelines of an 825 square meter block. It may or may not, depending on the council. Alternatively, I might go and build some storage facilities on the land. I would probably fit four storage units on the back would probably return more than putting something on it because it is not going to cost as much. That is actually what happened with this block. This was a multiple use property.
Case study: Ian & Helen Age 40ish, Married 3 Kids Financial Position when they started with Dymphna Helen working 6 days as hairdresser and a Ian, a Fireman PPR value Mortgage Equity Survival Mode!
I would like to mention Helen and Ian. Helen was my hairdresser. She earned $18 an hour when she came to one of my mentoring programs. $18 an hour and that was their financial position at that point in time. They had a $590,000 property that they owned with a mortgage of $380,000. The total equity at that point in time was $210,000 and this
$590,000 $380,000 $210,000
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was where they started with me, they were in their 40s. In their own words they were in survival mode.
Deal 1:
Purchase Price $110,000 Good condition, good part of town, doesnt need repairs. Currently rented $ 230/wk Est. market value $240,000
They bought an $110,000 property in good condition, in a regional area and rented it for $230 a week. They fixed a few things up and brought the estimated market value up to $240,000. Deal 2:
Block of 4, 2 titles List Price Purchase Price Immediate Costs Rented at Estimated value
$228,000 $138,000!!! $ 55,000 $ 660/wk $550,000
Then they bought an ugly block of four units that was on two titles. They had enough room to build another two units on the land but they got a bit slack and have not done this and therefore not maximized their return but that is beside the point. It was listed for $228,000, but they purchased it for $138,000, post negotiation. They had signed a contract at $228,000 but because there was documentation that only came up in the searches after the contract had been signed that through a good solicitor showed that the council was demanding a retaining wall be put in on this property and that was going to cost a lot of money. So they got a quote to show the vendor how much that this was going to cost and through negotiation they were able to bring the price down to $138,000 if they would fix it rather than the vendor. The vendor walked away from the problem because he did not want to do it. That was why he was selling.
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The property was rented at $660 a week. They revalued the property after a few renovations and other bits and pieces and the retaining wall which cost $55,000 and with the problem fixed it was now worth $550,000 as well as being positively cash flowed.
Deal 3:
Land New residential subdivision Sold for Time Frame 8 mths
$83,000 $120,000
Then they bought a block of land off the plan stage, one of an eight stage development which they sold within an eight month timeframe for $120,000.
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Helen & Ian Post Dymphna
House Units Land PPR Total Passive Income 16,530yr
Equity/Profit After Before $ 130,000 $ 367,000 $ 43,000 $ 700,000 $210,000 $1,240,000 $210,000 $ 318/wk $
Better lifestyle, Helen now works flexible hours in real estate and Ian can follow his dream of playing in a band!
After just 12 months with their initial $210,000 worth of equity they were now in a situation where they owned their own home. In the process they actually sold their house and built another one, so they manufactured growth in their own home for $700,000. They had $43,000 profit on the land. The units they had increased by $367,000 and they have been increased by $130,000. Helen is not longer a hairdresser. I am her only client that she continues to do hair for which we always do over a glass of wine and basically, her passive income was $318 a week or $16,500 a year. That made an enormous difference to them because once they were continuing to do what they wanted, she fell in love with real estate and now works as a real estate agent part time and he had the ability to be able to follow his dream and he might be a fireman but he loves playing in a band so he now takes time off and does that. That $16,500 has given them the freedom to be able to do that. They have got a clear path to be able to move forward.
Business Cash Cows

When you start looking at businesses, you have got to leverage yourself. Some businesses are easy to manage for example Laundromats and things like that. They can be placed under management. What you do not want to do is to buy a business that you are stuck in; where you are working in it and not on it.
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These are some really quick figures on a leased option or a rent to buy: This is not a strategy that I particularly like to do but these are numbers on one that I did as a joint venture with another party.
Lease Option Example:
Purchase Wrapper loan Settlement money needed Deposit Costs
$83,500 95%
$ 4,175 $ 3,000 $ 7,175 $ 5,000 $ 2,175
Wrapee deposit received Total cash outlay
$83,500 is the purchase price. The wrapper is me, the owner of a property. They have got a 95% loan. The settlement required to make that happen meant that I needed a deposit of $4,175. The cost was $3,000 so it is $7,000 all up. The new person coming in who is doing a lease option or a rent to buy contract on this property is putting in a $5000 deposit. Typically, the buyer is going to be somebody that cannot get a loan somewhere else. They are going to be credit impaired in some way but still have the capacity to be able to repay it. So initially the joint venture was actually out of pocket $2,175. Analysis:
Wrappers interest ($83,500 + $2,175) @ 7% or Wrapee payments or
$ 5,997 $645/month $15,547 $ 1,150/mth
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Positive cash flow or Net return on investment of or
$505/mth $6,060/yr $2,175 278.6%
From an interest perspective, we looked at an interest rate of 7% which meant $83,500 came in at a cost of just under $6,000 which is $645 a month, it was costing. The wrappee was paying $1,000 a month, or it was $1,150 a month to take the property and buy it as fixed price at the end value. Plus there was a positive cash flow of just over $500 a month which if you look at the percentage return on your money; that is a $2,000 outlay for $6,000 return which is a 278.6% return on your money. But these deals are a bit of work. It is not my favored strategy but it does work and it is a cash cow. Overseas investing Property investing does not have to be Australia. My girlfriend bought a property in Bad Berneck which is in Bavaria, Germany for 42,000.00.
Bad Berneck, Bavaria Purchase Price Rental Income Gross ROI
42,000 300/wk 37.1%
Rental is coming at 300 per week, which is a 37.1% return on your money. Do we care what a Euro is? No. The rule of two still applies no matter what the currency is. Another example was purchased is the Unites States for US$89,900. The ROI on this particular property was 26.9% after the costs and bits and pieces.
Four Units. Beautiful Victorian building. Separate electrics. New exterior paint. Garage and off-street parking. Close to Elementary School. Listed Price $89,900 Current Rent/Mth $2,016 Taxes / year $3,105 Good Faith Estimate $5,394
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Insurance & other ROI
$ 900 26.9%
Case Study: Natasha age 19 - Party Mode Cash cows come in many different shapes and sizes. A girl I know, Natasha who was 19 at the time and in party mode when I first met her but prepared to give anything and go. She bought two caravans, one for $4,000 and $6,000 for the other. She fixed them up and rented them out. The improvements cost her $3,000 but she could not borrow to buy them so had to have the savings help from her father. The rental on them was $440 a week. Purchases Improvements Rental Income Park costs Passive income $13,520/yr $4,000 + $6,000 $3,000 $440/wk $180/wk $260/wk or
The caravans were sitting in a mining area that did not have enough housing for the miners which is why she was able to get that much money for them.
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Ravenshoe Reno Purchase Reno cost Current value Will rent for
$ 62,000 $ 15,000 $130,000 $ 160/wk
She then went on to buy a property in her hometown for $62,000. The renovation cost her $15,000 which she did herself with the help of her father. The current value is $130,000 and the rental of the property was $160 a week.
Hughenden Cash Cow Purchase Rental Income Current value
$ 35,500 $ 100/wk $ 40,000
Then she did a similar kind of deal but the next property did not really need much of a renovation. It was a cash cow from the beginning. It cost $35,500 and was rented for $100 a week. The value immediately after buying it was $40,000 so although it was not much under market value it gave her a bit of a boost.
Characteristics of a manufactured cash cow
Under Market Rentals Improve for Higher Yield - Think Laterally Build it Create more Income Streams Reduce debt for higher yield Creative Management Equity Down and Discount Purchasing Selective selling
Under market rentals, improve for a higher yield, think laterally, build it, make it, create more income streams, reduce your debt for a higher yield. Creative management, think outside the box constantly! Equity down, obviously, that is the slow method but basically if you are putting money in, it is going to be positively cash flowed and by
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selectively selling over a period of time it can help you to create more income. This property here was a property that a gentleman on the Sunshine Coast owned. His daughter was going to university in Brisbane. He looked at the prices of sending his daughter to university and he found that they were exorbitant. So he decided to buy a property near the university. He paid $265,000 for the house. It was a large house and he converted the garages into two more bedrooms. He did a lease with his daughter, a commercial lease. She took out the lease with the ability to be able to sublease out the other rooms. She then subleased all the other rooms for $100 a week. So that property produced, after renting out the other rooms a $12,300 passive income per year. Plenty for the daughter to be able to have some spending money while at university.
Large 5 Br house, 3 Bathrooms, DLUG, Living area upstairs and down, close to Uni, train & shops Purchase Price $265,000 Converted to 7 individually rented rooms after garage Conversion Costs and some additional plumbing $15,000 Rented to Uni Students at Positive cash flow $100/room $12,300/Yr
This was cheaper than putting her into housing at the university and he has an asset that is increasing in value. She gets $12,000 a year to live on while she is at university and it did not cost him anything, so he decided to throw in a car. How do you get the real estate to ring you with that kind of deal. They dont; you have got to chase it. You have got to start to recognize those kinds of deals. Remember, previously I mentioned when a business not making any money, it is your problem. This is an example of a business that was not making very much money. Look at what it is needing. Is it on a busy road? Look at the entrance, does it have signage? Does it need better signage? Blue might be a pretty color that you like but go for a color that attracts attention and not gaudy rather than something that blends into the landscape. That is not what you want when you are looking for a commercial property. A new entrance, which may cost
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$25,000, a repaint and some signage will mean that the property is worth more. It will increase the rents. It will increase the business. It will increase the profitability of the tenant in there. He loves you to pieces because of what has happened to his business and this is where caring for your commercial tenants really starts to come into play.
Equity down deals This is where I was talking about paying down debt earlier, where you have a property where you might build eight units and you might sell six and keep two. You use the profit that you make on the other six to pay down the debt on the remaining two and keep them. That property could be in a growth area that is positively cash flowed. Another mate of mine, he is a very successful developer. He has been doing this for years and years and his daughter did not want to have anything to do with this business. She wanted to go to university and she wanted to be a teacher. Right or wrong, from the day she was really little, it was her thing. She wanted to be a teacher so he said to her, that he had no problem with her being a teacher but he would like her to take 12 months off and spend it with him so that she has some other skills as well as being a teacher that she can rely on. She agreed. She took what we call a gap year before she went to university. He also said to her that he was not going to pay her any money for the next 12 months she was going to work but he was not going to pay her any money. Instead, he was going to do this project together. He would put in the money required to do the project but she was going to be the one to do the project. He wanted to teach how how to do this. Again, she agreed. The project began and she negotiated on the land. She negotiated with the architects, the building and the DA through the council as well as the town planners and everybody else along the way. She had negotiated to buy a block of land that they could build 16 townhouses on which they did. They got it through council and built the townhouses and then she sold eleven of those townhouses and kept five. Of the five that she kept, she used the money from the sale of the eleven to pay down the debt, not completely but mostly down on the remaining five. She went to university next year and became a teacher. That is what she wanted to do. But the difference between her and the kid that would
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have gone straight out of university and gone into teaching is that she went into teaching with a passive income of $50,000. She went into teaching with a pension of $50,000 that she could live on. She did not have to worry about her income anymore. She had done it. But she went on and she became a teacher and I spoke to her father probably the end of the last year and he said, she is still a teacher and the property is going up in value and she has never done any more but she never has to worry about having to work again because the rents have gone up and the townhouses are paid down. She has that bench mark that I spoke about in the beginning. She has her basic needs more than covered. She has got that done and dusted. So now, she can do what she loves because she wants to do it. Se loves being a teacher teaching lower primary school children. She is doing it because she loves it, not because she has to. She has got that covered. Is that not something that you think you would like to strive for? That is what cash cows can do for you. That is why you have got to be balancing this portfolio.
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Discount buying
Mortgagee in Possession Deceased Estates Forced Sales Divorce, Moving, Illness, Old Age, Financial Pressure Rates Defaults Public and Perpetual Trustee Ill-informed Seller or Agent
When you are buying, you are looking for a deal. You are not just looking for an average kind of property; you are looking for a deal. You are looking for a mortgage in your possession. It may be an estate, a default mortgage, a divorce settlement, a moving, an illness, an old age, a financial pressure. You are looking for a rates defaulter a public or perpetual trustee kind of property, an ill informed seller or an agent. Judy and Greg are a couple that are in my Platinum Program. They bought a property in 2000 for $8,000. This is their principle place of residence. The current value of the property is about $250,000. Since they joined a coaching program they have bought as a result of that program a duplex for $90,000. The current value of that property is now about $180,000. The rent is $120 each, passive income $100 week just to give you an indication of how things can start to add up. Then there was a triplex. They paid $120,000. The current value is $240,000 and the rental on the property is $360 a week, which produces $170 a week passive income. Everybodys trigger is different. Gwyneth did one of my programs, not for her, or for her lifestyle or any of those things. She did it because she wanted to motivate her lazy sons. She had twin sons in their late teens and she did one of my programs and then bought a block of four units in Haywood in Victoria. The units rented for $340 a week.
Heywood, Victoria Block of 4 units Rental Income Manufactured Growth of and increased rents to Profit Positive cash flow
$160,000 $ 340/wk $ 90,000 $ 440/wk $ 90,000 $ 8,155
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She manufactured growth by making those two lazy sons go down and renovate them. The profit on the deal was $90,000 which produced her a passive income of $8,000.00. Her two lazy sons are now full time real estate investors. It worked. My motto and I want you to remember this is:
Real wealth comes from accumulation, not trading.

If you are selling properties, you are trading; you are creating income which you pay tax on. If you want to create real wealth, you do not sell. You accumulate because those properties will continue to grow. They will continue to earn income. They will continue to do what they do. If you were trading, you might make a great profit and you sold it and you paid tax on it but guess what, it is now gone. If you use it for lifestyle, it is completely gone, you have got nothing left to go off and do it again with so you have got to do it again just to earn the income. This is a trap that a lot of real estate investors fall into particularly those in the game in the construction industry like builders and plumbers and electricians etc. They see the money, they sell it, and they think wow I did so well. But they have got to do it again next year because they sold it. If I kept it, it could have been positively cash flowed and it would have continued to grow. It would have continued to exponentially increase their wealth, etc. But they sold it and they made a great deal and that is great, but it is accumulation that gives you real wealth, not trading. Sometimes, you have to sell but it should be the minority, not the majority.
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Finance
You need to be mindful of your internal language, as in your personal mindset towards money and wealth.. It is impossible for you to become rich if your internal language will not allow you. I believe that all of us are hypnotized to work for money. It is a deep hypnosis that we need to wake up from. Once you wake up you will get depressed, you will get excited, one minute you are going to love me for the insights that I have given you and the next minute you will hate me for all of the emotions that you will go through. My purpose is not just to wake you up, but to empower you. Through reading this you are going to pick up a lot of ideas but you have to understand that in order to become a multimillionaire, you have to have your house in order; you have to have your accounts; in order; you have to have your finance in order; you have to have your financial plan; and you have to have a greater understanding of how things work and that is what I am helping you to do. The best analogy I can give you is ask you to remember when you were five or six and your mother asked you to you hop in the car. Even at this age you knew that this machine would take you places, but as far as driving was concerned, because you did not know how to drive, you were unconscious and incompetent about driving, yet you understood the concept of where the car would take you, in this instance it may have been your grandmothers house. Then when you reach 15 or 16 years of age, you develop a sense of independence; you wanted to go places, do your own thing and you suddenly become conscious of the fact that you do not know how to drive. Then you begin to get really excited about the possibility of driving. When you become conscious of something, that is where pain can begin which is hard but the excitement about learning, in this instance, driving, is where you reach a break through. That is when you actually get behind the wheel and start driving. Just think of your first parallel park. The first time you try you are not very familiar your surroundings and the whole experience is awkward and clumsy but at some point or another you became unconsciously
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competent until you reach a point where you are on automatic pilot. Most of us drive from work to home every day and dont even know remember the process it is so automatic. Think about this from an investment perspective, we all know that money makes money and we all know that investment opportunities are all around us but the truth is, because of the education we have, the conversations we did or didnt have at school or with our parents, we are unconsciously incompetent. Let me give an example of how deeply hypnotized people are. Imagine that you are at an investment seminar where you can talk about money and it is acceptable to do so. Imagine that started asking people how their superannuation was doing. 50% of the people would probably say that they did not know because we are unconscious and incompetent when it comes to superannuation at that point in time. But once you recognize that it is something that you need to learn about that is when you break through and become competent and conscious in your conversations with others. You start asking questions: How did you do that? How did you set up that company? How did you make that investment? Where did you place your money? When we were little we were shown how to put the money into a money box and we were told if we put the money into the money box that it would accumulate and we could do some big things with it. But then we grow up and we forget about it. When I had my accountancy practice, the average client would be 46 years of age with a house that is worth $600,000, owing $200,000 on it and they have about $150,000 in superannuation. They would tell me they would like to retire at 55 and then I become the person who is going to tell them that they are going to run out of money if they retire at 55. In third world countries they have lots of kids, the kids help to look after them in retirement, but in Australia, the average family only has two kids and it doesnt quite work in the same way. In Australia the belief is that if you get a good education you will get a great job, but what would be a much better thing to instill in people is to go and get a good education, so that you can get that fabulous job and from the moment you start to get money coming in, get that money to work for you. Take a percentage of each dollar that you earn and make it
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bring you an additional return. You need to send your money into the market place so it will bring a return and get this; then you can switch from working for money to making your money work for you. Let us say you ask how you get your money to work for you? The secret to becoming poor is spend more than what you earn. The whole idea of having money work for you, you have to have the money in the first place. Send it to the market place to work for you. If you are stuck in the middle of a mass of bills you are in the treadmill and it is difficult get out of it. The whole point here is to pay yourself first. When a child graduates from university one of the first things they do after they get their first job is buy a car usually by borrowing $25,000 from the bank, but the truth is that five years later, they will have paid $40,000 for that car and it will now be worth only $13,000 - $15,000. They start life in debt and end up working for money, to pay for the debt on the car. There are certain bills that are nonnegotiable such as your mortgage or car repayments etc. but taking those away I would like to propose that regardless of the bills that you have, that you pay yourself first. Make an agreement with yourself that you are going to pay yourself a certain amount of money and you will put this amount of money to work for you. Then you will have what we call the petrol for driving the engine, your wealth creation engine. Having done that, the next problem that you will face is what to do with the money that you have put aside. The truth is, the market place for investment is exactly the same as the market place for food. Could you imagine the butcher telling you that their meat is not very fresh that you should buy some fish instead? Could you imagine going to the fisherman and him telling you that his fish is not very good, you should buy some eggs? It would never happen. You will find a similar situation when you go into the market place looking for real estate; the person in real estate is going to tell you that property is the investment vehicle for you. The person dealing with shares is going to tell you the only thing worth investing in, is shares. If you go to a financial planner, they are going to recommend a managed fund, some shares and perhaps some insurance. Everybody is trying to sell you their fish!
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When you go to the market place got to understand that this is the case and that whatever it is that they are selling is going to be what they are going to recommend is the best thing for you. What you need to get is a balanced diet; you need to understand a little bit of everything. The problem in todays society is that the minute we save some money, we usually go and spend it. We spend it on gadgets and overseas trips, we put the smallest deposit on the biggest possible house, we buy everything on credit and we think it is alright to do, because we have two incomes. Then we have children, first one, then another and suddenly we have child care and all of these additional bills to pay and the two incomes isnt stretching as far as it used to. Then at 46 years of age, after working for 26 years, you find yourself looking at higher risk investments so that you can retire as soon as you can because your superannuation is not enough. There is no such thing as investing without risk but if you start paying yourself first, you can command that money to go and work for you and diversify that money into more risk or less risk, but at least you will have your money working for you. The solution is capitalism! You live in the land of opportunity. Can you just imagine how much milk got drunk in Sydney today? I want you to imagine the infrastructure that allowed the milk get to everyone that drank it in Sydney today. A few days ago, a farmer had to milk his cows. The milk was put it through a system that cools the milk, cleans it and puts it in a truck where it gets taken to a facility that puts it into bottles. From there it is refrigerated and with another truck, gets taken to the stores and cafs that use it to make your lattes. What happened? Capitalism did. Mobile phones; 20 years ago - worthless; today - $32 billion. Imagine how many people get employed because of mobile phones. Capitalism is going on. It means that there is so much money going around that surely if you put your hand up some money ought to stick. We live in an age where anything is possible so the most important thing is to find out what you are passionate about. If you are passionate about hair, or food, or whatever, then open a business that works with that because then you have that motivation.
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The truth is, when I got my degree in economics, I realized that every single thing I had ever read was because somebody forced me. My parents expected me to go to school, so I went; the teachers expected me to do an exam so I did; they put books in front of me, and I read was because it was expected. Nothing that I read was because I actually wanted to read it. The moment that realization came to me, I began reading the things that I wanted to read on all sorts of subjects. If you want to know anything about investing in property, there are tons of books on the subject. Capitalism is not something that we just need to understand, it is something that we also need to take part in. Our forefathers did not go to war for the freedom of speech, they went to war for the freedom of ownership. That is why they went to fight. If you really think about it, we fought for freedom, the freedom to go into business, to own land and the freedom to do as we please. The reality of capitalism is all around us. That is why it is possible for you to read information such as what you are reading now. We have a capitalist frame of reference yet 50% of humans alive cannot access this thing called capitalism either as a result of shear poverty or government regulations. If you have a car key in your pocket and you can choose to have a hot water bath or shower at any time, then you are in the top 6% of people alive in terms of wealth.
Debt
Lets say you have borrowed $100,000 from the bank. Although you have borrowed $100,000, in actual fact over that 25 year lifespan of the loan at 8.5%, you will find that you will have paid the bank back, $241,000. This is because in the beginning you will have paid mostly the interest upon the interest, so the principal does not go down. What sounds even scarier is, for you to pay back that money you will have had to earn $371,000 and pay $130,000 in taxes and the only thing you truly meant to do was to borrow $100,000. This is everybody you know, your family, your coworkers; this is everybody that ever borrowed money. This is what personal debt does to you. Then the government comes along and gives you $7,000, to buy your house and we all think that is fantastic because it is the Great Australian Dream to own our own home, it is the Great Canadian, American, English,
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the Great Human Dream for that matter. So knowing that the average mortgage is $300,000 multiply all those numbers previously mentioned times three. The government gave you $7,000 but think about the return on the money from the governments perspective as far as investments are concerned. They invest in you $7,000, you bought a house, but you only ever pay for the house after you have paid tax. So you have to gross over $1 million which means paying $400,000 in tax, just to manage to pay your $300,000 mortgage. Is it a dream or a nightmare? When you go and buy a house, you are totally emotionally driven, you only see the total sum later. It is because most people, when they buy a house, they go to a bank ask to for money and the bank tells you what your monthly repayment and you can afford that so the deal is done. But the average Australian within seven years of purchasing that house will upgrade and then you wonder why you are in the financial situation that you are in when you come to my office at age 46 wanting to retire. If a young couple came to see me, saying that they are worth $70,000 each, I would say they should build a chain reaction first and once the chain reaction is up and running, then buy their own home; let their chain reaction buy the house that they are going to live in. There is the perception that renting is a waste of money; it is if you are not investing. There are a lot of books out there saying there is good debt and bad debt as far as I am concerned, debt is debt. The distinction is that there is debt that is non tax-deductible and tax-deductible. The debt that is taxdeductible does not hurt as much. I would suggest that you always have a debt elimination process in place. In other words, you are accumulating capital but in the background you have a debt elimination process that is quietly working away reducing your debt. One of the things I would like you to do today is to give you accountant a call and put on the sexiest voice you can manage and say I love you. Why do I want you to do that? Because your accountant is stressed and overworked; there is not enough time to do what needs to be done. The government has changed the rules which means even more work. If you call your accountant and say I love you, he is going ask who you are and when it comes to your file, he is going to remember your call and he might spend three minutes more on you. Thats three minutes for free
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and maybe where they pick up just another detail that saves you some tax. Accounting is a game of perception. All year you barely think about tax, and then tax time comes along and because it is the law, you do your taxes. However, very few people look at their taxes from a strategic point so a lot of possible tax savings are lost because they havent positioned themselves well in relation to it. Instead they run a round last minute trying to find some receipts with a vague hope that you will be able to make some extra deductions, but essentially it is too late. Part of the problem is that most people do not know how much tax they are actually paying. I am sure the governments decided somewhere along the way that it would be better if they did not tell people how much money they are going to take from them and just take it. Moreover, that hot guy that were dating, who told you he was making $150,000 a year, only makes $90,000 and that flash car he is driving, not his either, its leased. In that new job, you may have been promised $100,000 but you only end up with $70,000 of it in your pocket because the $100,000 is the gross figure and what you are being paid is only the net figure. The truth is, by the time you go to see your accountant, the money is already gone but if you look at taxation strategically you can work towards getting some of that money back. Tax planning is not the privilege of a select few, it is every persons right as a citizen, yet so many people view getting a little money back as merely being lucky. It has nothing to do with luck and if they have to pay more, it is because they didnt put enough in. People in general have no idea of the level of control that is available to them and what everyone needs to realize is that the more that they invest, the more they give their accountant the flexibility and ability to tax plan for them; Australia is a tax haven. So why is it that the majority of people do not invest? Because they never pay themselves any money first! If you do not provide the information for your accountant, you cannot expect them to get the greatest possible tax deduction. There is nothing wrong with the accounting profession. It is not your accountants fault that you have the wrong expectation about them when they are looking for possibilities while still remaining compliant. Most accountants are a
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very busy just trying to process all the data and still have enough time to study the legislation and work with investment products in order to marry them to you circumstances. Depending on how much work you do for your accountant in the preparation of your taxes will determine how much you actually pay your account. Obviously there is a lot more work in preparing and strategizing a company tax return as to an individuals return and the price will be reflected accordingly. It is dependent on the time that they spend working on your tax assessments, so it is fair to say that if they spend more time strategizing your assessments, then it may well cost you more money, but it will also save you money in tax. Where previously as an individual you may have paid $300 to your accountant and paid $12,000 in tax, now you may pay $1,200 to your accountant but your tax has been reduced to $7,500 thats saving of $3,600 because the accountant was able to spend more time on your return. Or in the instance of a company where paying $6,000 to your accountant may result in $32,000 tax payable, if the accountant spends extra time strategizing and charges you $12,000 instead of paying the $30,000 in taxes, you may now only pay $22,000 and are therefore $18,000 ahead. That $18,000 can then go straight in to your mortgage to reduce your personal debt. Unify against debt. Tax laws change all the time and this can make a huge difference as well, for instance new laws now mean that your superannuation can borrow and it is an amazing opportunity if you know how to apply that to your circumstances. When you start to become conscious of the effects that these things can have on you, you will start to become more competent. Please understand the power of emotional drive. I knew I was going to be a multimillionaire. Why? Because I can; it is a capitalist society. The banks lend me money and they cant wait to give me more. Most people know that you can pull equity out of your own home and go on a holiday or buy a car. What I am saying is pull the equity of your own home and go and buy another house. At the moment that you decide to do this most of us who go back to the same bank we always use because we feel a sense of loyalty. Every bank will try to collateralize everything you have. In other words they try to link any loans with existing assets and take control of everything you own.
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When you want to invest and set things up financially you can go to your bank and get $100,000 of the equity from your house. You now have $100 that you can go across the road to the next bank and use as a deposit to get another loan through that bank to purchase an investment property. The $100,000 is used as security by that bank to ensure that you are not going to run away with the money they lend you. You put in 20% and they lend you 80% and they take control of everything because they lend money for a return. In actual fact they do not lend money, they sell money. The moment the second bank realizes that you have a loan with another bank they are going to put offer you a professional package where they take .25% off the interest rate and offer you more money, but because they are exposed to more risk, they will cross-securitize the two loans and it becomes your risk. Every time that I buy something I protect my home by putting a firewall in the middle the two loans and force the bank not count my own house. My own house is protected. The reason for this is because if you default on your loans, they could come after you and your house. If a bank does not allow you to separate the loans, walk away and do not do business with that bank. So overall the more that you invest the less tax you will pay. The less tax you pay the more you will drive your debt down. The less debt you have the more you invest. The more you invest the less tax you pay. The less tax you pay the more you drive your debt down. The less debt you have the more you invest and it goes on when you become unconsciously competent. If you have any personal debt this is the debt that you are going to target first. Get rid of it ASAP. So if you have any investment shares or property that has dividends or income, use it to pay down your personal debt. So if someone is paying you rent park the money as long as you can, then only pay the interest component of the loan for that property at the end of the month and put the rest of the money towards your personal debt. Imagine if you could pay your house off now and all of your financial intelligence then can focus on your investment property. Now that you can concentrate on one property you will pick up speed in paying that one
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off. Imagine if you then had a series of properties and two of those properties are paid for and you focus now on paying property number three off; you now have the income of the first property and the second property, with which to buy number three. What you are doing driving capital, you are a building a chain reaction. Drive capital, no matter what your age is. Make a decision, if you can only save $20 a week, save $20 a week. If you can save $200 a week, save $200. However big or small, it will build a chain reaction.
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Growth
I want to explain growth deals and about where the market is at right now and I want to explain how I believe you can maximize your opportunity over the next two to three years. Think of any wealthy person that you know or have ever heard of and I bet you will find that they either made their wealth in real estate or hold their wealth in real estate or both. Think about that. That has got to say volumes about property. It has got to say volumes about this whole process. If the wealthiest people that you know of or have ever heard of either made their wealth in real estate or hold their wealth in real estate should you not think that you should be on the band wagon too? I would like to explain chunk deals and how to make a chunk of money. It is basically, the purchase price, plus an x factor. That x factor may be shuffling some paper or it might be time. It might be renovations. It might be changing the nature (use or zoning) of something. It might be building something or creating something. It might be changing the appearance of something. That x factor means that at the end of the day, you have earned yourself a chunk of money. That chunk of money is important because you have got a number of opportunities which you can do with that chunk of money. You can sell it and get your chunk of money in your hands and you pay tax on it and go on an around the world trip if that is what you should choose but I would be greatly disappointed if you did. Or you can do all of that and put it into another investment property, that might be the right strategy for you or you can do all of that and not sell it. You could revalue the property, draw the equity out and go and do another investment property or go on your merry way doing other style of investments. Which answer is right for you will depend on where you are at in your cycle of investing and your cycles go round and round all the time. It will
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depend on whether you really need all of the money or if drawing the equity out is going to be sufficient. Whether by drawing the equity out, you are actually going to still be in a mutual position or a positive position in whether your current serviceability can actually withstand that. But that is the stuff that all comes down to a mathematical equation. It all comes down to your ability to be able to work out your circumstances, what is right. It is not that hard.
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The Rule of 72
There is a rule called the Rule of 72. It is a really handy tool to use while out in the field. If you are looking at a property and you have got this real estate agent jabbering in your ear, telling you that the property is in such a good area and that it has increased by 10% and blah, blah..., the thing you remember is 10%. If you get a 10% growth on this property, how long is it going to take for this property to double in value? 7.2 years. 10% 72 = 7.2 years What you do is you take 10 and divide it into 72 and you get 7.2 years. So if that property increases by 10% per annum that is what happened in the past and that is what the real estate agent is telling you is going to happen in the future, it will take 7.2 years for that property to double in value. It does not matter what figure you pick, if it is going to increase by 8%, or by 14% or by 22.6789%. If you divide that number by 72 then it will give you the number of years it will take to double in value. This is really handy. Because if you are out in the field and you are looking at a particular property and at the moment, it is worth $250,000 and you know that the current rent on this property is $300 a week, while it is not positively cash flowed now, with those kind of ratios, you can work out if it may be in the future. For instance, if that property doubled in value, what do you think the rent would be on that kind of ratio? Probably about $600 a week, so if that property doubled in value and you were getting $600 a week and you bought it today for $250,000, then at that ratio it will be a positive cash flow property. So all you then need to determine is how long you need to hold that property before that property is positively cash flowed? To work that out you can use the Rule of 72 but first you need to find out what the growth is in that particular area. Not only is this really useful to work out how much your properties are expected to grow over varying periods of time, it is really useful to work out, if you are buying something that is not positively cash flowed now and you are not renovating or improving it to increase the yield on the property; you are just going to sit on it. It gives you an indication, as to how long it is going take before that property would start to become positively cash flowed
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as well as how long it is going to take for that property to increase in value and double in value.
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Ratio between yield and growth as a factor of how long it takes for a property to double in value 72 Yield 10% $ 250,000 Years 7.2 yrs $ 500,000
So we have the Rule of 72, we have got years on one end and we have got yield on the other end. If it is in a 10% yield area, it will take 7.2 years for that property to double in value. So if to start with our property is $250,000, it will take 7.2 years for that property to be worth $500,000. That is even handier when you start relating it back to how much rent it is getting now compared to how much rent it could potentially get then. All of this is giving you the tools to help you make better and quicker decisions. The Rule of 72, the Percentage Point Split, the Rule of Two, are all useful tools. They are really quick rules of thumb that when you are out in the field or you are talking to somebody on the phone or you have got a deal on the table, that you can really quickly make an assessment as to what the parameters are going to be.
Analysis paralysis
How do you stop yourself from not making a decision? Many people procrastinate, avoid making calls when they find a good deal or simply cant decided whether or not they want to buy the property because they have got to analyze everything first. You can get an analysis paralysis. At some point, you have got to give it a go. Just like this, but if you are using these tools, you are able to really quickly see if it has positive cash flow by the Rule of Two or if it is a commercial property, that through the percentage point split that it is going to be x dollars positive or negative. You are very quickly able to get a rough figure in your head. It doesnt matter if that rough figure in your head is $100 but if you are painstakingly going through and looking at every last cent, in the time that it takes, the deal may be gone - forget it, you are wasting your time.
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There are a lot of parameters that can help you to find out what an areas growth is. One of them is historical performance; you look at what it has been in the past. The other is the factor of what is actually going on in an area as in trends and that will give you an indication to what might happen. You will also get an indication from your professionals in the area of what their expectations are. Real estate agents have an idea of what things have been growing at and what is expected as well, but take it with a grain of salt because you are still going to have to do your own due diligence and make up your own mind. One thing that you do need to remember is that there are two types of growth properties, direct and indirect. You need to have both. You need cash cows and chunk/growth deals in order to create wealth. But with growth properties, from the day you buy them, they are either going to be a direct growth property or indirect growth property. How could you get a direct growth property? By buying below market value. From the day you buy it, you have got immediate equity. From the day you buy it, you have already created growth because you bought well under market value. Cashflow is not an issue when you are talking about growth. The school of thought that says market value is what somebody in a willing market is prepared to pay for a property therefore whatever you paid for it, is the market value. But the fact is if you could sell it tomorrow for a higher price, the market value is really what the going price is at that point in time. If you buy well and you are coming under that banner and you are buying something under market value, you have already made your growth. That is a direct growth property. An indirect growth property is when you buy something and at the very end of the scale, you do nothing. You are absolutely totally bone lazy. But what you are doing is you are selecting properties that are in a transition zone that will automatically, through the market, increase in value. You are increasing your odds of growth by selecting target areas. You do nothing to it but it is still has an indirect growth. What you are doing is you are targeting the growth that is naturally in existence in that area. If you wanted an accelerated growth cycle, you create your own. If you want a property boom, create your own and the way to do that is to
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do something to the property to manufacture growth, force the value of your property and that could be done in a myriad of ways.
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Where to look for growth

Transition zones Look for properties in areas of growth lag Jump on top of the Pebble in the Pond Effect Fundamental Analysis Industry, Population, Infrastructure, Employment, Transport, Building Trends Adverse public perception Media attention Do Your Due Diligence Look for Emerging Economies Do your own Micro Economic Analysis Prime Location water, views, proximity to amenities Rise in renovations and new constructions in an area Stage one of new developments with big marketing budgets
Transition zones First of all, let us look at transition zones. Let us have a look at areas that are going to give you potentially a better than the average return on your investment. Let us look at properties in lag growth areas; this is really apparent when you look at one suburb, next to another. For some reason, sometimes, a suburb starts to go up in value. But for whatever reason, the suburb beside it does not. You have got a lag effect; it is for no apparent reason that this suburb is lower than that suburb in median prices. What do you think is going to happen over time? Possibly, one could come down slightly and generally what happens is the other comes up to meet it or at least get a lot closer. Have a look for that strategy. Have a look for that when that happens and look for areas where that is in existence. This is not hard to do. It happens in Sydney and it happens in Melbourne, in Perth and Brisbane, it happens everywhere. Have a look at the dynamics of what is going on side by side. I was watching a particular suburb in Melbourne late last year. There were these two suburbs what were going berserk, rapidly increasing in value.
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But the one in the middle did not. There was a lag there of about three to six months. It had a window of opportunity for about three to six months to capitalize on what turned out to be about a 30% return in that period of time. The fact is when you look at the broader picture you will see that is not happening everywhere, the whole of Melbourne did not go up by 30 or 40%. But this target little area did because of what had happened, this little micro economy. When you look at growth, micro economics start to become very important. When you are looking at property, you have got to look at the fundamentals of the economy around it to give you an accurate picture of what could potentially happen and to enable you to best predict what is going to happen because you can capitalize on that. The great thing about property is that it actually reacts slowly. It is not an immediate thing where the stock market opens here and it finishes here and that is it and within a split second and you had an opportunity or not in some instances. Property works slowly and you can be a really slow thinker and still make a lot of money in the property market. With what happened in Melbourne with the property market you would have had a window of about three to six months to capitalize on what was as clear as the day as to what was going to happen. But if you did not look, if you did not know that this was something you should be looking for, if you did not know that was in existence then of course you wont be able to take advantage of these opportunities. When you think about it, it makes sense, it is not rocket science but if you are not alert to it, if you have your blinkers on and all you do is get up and listen to the crap on the radio, or television, you go to work do your things and you come home still listening to the crap on the radio - what is your life going to be like? It can only be as good as you allow it to be. Think about what you are you exposing yourself to? Feed your brain, open your eyes, get those blinkers off and start to have a look around. I am never more energized than when I am talking about real estate and making real estate deals or doing stuff. I love getting out there and looking at property and doing a subdivision or building that commercial property on the river that has got a restaurant above it. For me that is so much fun.
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Do a home study course, just try putting the CDs on in your car and listening to them instead of the crap on the radio. Just watch the change in your attitude and your performance even in your daily work. It may have nothing to do with real estate, but watch how you start react to people, look at your motivations and listen to what you are thinking. It changes; you change. You become more of a receptor, more of a beacon to what is going on around you and suddenly you start attracting the kind of stuff that you want in your life as opposed to tunnel vision you had previously. Ask yourself how much television you watch. Desperate Housewives is not going to further your financial stability.
Lag effects Lag effects can happen in a street, it does not even have to be a suburb. I have seen properties, one side of the street, admittedly, normally prime kind of properties vary dramatically to what is on the other side of the street. If there is a golf course, a canal, a view it may be a million dollar property, while directly opposite, without these features you have only a $300,000 property. It does not have a view, it is not on a golf course, but the $300,000 property is in a very good area. What do you think is going to happen with that kind of differential? Do you think one will come down or the other one is going to go up? You see these sort of things all the time and it is the exact situation that happened on the Sunshine Coast where I live with the canal front properties. When they first started to move, you could buy a canal front property for $650,000. The house across the road started to move as well but you could still buy one for $350,000. The canal front property moved to $800,000 - $900,000 but the house across the road was still $350,000. Eventually, the house across the road moved up and came up to $500,000 and the canal front property went up to $1.5 million, still too much of a lag. The house across the road then moves up to about $650/ $850/ $950,000 and across the road, you have got the $1.5 million property. There is money to be made in that. You have got to recognize that opportunity as a lag. Jump on top of the pebble in the pond effect, downtown Sydney, Melbourne, Brisbane, it does not matter where it is. What happens is you get a ripple effect. Prices start to increase and start to go out from the center. Prices then start to increase around the surrounding CBD and
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ripples out to the other suburbs spreading even further out to the regional areas and their towns. Eventually it gets there. If you live in Coffs Harbor or Port Macquarie and you see Sydney going berserk it is only a matter of time until Gosford, Newcastle and Coffs Harbor follow suit. There will be a lag. But that is okay, that just allows you to be a slow thinker and get in on it. The pebble in the pond effect - that is how it works. It ripples out from a lot of different areas. Sometimes it goes up and down the coast where you look at it from the CBD area and you will see it happening. If you open your eyes to that effect, you will see it happening all around you and you can take advantage of it.
Fundamental analysis This is my favorite topic. What you look at here is the core economic factors that have an impact. They have an impact in a lot of things but the things that affect me and the things that I am most concerned about and excited about is how it affects the property market. When you have an economic event, what you should be thinking as astute property investors is how that is going to impact on the property market and how you can take advantage of that situation, how you can make money out of that situation. For example, population. If you have a population increase as in the population in a suburb is increasing or the population in a state is increasing or the population in an area is increasing. What is actually happening? People are moving into that area. They are creating more demand for houses to rent, to buy, for infrastructure, for places to spend their money at shops, where they can send their kids to school, where they can go to hospital when they get sick, where they can continue their learning through higher learning education places. It creates a little epicenter all on its own. The Richest Man in Babylon, one of my favourite books, talks about the ancient Babylonians and its camel traders and merchants, but the core fundamental issues behind it are just amazing. George S. Clason who wrote the book was actually a guy who mapped the original map of North
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America. That is what he did for a living but his passion was writing about fundamental economic issues. He wrote about them in a biblical kind of way so people would read them and he published them paying for them himself. He would stand on street corners and hand these papers out to everybody in the hope that he could start changing the economic conditions of the everyday people in his time. He lived in the early 1900s, when he was doing this. I think he died about 1958. Somebody eventually collected all of these papers together and compiled them into a book called the Richest Man of Babylon and printed it. That book, when you look at the lessons behind it, is amazing. One of the lessons talks about the effect of a dollar and the circulation of a dollar. How when you can make one person richer by a dollar, they spend more and the people they spend more with are richer accordingly. They have more to do and they can put it back into their business with which to create more camels and silks and other things to trade. They can trade with other economies and that brings an influx of funds back into that community and more money starts circulating, that one dollar building an incredible amount of wealth. That is the core of economics. When you have something like that, having money come in, people coming in with demand for infrastructure and demand for property, housing, rental, schools and hospitals, you have an activity; you have an event that is an explosion. You need to be taking part of that. You need to be recognizing in the early stages that this is taking place and jump on the bandwagon. Start to recognize that something similar happened last year in such and such place and when that happened, these were the conditions and these were the types of businesses that went in, the types of houses that went in, the types of properties that went up by more in value than others and then you see a similar kind of circumstance somewhere else and recognize the similarity. By recognizing the similarity it allows you to potentially duplicate what happened somewhere else. You have got a model to create money because it is quite likely that what happened in the other instance may happen again. When you start opening your eyes and actually watching it and seeing it happen around you, you cannot be anything but excited about it because there is a huge opportunity there.
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Money follows money. So you should follow the money. Where is the money going? Where is it being spent? Governments, where are they spending money and what impact is that going to have? What social infrastructures are they putting into place and what impact does that have on the property market? Where are they setting up new call centers, welfare centers or other kind of centers, tax collection centers? Where are they spending money on bridges and roads? Where is the money going and what does that mean for those surrounding areas? Is it a short term impact on the property market because of a demand for the building and construction that is going to happen around that or does it have longevity? Is it creating long term employment? All these things are going to force a market and you are going to be part of that. Where is private industry going, what are they doing, where are they spending money? I buy property in the US. I buy property all over the place. A number of years ago when I was in the US, I remember sitting in a hotel room on a Sunday morning clicking through my televisions, 800 channels; I was not looking for Desperate Housewives either. I found this little local channel that was talking about what was happening in the local area and I thought this might be handy. This first program that came on was amazing, like a lump of gold just got dropped into my lap. The program talked about this multinational company coming to a particular suburb in Phoenix. They were going to spend $8 billion on a factory and plant and infrastructure and would be providing jobs and employment for a lot of people. The flow on effect was that it was going to effect peoples wages, roads and transport and the hub as well as a lot of other things had to be changed to accommodate this. Money was going to be spent by the governments, rebates would be given to encourage more housing in this area and this was all on television. This also meant single housing would be encouraged to be changed into multiple dwellings. What do you think that meant for me? Excitement! It was like gold, being able to take advantage of what was happening in this town, but if I had not been tuned to the fact that I wanted to watch this program, do you think I would have ever made any money on that? No.
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Open yourself up to those kinds of premises of what is happening. Follow the money. Private industry, where are they spending money? Governments, where are they spending their money? What infrastructure projects are going on in your area or your state or anywhere? What does that mean? What rail links are going in and where are they going to stop and what does that mean? What ports are going in? What industries are suffering at the moment because we cannot get enough product out of this country because we do not have enough port space? What happens when that changes? What towns are going to be affected and what is the house price going to do in that area? This is the stuff you need to be filling your heads with. Employment, building trends, look at the movement across the country. When people are moving into a particular state or area, where are they coming from and what kind of housing needs are they going to need or want. People moving into Victoria or maybe moving from overseas, they are mainly a migrant population who want a certain style of property. They tend to live in certain areas. Take advantage of that, give it to them. Charge them a market rental for providing them for the service. People are moving into southeast Queensland but they tend to be coming from the rest of Australia. They have a different set of attitudes and they have a different set of requirements. Provide it. When you start opening your eyes to this, the amount of money that can be made is phenomenal.
Adverse public perception This is where you look at what is happening in the short term. For example, on the Sunshine Coast there is a particular place that about 15 years ago used to have a big problem with sand flies. About that time, the local council took some action and got rid of that problem. They did a big spraying exercise and whatever else and there really has never been a problem since. But all the locals started saying, you do not want to buy there, you get eaten by sand flies that carry you alive. Consequently, the house prices in that area remained low for a very long time. The boom came, all the areas around it were going up in value and this place is still at least $100,000 below market value. But what happened, people from Sydney came up and said this is pretty good; we will have some of this.
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People from Victoria came up as well. They did not know about the sand fly problem that used to be there. The prices went up. Public perception is something that never lasts. There is always a window of opportunity but you will always have an evening out of the market. Exactly the same thing happened in Auckland where there used to be sewage plant. It happened to be closed down 10 years ago. Same thing, public perception and an influx of outside funds. They do not know the public perception, the prices eventually go up. Media attention could be good or bad depending on what is happening. Watch the media attention and watch the markets and how they react. Take advantage of them if you can. But always do your own due diligence. Do not believe what you are told just because she was a nice looking girl that told you at that time. Always back up what you are being told. Ask everybody. Get information from everybody. Filter through what you are being told and form your own opinions and be responsible for your own opinions. The worst thing you can do is not have an opinion. Look for emerging economies, do your own microanalysis. Have a look at the fundamentals. Talk to people. I was in a small town in Kentucky in America. As a foreigner I do not have any preconceived ideas about any particular town over there and neither do you. So when I am in an environment like that, I am like this big sponge. I want to know everything about everything from everybody. I talk to everybody. I talk to the waitress. I talk to the real estate agents; I talk to the lady behind me at the K-Mart line; the lady behind me in the queue was talking about how her sister-in-law sold their property to this big time person who came into town who was buying up all of this land. They were not paying fair price but everybody seemed to be selling to them so her sister-in-law did too and where is this place that you are talking about? What is going on? It is near the airport. I do not know what they are going to do with it. They will probably ruin it like they always do. I asked a few more questions. Yes, there is a conglomerate buying up a lot of land at the end of the runway. They need to extend the runway so it was the airport authority that was doing it. They have been given major grants to have one of the big major government departments moving into town meaning that an essential hub was going to be in this town. So they needed to have larger planes be able to fly into this town which was why the airport needed to be extended.
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What do you think that is going to do to this town? Prices will increase, more people will come in and the general socioeconomics of this town was going to go up. Things were starting to happen. You started to see buildings being transformed, built, or renovated. You start to see movement in the market and that gives you an opportunity to take advantage of that. I thought if I could buy property in the market today understanding that there is going to be a growth some time in the next two years, and it did not cost me much to get or to hold on to it, so it was mutually or positively geared, it would probably be worthwhile. That is what I did. I bought a block of four, neutrally geared with the seller financing. That means no money down. I got into the deal without any money down. It was a little bit positive, but not a huge amount, but what do you think happened over the ensuing two years? I rode the wave this is the stuff that you should be looking for. When you are looking at prime locations like water, views, proximity to amenities, those kinds of things, these are properties that will always sell first. They will always be in higher demand. So depending on how liquid you want your assets, they could be better areas to focus on. If you are getting a 15% return on a million dollar property, how much are you getting as an increase? $150,000. But if you bought another place that only cost you $100,000, you have still got a 15% return on your money - $15,000. It is proportionate to the dollar that you have got to put in to actually make it happen as well. When you see rising renovations and constructions in an area, what you are normally finding is an area that is in transition. This is an area that is improving. You have got people that are starting to take pride in their property, they are improving their property. They are not run down. They are fixing their gutters, they have landscaping, they are rebuilding. All of that indicates an area in transition so in that area, what is the ideal property that you should look for? The oldest dog box you could possibly find because it will have a natural increase from everybody elses effort plus you have got the opportunity to get in there and do some work and exponentially increase its value yourself. Never, ever buy in a stage eight of an eight stage development. They have already made their money and you are the piggy in the middle who has paid it. What you want to be doing is get in stage one or stage two or possibly stage three of an eight stage development with a developer
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that has got big pockets with big bucks to spend on advertising and marketing. When you are in that situation, what you are doing is riding on the back of their bucks or their dollar because they will force the market. They will make that market increase because of their advertising and effort in the marketing of the whole process. You are just riding the wave with them. Such areas, you start to have a look at. If you look for areas that have got a 10% growth strategy, 10% is what you predict a particular area to do and you are putting in your 20% or your 10%. You cannot go wrong. If you are putting in 20% deposit into something which is coming out of savings and other bits and pieces to be able to accumulate and you are buying in an area that has a 10% growth or better, your fortunes are guaranteed so all you have got to do is be able to keep your eyes open and identify areas that are going to achieve at least a 10% or better return on your money. If you bought something at $250,000 and after seven years it goes to $500,000, you would have made $250,000 and would you be pretty happy with yourself. If you are putting in a 20% deposit and claiming depreciation along the way, it is going to be at least neutrally geared if not positively geared by the end of that five year period. But it has not cost you a lot to do that. These are the kind of circumstances where sometimes negative gearing is the right thing to do. However, you have got to work it into your overall strategy.
Case Study: Suzanne Position pre Dymphna two day conference June 2004 PPR value $320,000 Mortgage $256,000 Married, 2 children aged 3 & 6 yrs Employed as a disabilities carer Husband employed as a postman.
Suzanne is someone who came to a two day event of mine in June of 2004 and decided that this was what she wanted to do and then became part of one of my coaching programs.
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Suzanne is from Melbourne. She started with her principal place of residence of $320,000 and it had a mortgage of $256,000. She was married with two children, three and six. She worked as a disabled carer and her husband was a postman. That is a pretty modest start. This is what Suzanne did in 18 months.
Deal 1:
Price Cost of project End value Profit Time
$270,000 $185,000 $645,000 $190,000 8 months
Chunk deal process: Block of 3 units in Ballarat, Victoria. Came with plans and permits to build 2 more units on the block. Plan: Stata title units and build 2 new units (put these on separate titles)
she had a few joint venture partners along the way but one of her properties, she bought for $270,000. The cost of the project was $185,000 and the end value when she finished doing things to it was $645,000, which gave her a profit of $190,000 in eight months which was how long it took her to do that. It was three units in Ballarat and she basically renovated and strata titled them.
Deal 2:
Laverton Joint venture deal Two house 4 bed, 2 bathroom per house Purchase $170,000 for both Rental income $400 per week total Positive Cash flow $140 per week
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This property in Laverton was a joint venture deal. It was two houses, both with four bedrooms, two bathrooms per house, the purchase price of $170,000. The rental was $400 a week and the positive cash flow in this one just as it sat, just for buying it, was $140 a week because of the way she structured the loan.
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Deal 3:
Price $245,000 Four dwellings on an acre in Newborough, Victoria. Plan: Renovate each house and subdivide so that each house is on a separate title. Cost of project $ 70,000 End Value $435,000 Time 6 months Profit $120,000
The next deal cost $245,000. It was four dwellings on half an acre in Victoria. She renovated each house, subdivided them and then put them under separate titles. The cost of the project was $70,000. The end value was $435,000 after just six months time which resulted in a $120,000.00 profit.
Deal 4:
Kalgoorlie 23 units complex Purchase price Current value Rental per week Positive cash flow Est. washing machine income
$295,000 $335,000 $ 1,625 p/week $ 1,149 p/week + $ 50 p/week
This deal was in Kalgoorlie, it was a 23 unit complex purchased for $295,000. The current value, at the end of the 18 months was $335,000. This property is now worth over $1 million. Rental on the property was $1,625 per week. I spoke to recently and she said the rental on that now is $2,100 per week. Additionally she had passive income at the end of the 18 months that was $1,150 a week plus she had a little extra income through installing coin operated washing machines from which she gets an extra $50 a week.
Deal 5:
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Blackwater, Qld Residential block of land Purchase price Sold Time Profit
$42,000 $70,000 5 months $28,000
The Suzanne did a little land deal out in Blackwater, Queensland. Purchased for $42,000 it was sold for $70,000 in five months resulting in a $28,000 profit.
Deal 6:
Purchase price Current Value Rental Positive Cash Flow
$27,000 $55,000 $ 90 p/week $ 23 p/week
This next deal was in Western Australia. It was purchased for $27,000, in a very small town in Western Australia but in a town that had good strong rental. The current value at the end of the 18 months was $55,000. Rental was $90 per week and probably is still at $90 per week which meant that it had a positive cash flow $23 a week.
Deal 7:
Purchase price Current Value Rental Positive cash flow
$210,000 $310,000 $ 510 p/week $ 210 p/week
The next deal was also in WA, remembering that Suzanne lives in Victoria, she is investing all over Australia. The purchase price of this property was $210,000 with the market value at the end of the 18 months at $310,000. The rental was $510 a week which resulted in a positive cash flow $210 per week which is $10,000 a year! Will that make a difference in your life? Particularly, when you add up the income on these this deals,
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collectively including growth Suzanne has created a net income of $150,000+ a year! This amounts to such an enormous difference to your lifestyle, your paradigm, your everything.
Suzannes portfolio so far:
Total income Total gross income Total net income
$ 2,885+ p/week $180,000+ p/year $150,000+ p/year
Now this was the tally. She was earning a total passive income of $2885 a week which had a growth income of about $190,000. Because she paid a PA to look manage things and everything else it amounts to a net figure of about $150,000 a year Now, do you think her journey was hard? Probably, she has got two small kids. She is working part time as disabled carer and she is trying to fit this in around everything else that she does. Her husband is doing his bit as well, working as a postman. How much Desperate Housewives do you think she watches? None - and that is what it takes. Yes, it can be done and look, now that she is in that position, do you think she will ever have to do that again, no. This is the life. This is what you can do in such a short period of time. It will be hard and yes do have to make it work and yes you do have to be focused and yes you kind to have to miss Desperate Housewives sometimes or all of the time, but it can be done. This is the difference that you can make and you only have to do it once. Because, every time you do it, every deal that you put together that puts that extra $100 a week in your pocket means that you never have to work for that $100 again. It gets easier and easier and easier.
Renovations and rehabilitations The renovation industry is $3.6 billion a year industry. In fact, if you just focus on income, you will eventually run out of equity. I ran out of equity quite early in the piece so had to manufacture some growth to create additional equity so I could move forward.
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Renovation 1
Purchased Renovations Sold
$135,000 $ 45,000 $280,000
To create equity I bought a property for $135,000. It was totally dilapidated so I spent $45,000 renovating it and sold it a year later for $290,000 for nearly $100,000 profit. That was pretty good I thought at the time... No! I sold it! Why would I be so stupid to sell the property that is now worth over $450,000 had I kept it? I was too shy, I got misled. My darling real estate agent, who is still one of my good friends, talked me into it. If I needed the money, it would have been the right decision, but that time, I actually did not need the money, I needed the equity. I can borrow equity and use it, I did not need to sell it and pay tax on it to get it. It was looking after itself so I did not really need to do that.
Renovation 2
Purchase price Purchase Costs Renovation Renovation time Sold Profit Time frame
$ 30,000 $ 1,500 $ 6,000 13 days $82,500 $51,000 3 months
I bought another property. It was totally run down, but I bought it for $30,000. Now, I didnt have the money so I had to put the deposit on my credit card so I could go and get 90% borrowing on this. So believe it or not I put $3,000, on my credit card and that was my deposit to buy this property. The renovation costs $6,000 and that also went on my credit card.
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The renovation time took 13 days. Now, understandably, the average person could not have done that in 13 days and it was not me either; my darling husband and my brother went off and did this. We didnt have a lot of time but we had this window of opportunity in which to get it done and so we did. I would buy materials at the auctions and send it to the property and my husband and my brother would be up there doing the work and the managed to do the renovation in 13 days. After three months it was sold for $51,000 profit at $82,500. Again, I made the mistake of selling!
Renovation 3
Purchase price $ 59,000 (after $4,000 rebate for repairs) Renovation Costs $ 10,000 Rented $ 145 p/week Revalued $105,000 Cash back in pocket for next deal $ 34,000 The next renovation was a property purchased for $59,000. The renovation cost $10,000 renovation and I rented it out for $445 per week, learning this time and not selling it but through revaluation allowing access $34,000 in equity tax free because it wasnt sold.
Opportunities just usually disguised hard work so most people do not recognize them. Roger Staubauch
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Characteristics of a chunk deal

Renovations Off the plan purchasing Prime locations Emerging economies Subdivisions Distressed sales Strata titling Public perception Under market value Mortgagee sales Deceased estate Speculation Development Re-zoning Gaining Approvals Building on land
Chunk deals are something that can potentially, give you accelerated growth. I go into a lot of detail in all of these and a whole lot more as part my courses but it is too much to cover here.
Case Study: Wanda Wanda has been part of a number of my courses. She was 53 when she started with me and she had a very distinct plan. She wanted to pay down as much debt as she could on co-properties before she was 55 which is when she wanted to retire. Risk was very important to her. She did not want a lot of debts. She was prepared to go into debt to make money to reduce debt and that was her philosophy that we have worked together on that that might happen.
Now, we stuck to that philosophy. After two years she has $5 million worth of property with $3 million worth of pure equity. Since then she has put a new peg in the sand, it was a bit bigger so now she given up work because she absolutely love the game and the third game was doing chunk deals, manufacturing growth and making a chunk of money like the one I am about to explain.
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She wanted to pay down the debt on a number of properties that she wanted to own long term; for the rest of her life and with no debt. This was her safety net, her superannuation that she planned live on when she retired and she was paying down the debt on these properties very quickly. She worked full time over two years where she did most of this at night. She recognized where the area was that she liked to invest in and would not go outside of this area. She was not prepared to look at anything else. She found that in this area an office that had a car park with it was worth more than an office that did not have car park. A car park came available on its own for $20,000. You cannot normally borrow on a car park so she bought it and paid cash. Then she went shopping to try and find an office that she could marry up with it. She found a medical suite not far away from the car park and she bought for $150,000. Within three months, she sold the medical suite and the car park together as a unit for $300,000, giving her $130,000 that she now had in her hand to pay down debt on one of her co-properties. That is the strategy that she did creating a chunk of money, paying it down on debt on the coproperties, the properties that she wanted to keep in the long term. This is just one of the possibilities. This next deal that was sent to me by one of my buyers agents in New Zealand. This particular buyer focused on a certain type of property which I like. I was too slow of getting back to him, so I was not the one saying, yes put a contract on it, because I was not available. So guess what? He picked up the phone to ring somebody else. But this was the deal:
Deal:
Waikato Universitys doorstep! Purchase price $1.62 million Strata titled the block of 10x3 bedroom units Rents increased to market rental from $250 p/week to $300 p/week On selling now at $205,000 each Profit $430,000 Time Span 3 months
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$1.62 million was the purchase price of 10 units, but that were already Strata titled so they were already broken down onto individual titles. They were all three bedroom units but they were at random market rental. They should have been rented the $300 a week, were currently rented at $250 a week. What the buyer did was negotiate a long contract. The builder who owned these units was building another property in the area and he needed an unconditional contract to enable the bank to give him bridging finance to be able to continue his project. The buyer that bought this negotiated a three month contract on it and then went about selling off those properties, no renovation nor anything individually for $205,000 each. He sold all of them on simultaneous settlements within the three months and put into his pocket $430,000 without taking any money out of his own pocket. That is not bad work for three months and he did it part time on the side while doing whatever else he did. You can apply the same to a business. One of my students is actually a butcher and he took the philosophy that I use in real estate and applied it to his business. He is a butcher but what he does can be applied to a whole realm of businesses. As a butcher he would go in and buy a butcher business that was losing money. He had a particular philosophy as to how a butchery business should run. Number one, he would normally get rid of all the old stuff. Then he cleaned it up. He had a particular way of presenting his meats, nice bright colors, big signs, all that kind of stuff and he hired young butchers that were very good at cutting meat and were good at selling. His business boomed. He would buy a business for like $20,000 for the stock and typically would then sell it in three to six months, sometimes 12 months for anywhere from $150,000 to $300,000. That is good money.
Buying growth
While in the US, Karen had a particular interest in Florida and these are some of the properties that she had picked.
Growth Pick:
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Price Rental ROI
$265,000 $ 14,400 / year 5.4%
The purchase price on this one was $265,000. The rental on the property was $14,400 a year which has a return investment of 5.4%. Why do you think she would be interested in this property? Because across the road was a beautiful house that was worth $950,000 and her calculated estimated growth was 20-30% based on the fact that this property was across the road.
Case study: Kemorine Kemorine is a model. She would do anything not to break her fingernail. So when she entered the property market, we had to define some deals so that she did not have to actually do anything or break one single nail with.
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Deal 1:
Purchase price $275,000 Strata titling costs $ 10,000 Current rental $ 600 p/week Current value of 2 bedroom units in this condition Strata Titling Profit $ 95,000
Kemorine bought a property which was $275,000. She paid a consultant to strata title the units so she did not have to do anything herself. She paid the consultant $10,000 to do the strata title. The block of units was already renovated beautifully and they were rented out for $600 a week. Each property went up. So just by shuffling paper and signing of few documents she made a profit of $95,000.
Deal 2:
5x2 bedroom units Purchase price Rental Income Strata cost Value post strata titling Profit
$340,000 $ 750 p/week $ 10,000 $460,000 $110,000
She bought another one very similar which was a block of five units at same deal and $110,000 profit. The two deals took a total of three months and she had a positive cash flow on the property at the end, she made over $200,000 by merely only signing her name, without too much challenges. A couple of years ago I led a few groups in Victoria. One lady present said that there were no deals to be had in Victoria and that you would not be able to find anything in Victoria. So I started to have a look and found a house in Myrtleford. Advertisement: Myrtleford House $10,000 FOR SALE AND REMOVAL
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Easily transported, this weatherboard dwelling with tin and aluminum cladding consists of kitchen / lounge / dining in an open plan living area, floor boards throughout, 1 large and 2 small bedrooms, 1 bathroom and a laundry. GREAT BARGAIN.
There was no land attachment but I wanted to see if we could move that house somewhere and make some money but manufacturing some growth. First of all I have to find out how to go about it, because I did not know. At $10,000 it was aluminum clad with two bedrooms, it was not really flash but wasnt too bad either. Land in Myrtleford sold at the time for about $40,000 so with land and removal costs which would be about $10,000 it would cost up to about $65,000 to move it onto the block. It would be another $10,000 making it $75,000 to connect it to all of the facilities etc. and then maybe another $10,000 for landscaping. So I am now up to $85,000. Okay, that sounds fair. Now I needed to find out what houses in Myrtleford were selling for. One I found that would have been similar at the time was $140,000.00 reduced from $150,000. It was a two bedroom house that was quite pretty with timber floors, heating and I could make mine fairly similar. There was another one for $138,000, a low maintenance, aluminum clad, two bedroom house, nothing very much different from the other property. Now, even if I could only get $120,000 for mine, I could still make $45,000. Look for these deals. Look for the opportunity all the time.
Case study: Julie, 39 divorced with 1 child Before starting with me Julie had no savings, no settlement, no property, no debts, but a good job.
Deal 1:
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Port Hedland $230,000 Rented for $ 300 p/week Renovation costs $ 1,200 + hard work Across the road from the beach and Spoilt Bank Yacht Club Current estimated value $350,000 Intention to subdivide and build a duplex on site.
Julie bought a property in the town where she lived which was in Western Australia in Port Hedland. It was pretty ugly and run down, but was $230,000 and it rent for $300 a week. She renovated it doing most of the work herself so it only cost her $1200 so it looks good now. But the thing is, when I visited her and I walked around the property, she had only painted the front of the house. Upon questioning her about this, she said nobody ever paints the back of the house in Port Hedland but, she managed to increase the value of the property by $50,000 and she did make some money on it. She also has some room at the back of the property to put a duplex and to subdivide it. Manufactured Growth example:
Purchase price $340,000 Partly finished renovations currently unlivable Paid $320,000 Renovation $100,000 End value $950,000 Financing Option conventional and hard money 90% hard money until completion and refinance
Another property that Karen picked in the US was one that she bought again because it had a huge and beautiful house across the road. It required major renovation. It needed $100,000 spent on it to make really nice but it would then be valued at $950,000 and on a deal like that you will end up being able to finance that through a thing called Hide money which we really do not have here in Australia but it is a private money fund that lends on this kind of stuff all the time.
Case study: Rob & Kylie Purchase Price $295,000
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Renovation costs Revaluation Profit Time
$ 20,000 $390,000 $ 75,000 6 weeks
Kylie is in my Platinum Program and her and Rob did a renovation on a $295,000 house which cost $20,000. It put $75,000 back in their pocket in the way of equity after it was revalued at $390,000.
Case Study: John Ballina Development $367,000 Current rental on existing house $ 220 p/week Medium density development block on Ballina Island. Tenant wants to stay.
John bought a development block that had on it a little old house that needed renovating for $367,000. He also built a duplex out the back that cost $190,000 to build. On completion the duplex and the house was rented and the whole block was revalued in excess of $750,000. Example:
Old Pizza Hut Building Sold $ 680,000 New faade, renovation and new tenant Valuation $1,300,000
Another example is an old Pizza Hut building. It was one of those opportunities that you would have driven past everyday and missed. I drove past it. The Old Pizza Hut closed down and for about 6 months nothing happened to the building until somebody came along and could see a much bigger picture. They put it on an extended settlement, long contract, and in the contract phase they built up the faade. The original Pizza Hut roof is still underneath the new built up faade which was created to alter the look and make it appealing for a new commercial tenant which turned out to be a very good commercial tenant. Just after settlement the building was revalued with the new tenant in place
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for $1.3 million. So please open your eyes to this kind of possibility as you drive past. Find other plan, opportunities are when you see the block with the for sale sign, before the deal when it was ugly. Do something with it, look for some opportunities.
Negotiation skills
One of the things that my course can teach you are techniques of actually how to negotiate. Good negotiation skills will allow you to purchase property at much lower prices than you might otherwise. Those savings alone will enable you to buy properties saving in the long term way more than the $3,000 you will be paying to be part of my program and work with me for a year. Remember that flexibility is always on your side. The deal will be as flexible as your imagination allows it to be and if you are not then you may already have your no. Think about that. If you do not ask, you have already got a no. You will never know if a vendor is going to say yes. Do not forget to put your foot on the deal with a conditional contract to secure it while you are doing your analysis so they cannot sell it to anybody else in the meantime. Have a finance clause in there, a building inspection clause, any kind of clause you want in there to make it yours and nobody else can have it but you at that price unless you choose to back out of the deal.
Sharing Knowledge
Sharon and Andrew started with me a number of years ago and they have done numerous courses with me. They are up to 34 properties and now live off their passive income and they actually spend most of their time helping their dad do the same. Doing this, changes your life, it changes your circumstances making your life better. That is what gives me the biggest thrill, sharing the knowledge, passing it on to other people. These guys have impacted an amazing amount of young people in their town by their success. You cannot help somebody unless you are successful yourself. You cannot lend somebody a hand to get to pull them up unless you are in a position of strength yourself. So if I can help you to get in that position of strength you can pass it on like pebble in the pond, that ripple effect.
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My reason for doing all of this is my kids and my husband Brian. We live on a beautiful property that I have cased out on the Sunshine Coast, completely surrounded by rainforest. I love it. I am a country girl. I have set up a profit center on my property where I live. From there I run a commercial farm that I can take advantage of for tax purposes and everything else. But I have set it up in such a way that I got a profit center operating. I grow hydroponic lettuces. I produce 2,600 lettuces a week, which produces sufficient income to pay for full time farm manager to be there plus a part time assistant. That gives me the flexibility to go away, travel, do whatever I want and farm is maintained. He looks after the garden, he does the landscaping, he mows the lawn, he grates the road, he grows my organic vegetables, the only thing he doesnt do at the moment is milk a cow which I am trying to convince him to do. He hates milking cows he tells me. This is a financial model that I put together to support my lifestyle decision. As you move forward you will be able to do exactly the same. Some of the models will be based on a pure profit-like business set up and some will be based on a lifestyle like mine. Or, if for instance if you like driving Ferrari cars then maybe there is a business model that you can put together with luxury hire cars that enables you to have a Ferrari car for yourself; private use for the business model. Or, maybe you like airplanes, maybe you like boats, maybe you like stamp collections, maybe you like crystals. I do not know, but when you start to think in business models and you start to think from profit centers you will paradigm shift. Your possibilities shift. You have got to open yourselves up to the possibilities, to the realities that are there, and if you do not expose yourself to the things that you really want, you do not spend time actually thinking about what you want, then how on earth can you ever expect to be able to achieve it? Not enough people stop and think about where they are at, where they are heading and what they actually want, because if you do not know you cannot have it. You cannot achieve it. So spend some time doing that stuff. Think about what you are going to achieve, whatever that is. I know from experience and I know from my friends, some of them we consider exceptionally wealthy, and every single one of them will tell a major component, a major ingredient for their success has been an awful lot of money spent on education.
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Some of them have learnt through courses while some it has been through learning from other people, but it is always consistently going on. It never stops, continually learning and growing and experiencing, expanding, that is how you continue to get ahead. That is how you continue to increase your wealth and have more success. Do you think it could possibly be that I could potentially teach you a little bit more? Those of you who would like to come on that journey with me, I would love to have you part of the team. I would love to have you as part of that relationship for many, many years to come. I would love to be able to make that difference in your life so that you can pass it on. Many years ago, I had a lady come to me in my accountancy practice, and she was of Chinese descent. She just came back from China and she was very emotional about her trip to China, because she did not go on the trails and the tourist tracks, she actually went back where her family came from. She saw first hand some of the tragedies that happened, how people lived, and what their reality and paradigms were. She also saw the results of a policy in China called one baby policy. She saw little baby girls being killed at birth. Because, little baby girls were not favored as much as little baby boys, and this affected her so profoundly, so deeply that she wanted to make a difference. She wanted to change the lives or the potential lives of those little baby girls. But, she was also smart enough to recognize that she could not do very much, she could make much of a difference unless she was financially secure herself. She needed to be in a position of relative strength to be able to achieve that. So I worked with her for about a year to give her a financially stable situation so that she could go to China and she could setup orphanages and that is exactly what she did. I ran into her a couple of years after that when she had two orphanages and she told me that she had saved literally hundreds and hundreds of little girls lives, and she was in the process of negotiating with Western Societies to be able to adopt some of these children into the Western Societies. This sort of thing is so rewarding, so special, and so amazing for me to have been a little part of making it happen. By me getting her to a position of financial strength she was able to go off and follow her passion and pass it on in her own way. I feel satisfaction for all those
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little baby girls that she helped in some way that I might have had a little part in there. That is amazingly special to me. I am privileged to have been able to see the effects of my work. I have been privileged to be able to see one lady that I helped in Central Western Queensland in a town that was devastated by drought for a lot of years. The town had lost hope; no money, not able to even send their kids to the off the land or to private schools or anything else. The town had lost hope. The farmers did not have the money to buy the bread so the grocers did not have the money to pay the supplies. The whole town was dying, it was crumbling under itself. I had the privilege to be able to help that one lady in that one society. She was a farmers wife. I helped her initially and then her husband joined in as well. Together, they started to change their financial position by creating passive income. She went on to teach the same skills to other people in her little country town. She taught her sister, her aunt, the lady down the street. She taught the country womens association. They got together and they had a little share group going to help the others who maybe did not have the equity to make it happen by themselves. That towns attitude changed. It changed to an attitude of hope. They realized that it did not have to be this way. They created businesses. They set up this craft business with the wool industry and they exported to other countries and suddenly they have got this little industry. They now own a factory, communally. They employed the kids so they now have a future too. I saw the difference that, that woman and her husband made. That is so special. Wherever you are at right now, I want you to think about what difference you are going to make. The difference that you are going to make when you are in a financial secured position, when you have got that peg in the sand and all of your basic needs are covered and you are shooting for the next thing. What are you going to do to pass it on? Somebody very, very wealthy who helped me out in the early stage with some advice said to me Part of your success is a responsibility to pass it on. I say the same thing to you here now. You have a responsibility to yourself to achieve that peg in the sand and responsibility to yourself and the others around you to pass it on.
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I hope I have been able to pass some of that on today. I hope I will see most of you come with me in that journey and make that difference to be part of the process. I cannot wait to see your journey and the outcomes of what happens, and to be part of that relationship for many, many years to come.
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From Virtually Zero To $3.5 Million in My First 18 Month in Real Estate

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From Virtually Zero To $3.5 Million in My First 18 Month in Real Estate

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From Virtually Zero to $3.

5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

Introduction ........................................................................ 4 Asset Protection & Tax ...................................................... 13

Income Properties .............................................................. 42

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

Growth ............................................................................ 104

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

Asset Protection & Tax

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

Types of Asset Protection;

Insurance A quote that I love is one by Robert Kiyosaki:

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

Let us have a look at a typical business and investment structure:

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

Wills Intestacy Enduring Power of Attorney What renders a Will invalid?

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

The Rule of Two

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate

From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate