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

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

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

www.knowledgesource.com.au/dymphna

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

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

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It was the easiest thing for me to fall back on. It puts you in the percentile that actually gets out there and does something to actually succeed. and I wasted a lot of money on my first husband. I had worked in the banking industry. At that time. because for me survival mode was accounting. but when I found myself going through a divorce. At that point I went into survival mode.com.au/dymphna 4 . I found myself in a situation where I had $40. I was pregnant and had a small baby as well. you are a product of your past. I had been a financial controller. After 10 years of earning really good money. For some people.000 out of the property settlement from my divorce. reality set in and at some point everyone will have a trigger. I was still working 40-60 hours a week. very different from the situation that I am in now. All things aside. So that means you can learn from it to move forward. that trigger comes slowly while for other people it may be a major catastrophe such as an illness.From Virtually Zero to $3.knowledgesource. I spent a lot of money. So congratulations for making the effort to be interested to learn a little bit more. www. It puts you in the minority. I had created my own practice. pick up a few tips that you might be able to implement. I moved there in the midst of a very messy divorce. I have done a lot of different things. That was what I knew. I had run a very large mining company from a financial standpoint.5 Million in My First 18 Month in Real Estate Introduction Congratulations for beginning. For me. or an event like a divorce or similar. 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 1990’s.000 out of 10 years of earning an exorbitant amount of money and that was not very much to start with. Even though I owned my own accountancy practice. The fact was. In my earlier career. I was really stuck in my job. It was not that long ago that I was in a situation that was very. I only ended up with $40. I had been a financial adviser.

Everybody I had spoken to at select points in time. I was still trading time for money and thought there was something that had to give here. It is as simple as that.5 Million in My First 18 Month in Real Estate For me the divorce was not actually my trigger. an entrepreneur.com. I expected to ‘fit’ into this ‘box’ because that is how things were. But the plan was like a 25 – 30 year plan. I realized that even though I was in my own business.au/dymphna 5 . I had to unlearn so much stuff. My trigger came very slowly. So I had to redefine the boundaries to those ‘boxes’ and for me that took a lot of effort. Being an accountant. and it was those little things were what niggled at me. and had the office which from which I ran the accountancy practice. The reason I had to unlearn it was because I expected everybody to ‘fit’ into this ‘box’. 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. It took a lot of trust in my own intuition and all of those sorts of things. I remember my little kids would say “Mommy. long time and I understood things from a technical perspective easily. Even though I was an accountant and an economist and had worked in the finance industry for a long.knowledgesource. We did not have a place to live. because that is what the books says you are able to do. It came very slowly as my reality started to set in. all of that stuff. an economist. it was actually a disadvantage to me. When I decided that things would have to change I looked at my home and then my business. 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. That is how it says that reality works. or 40-year timeframe ‘boxes’ where I would end up spending time with my grandkids. these 20. This reality was single parenting.From Virtually Zero to $3. If I did not work. rather than my kids. But I didn’t want to fit things into these ‘boxes’. I had this plan. looking after two kids and doing it all on my own and what this actually meant. we did not eat. 30. was actually a disadvantage to being wealthy. as most people do. I thought that because I was in business I could www. There was a defining moment when giving a talk on asset protection and taxes as I do. 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. Even though I had savings.

When I started to look at the characteristics of what I now call a cash cow. It continues to keep you in the rat race that you are trying to get out of. I managed to buy some properties in the early stages without it costing me any money to get into www. but it wasn’t. All of these things just did not suite me. As time progressed. then at least I would be heading in the right direction. I looked for what else that I could do to change my position. I needed something a little bit more secure that would as a conservative accountant suit me. Multiple negative flowing properties will just worsen the situation. but I needed a lot more money to be able to do what I want to do and replace my income. where it brings in more money than it costs. 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. 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. all not my thing. I looked at my clients: I had some clients that were doing really.000 property settlement stretch a fair way.knowledgesource. well through the internet and thought that this could be my thing. I had made my $40. I really started to research and study.com. 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. I did not have a lot of money at this point.5 Million in My First 18 Month in Real Estate leverage myself out of that business and work on it rather than in it. 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. I looked at other models that worked but they were all not my thing. but that was the only model that anybody ever talked about at the time and I couldn’t help thinking that there had to be something else. I looked at shares and options.From Virtually Zero to $3. they had certain characteristics. I did do that but it did not happen quickly enough for me at that point in time. but more quickly. 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.au/dymphna 6 . So that is what I looked for.

We live in a very litigated society. It was not about one or the other. I had to do some growth strategies as well and that was the key. I love the real estate marketers as it is at the moment. are actually protected. In fact. But when I just focused on cash cows I eventually ran out of equity so I could not keep using this strategy. it is not surprising that the first and the second place go to California and Texas. Whenever you have an imperfect market place with imperfect knowledge and imperfect scenario. 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. New South Wales is the third most litigated State in the world.knowledgesource. Fundamental economics and an imperfect market place = Opportunity to make profit. but New South Wales as www. The market today is different but in many ways is very much the same. 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.au/dymphna 7 . 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. as you accumulate them. To do business in this society. 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. where you are not paying too much tax and that your assets. We have a market that is dynamic and changing and in economic terms what we call an imperfect market place. you have got opportunities to make profit. I know it is bit heavy to begin with but it is one of those things that you just have to do.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate the deal and that gave me a bit of a leg up.com. You can put yourself in a position where you are tax efficient. It was about balance and balancing your portfolio and knowing what you need next. Compare that to America and all of the litigations that goes on over there.

to be successful in absolutely anything that you can possibly think about. That is really sad. If you make a bad decision then at least you got the opportunity to learn from that.From Virtually Zero to $3. 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. 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. You actually have to take action. If you do not participate and sit on the sidelines then that is exactly what you will be doing the day you die. Queensland and Victoria rank in the top ten. Another statistic: Approximately 13% of investors only own between two and four properties. You have to put yourself in positions where you make decisions.6% of property investors only buy one property. One of the things that you have to be to be successful is a decision maker. because in this game.au/dymphna 8 . number one. One property is not going to cut it. You will know what should have happened and what www. you have to be focused. If you are serious about changing your paradigm and serious about changing where your life is right now. you should be deciding if you are committed to this process or not? If you are. you have to be committed. you get the opportunity to look at what you did and analyze the circumstances.5 Million in My First 18 Month in Real Estate third is ridiculous. and you have to be determined and you have to participate. in any game. one property is not going to be enough. So.knowledgesource.com. you will be sitting on the sidelines. I am a straight shooter and if you don’t want to own more than four properties then you are not going to cut it. Because the very worst thing you can do is not make a decision. Let us start with some statistics: 82. So it is a fact.

it is the thing that is solid behind you.au/dymphna 9 . Real estate is your Plan B every single time because it is the thing that grows your wealth. I have made some mistakes.From Virtually Zero to $3. that I am highly unlikely to ever make that same mistake again. build yourself portfolio. they expect there will be only one taxpayer for every pensioner. as it stands now. you have got something to fall back on. That is $269 a week! The baby boom explosion that we had post war. in the 1950’s and 60’s. When you look out sound economic models. and it is the thing that is going to always be there.000 a year. a wealth asset on the side. you cannot do what you love doing in your work. This way if for any reason at any point in time. Real estate and investing is your vehicle to change this situation. but at the same time. You have your basic needs covered but you are choosing build an additional base. 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. but it has never been lost. fantastic! Use it. if you love your work. 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. which means. you still have to do it. there was six taxpayers for every pensioner.com. www. By 2020.knowledgesource. If it has not been lost it means that I learned from it. Eight out of 10 Australians will retire with less than $14. It is going to be hard. you have always got a buffer and you have always got a Plan B. 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. keep doing what you are doing.5 Million in My First 18 Month in Real Estate course of action that should have been taken and you can repeat it from happening again. Not every decision that I ever made has been fantastic. but it is not impossible and the climate we have in the market right now is so opportune to do exactly that. when there were 18 taxpayers for every pensioner now means that in the 1990’s.

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. You can read books but the reality is you do know it until you have experienced it. whether it is properties or a business. They are not necessarily achieving it but they are trying and this is why. 1. Dealing with people whether they are professionals or not. The tax act would probably stand about two meters high if you piled it on top of each other. this is something that you have to know because you are the one that has to stand up and take responsibility.From Virtually Zero to $3. As an astute successful investor. 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. 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. 2. www. you do not know it until you are street smart. Be Tax smart and Tax efficient in your investing You have got to be tax smart and tax efficient in investing. This is what you have got to do. I call it being street smart. Acting in ignorance will not help you or the problems that we have in society.5 Million in My First 18 Month in Real Estate If you are the taxpayer do you feel like supporting somebody else totally? The reality of this has hit our government. There are lots of ways of doing things. 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. There are a number of things that you can do to help change this situation. it could be anything. 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.au/dymphna 10 .knowledgesource.com.

you are able to do a deal so when the right deal comes along.Growth Properties . you can actually act. 3. some specialize in double tax agreements across the country. 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. Professionals are very. This is where you need to be www. very important but they specialize in all different things. This is where you need to step up to the mark and take responsibility for not only where you are at right now. Without all of this you are not in a financially strong position to be able to act. Focus on sound investment strategies . Always be market ready The next thing is that you have to be market ready.knowledgesource.5 Million in My First 18 Month in Real Estate 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. Market ready means getting your financial position in order and tidying up your loans and reorganizing your finances.Balanced Portfolio I am not one size fits all kind of girl. because you have got to know enough to know whether you are getting the maximum out of your professionals. Some specialize in criminal laws and some specialize in property law. 4. but where you are going to go in the future. Some specialize in corporate mergers. some specialize in personal income tax deductions for plumbers.From Virtually Zero to $3. It means having your structures ready to go into the market and buy. Everyone has areas of specialty. some specialize in just GST. you can only act if you are market ready so you always want to be market ready.Cash flow Properties (Cash Cows) .com. I see this all the time where people have not done their tax returns for the last two years and are not market ready.Property Money Machine (Chunk Deals) . 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.au/dymphna 11 . When you are always market ready.

the higher the level of income from that property. 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.knowledgesource. if you are heavily into negatively geared investment properties.com. a deal that makes you a chunk of money. your personality. For instance. the size of your portfolio and what the mix of your portfolio is. then you might be looking for a cash cow to help fund or support that activity. 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.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate looking at your situation and saying. so debt can be a factor with that. www. it means you have got debt if it is rent or not. The lower the level of debt.au/dymphna 12 . that I need? Where is the balance? This is a factor of you. If you are negative gearing. Or you could also be looking for a chunk deal that you can turn over relatively quickly.

Yes. but our influence today is not England.From Virtually Zero to $3.knowledgesource.every single time. 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. We are definitely one of the most litigated countries in the world. our legal system has come from predominantly England. 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. www. they have more of a chance at winning a lawsuit with the person who everything under their own name. 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. Minimising the risk of being sued. Protecting assets if successfully sued. The first example was on a baby stroller: Warning: Remove child before folding. Public toilets: Warning: Recycled water. Firstly.com. 2. with our law being passed down through prime ministers over the generations. 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. Which one you think they are going to sue first? The person with everything under their own name . 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.5 Million in My First 18 Month in Real Estate Asset Protection & Tax What is Asset Protection? 1. prevention is better than cure.au/dymphna 13 . We really do follow in the footsteps of America in so many ways and our legal system is no different. You should be looking to put walls around you and your assets. unsafe for drinking.

read ‘Warning: Once used rectally. 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. imagine this.au/dymphna 14 . In 1994.5 Million in My First 18 Month in Real Estate An electric router: Warning: Not intended as a dental drill. A laser ink cartridge: Warning: Toner not intended to be consumed. 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. He lives in Townsville.com.From Virtually Zero to $3. you would be relatively safe: Warning: Not intended for the highway use An electric hair dyer: Warning: Never use hair dyer while sleeping. Sleeping pills: Warning: May cause drowsiness. He gets a phone call from his bank manager asking what he was doing on the following Saturday. The gentleman that the ball hit was obviously hurt he played on. he has come to a number of my seminars and I consulted for him to see what we could do for him. So you can get lawsuits from anything! I would like to tell you about Mark Shanahan. So he turned up for the charity game and teed off as the third player in his group. Mark is sitting his the office on a Thursday afternoon. should not be used orally’. it wasn’t until after the www. You think with a wheelbarrow. duh… An electric iron: Warning: Never iron clothes while being worn.knowledgesource. He went on to invite him to take part in a charity golf game on Magnetic Island to which Mark agreed. a digital thermometer.

But for 10 years it continued to drag and he had built up a legal bill in excess of $500. www. Now at the time he went off to go and play golf with his bank manager he was happily married. he had lost his company and all of his assets. Mark went to his local insurance broker and got his insurances reviewed. It is a very sad story but a true story. Ten years of his life had been put on hold.From Virtually Zero to $3. he was not negligent.6 million.knowledgesource. on top of the legal bill and the $2. he is now on hold again for a further 12 years because they have 12 years to recruit the $2. owning real estate. In Australia the three main areas of litigation come from owning civil business. and personal actions involving motor vehicles. Mark of course was really sorry about what had happened because he sincerely did not see him down the other end of the green. unable to know where your life is going or anything else.au/dymphna 15 .6 million in debt. It was too late for Mark. because somebody told him it was a good idea. Many weeks after the incident back in 1994. he had become totally penniless and the high court awarded against him to the sum of $2. when he still wasn’t feeling that well. unable to do anything yet. 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.000. 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.5 Million in My First 18 Month in Real Estate game. He was not sure what to do and sought legal advice where he was told not to worry. So 10 years plus 12 years equals 22 years of your life where you are unable to accumulate wealth. it would go away. owned a business. Now. He lost everything he had for playing a game of golf. that he went to the hospital and discovered that he has a fractured skull and was really hurt.6 million which he did not have. 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 content’s insurance but as it was the insurance he had then does not cover them even though the insurance they were putting in place would.com. had a couple of kids.

000. Because of this the insurance company was required to only going pay out three fifths of his $80. a young couple invested in a property. Unfortunately this was not the end of the story. but if something should happen whether it is bad credit or a legal issue.au/dymphna 16 . It was considered criminal negligence and therefore not covered under their insurance policy. They now lost their house. That is how insurance companies work. They went in a little bit negative because it was a good idea for tax and rather than pay to set up a structure. He was insured for $300.000 claim. So you take out public insurance and you do your best to cover everything. for your business.000 not $300. 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 www. They got the building inspection report which said that the back step was an illegal item that had to be fixed. he would have to pay the remaining two-fifths that he was underinsured himself. This is the type of thing that can happen. A few years ago in Bridgeton. So if you have your business under your own name or if you are sole proprietor or in a partnership. The insurance company believed that he should have been insured for $500.5 Million in My First 18 Month in Real Estate Most people understand that if you are going to go into business you hold yourself liable etc. it was informed knowledge. they can then go after your assets as the individuals of the partnership or the individual. but an assessor came out to look at the damage his assessment implied that he was underinsured.000 and he put a claim for $80.knowledgesource. They decided that they could fix that themselves but it never ended up getting done.From Virtually Zero to $3. They got sued because of the illegal step and they lost because they knew about the problem and they did not fix it. they can access not only the assets of the business but any assets that you own in that same name. You would think this would be fine. The inevitable happened someone slipped on the back step. they just bought under their own name. I had a case on the Sunshine Coast where there was a fire in a warehouse. Another similar case was with a balcony down in Victoria a couple of years ago.000 so according to the assessor they were definitely underinsured. if it is upheld. their investment house and their own house. Then there is property ownership.com. because they had it all in their own name all to save a little bit of tax.

If that fire had burnt down a house in the street. 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. Number one priority. settle out of court because if you go to court you will lose everything. health care and legal bills. So again.au/dymphna 17 . www. A foundation on the coast had really looked after his wife during her treatment so he was very committed to the foundation. we are following in the footsteps of America when it comes to litigation. He was told to give her anything that she wanted to make it go away. the next door neighbor’s landlord wanted reimbursing for the twofifths that the insurance company did not pay. have a look at your insurance policy reconfirm what you are covered for and make sure that you are not actually underinsured. It is a very sad case on both sides where the only person who really wins is the lawyer. All in all it up ended up costing him an additional $120.com. 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.5 Million in My First 18 Month in Real Estate pay. 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. He was quite wealthy and had a nice home. So yes.knowledgesource. 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. a couple of canal properties and businesses and he wanted to give something back to those who had helped his wife.000. There was also damage to the next door neighbor’s property. He went to every barrister in Queensland and they all told him the same thing. His wife had recently died from cancer. Another case on the Sunshine Coast is a gentleman I know.From Virtually Zero to $3. he would have gone bankrupt. 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. Fortunately he had a good business and he was able pay this and to move on.

” Insurance is usually piece of mind. Have a look at your home and contents insurance and your lifestyle . Insurance is simply peace of mind. Friendly debt is a debt that is tax deductible. you may lose your house. Please look at your insurance policies and these types of clauses and exactly what it covers. A friendly debt is a debt that you have with yourself or one of your other structures. the interest is a tax deduction. That is not necessarily my definition. Some of you will be covered but if there are ‘uninvited guests’ and something happens.au/dymphna 18 . My definition for asset protection purposes is that an unfriendly debt is a debt that you have with the third party. Nonfriendly debt is debt incurred through credit cards or a store card or the debt on your own home.From Virtually Zero to $3. • • • Insurance Debt Structure Insurance A quote that I love is one by Robert Kiyosaki: “Insurance is a very important product in anyone’s life plan.knowledgesource.com. 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’. It is a debt that you have with banker or financial institution who lends you the money. as in the story of the three year old girl. It is non tax-deductible. The trouble with insurance is that you can never buy it when you need it. Debt There are two types of debt: friendly debt and non-friendly debt.5 Million in My First 18 Month in Real Estate Types of Asset Protection. www. So you have to anticipate what you need and buy it hoping you’ll never need it.things like the golf club would it be covered in that kind of circumstance.

000 but you may also have a $300.5 Million in My First 18 Month in Real Estate A friendly debt could be all sorts of things but it would still be a legally binding debt.From Virtually Zero to $3.knowledgesource. For instance. www.com.au/dymphna 19 . If somebody tried to sue your company they would get nothing.000 and it has a debt of $200.000 registered mortgage with one of your other companies. That is where internal mortgages can start to be a form of asset protection but it is important to have it set up. if you have a home and it is worth $500.

all you can do is lose your $10.5 Million in My First 18 Month in Real Estate Structures • • • • • Sole Trader Partnership Company Trusts – Unit. Companies are a separate legal entity. www. and did not benefit from all the money he took off to the Bahamas. they cannot come after you as a shareholder and ask that you pay their debt. Derrick pinches everybody’s money and runs off to the Bahamas. You can have partnerships of trust which come under a different category. The shareholders are limited. Partnership Derrick and I go into business together.com. Company Now. Hybrid.au/dymphna 20 . you can lose the whole lot.From Virtually Zero to $3. That part comes from a limited liability. Any credit that BHP has. I will be equally liable for the actions of Derrick even though I may not have known about it. Because we are in partnership together. belongs to them. it means that you trade in your own name. but you can have partnership with companies where this is not the case. the previous example is that of the partnership of individuals. If anything goes wrong. A company is a structure that has directors and it has shareholders.000. 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 person’s actions as well. So partnership. had nothing to do with it. you are doing business in your own name and own assets in your own name. they have a limited liability. So if you have gone and bought $10. You will not lose any more than that. They come under the same category as if you did it directly in that structure.000 worth of shares in BHP and BHP goes down. Discretionary Superannuation Funds Sole Trader If you sole trade. I would be equally liable for that debt.knowledgesource.

that is where most of them come unstuck. what you might want to do is not actually have the company directly doing the trading but a trust underneath it www.From Virtually Zero to $3. Primarily the major rule is whether or not the directors were trading insolvently or illegally in any way.au/dymphna 21 . So.5 Million in My First 18 Month in Real Estate There are some rules governing the directors.com. Now if they were trading insolvently.knowledgesource. meaning that they continued to trade when they knew the company could not pay its bills. when you are trading in a business.

If you have units in your own name. you have a trustee. 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. the unit holders. 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. Again. it is a book of rules that says things have to be dealt with this way. Now. As an example for a unit trust. Discretionary Trust So let us have a look at a discretionary trust. Now. it would not affect my half of the business per se. So. There are others that are better. Derrick and I. even if you have unit trust but you own units in your own name. A trust is basically is just a book of rules. if you are in a trust on its own. They are the manager of the trust. the trustee is the one that controls the trust. we can have a trust where for instance an item is the asset of the trust and because I am a control freak.knowledgesource.com. I am the trustee and I have a number of beneficiaries of the trust. because Derrick did the dirty on me. as in the case earlier. I do not want to give him any of the income from that item and because I am the trustee and I have www. So what I would insist on doing if I was going into business with Derrick is to make sure he didn’t own the units in his own name in this instance the vehicle that you would be using would probably be a discretionary trust. it is an outdated vehicle. The trustee is given the job to manage that book of rules. maybe he embezzled money or was a major bankrupt.au/dymphna 22 . 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. A trustee in bankruptcy would be appointed on his side. we have got a trustee but instead of having unit holders. In a unit trust.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate Trusts Unit Trust The first trust that I want to explain is a unit trust. but not mine. you basically do not have any asset protection because should you get sued and you lose. we have actually got beneficiaries. those units can be taken away from you just as easily as market shares will be taken away from you.

the primary beneficiary has to sign the loan documents. Never. the kids are already included. Either way. Now. it is up to me whether he gets any of that trust or not. it says who does what. ever.From Virtually Zero to $3. I can share the return of that item amongst anybody I chose except Derrick. you do not want a five-yearold signing a loan document. so it is problem. 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. now or at any time in the future. ever. Now. the spouse and three generations all around. and they can specifically exclude people too. ever. now or in the future be a potential beneficiary of the trust.au/dymphna 23 . ever. it will be the individual. ever. This is the best structure that we have from an asset protection perspective in Australia particularly for ownership of property. so are the parents. 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. Once the trustee does not own the assets of the trust. the grandkids etc. it is the ultimate discretion of the trustee. They can’t anyway. One important thing that you do need to understand is that of the role of an settlor.5 Million in My First 18 Month in Real Estate total discretion.com. for a number of reasons. I can do that. or when you go to get a loan. I will be the one making the decision to distribute any of the income or capital or the assets of the trust. it controls them. Your children will be automatically included anyway because in a family trust. www. the beneficiary group in most family trusts will be. the individual and their spouse and three generations all around them. ever put the kids in there. the sister. You might have more kids later on. like a exhusbands. if you so wish. because at that point in time.knowledgesource. this is probably the best structure. The settlor needs to be somebody totally independent that could never. So the trustee at any point could distribute any income to anybody in that family group. There is a better structure for ownership of business but for the ownership of property. 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 can’t. The individual and the spouse would be named as the primary beneficiaries.

This proved that a settlement fee was charged which meant that 15 years later. They both lived on the farm but there www. It is the position which is the one that gets to appoint or sack the trustee. The important position is that of the appointer. She married this gentleman who is a grazier. assets that had built up in that trust to the value of $1.com.5 million were now up for grabs. As the uncle got older. Recently I spoke to a friend who is an accountant.5 Million in My First 18 Month in Real Estate I had a case where I had a trust brought to me when I was in the accountancy practice. her husband’s father and his uncle) that is worth some $20 million. The trust was void.au/dymphna 24 . This the position of real control. your grandmother’s mate or someone or other that settles the trust.knowledgesource. it was a $1000. It loses all of its asset protection quality and is useless having it. The two brothers bought the property years ago. who owns a property in New South Wales with his family (two brothers. There was a case in the 1970’s where they subpoenaed the records to prove that the accountant who set up the trust charged the $20 settlement fee. It is an old. 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 appointer is sometimes also called the guardian or protector or sometimes the guarantor. The settlor of the trust was the boyfriend soon to be husband of the primary beneficiary. 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. my girlfriend’s husband bought out the uncle (with real money) so he now owned a third of the property and his parents owned the two thirds. somebody in the legal firm.From Virtually Zero to $3. A settlement fee cannot be charged. The invoice for that year showed $1020 whereas every other year. That is what it was originally setup for although they have changed their uses at they came down the generations. So the settlor is normally somebody in the accountancy office. As soon as they are in a relationship that trust is now invalid. One brother (my friend’s husband’s uncle) owned a third and her husband’s father owned two thirds.

Mum and dad were also the trustees.au/dymphna 25 . 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. He got the solicitors that his father used and set up the trust. as you do when you are a younger entrepreneur. he went to the solicitors. They are now in court. 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. to pass that job down to the next generation.knowledgesource. Now. let us say we have got a million dollars worth of assets in this trust and it builds up over a number www.5 Million in My First 18 Month in Real Estate 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. which was the right thing to do. But for safe guarding that. all of this transpired some 10 years later and what has happened is that his father. not taking into consideration that he had actually purchased his third of the farm. Now. you have got to understand it and get that right. When my friend’s husband bought out his uncle. A very. The other thing you must do is make sure that you take care of it in your will. who was the appointer of trust.com. and forced the sale of the property. My friend’s 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. put it in the trust to own his third of the family farm. they wanted their share now rather than when the parents died. appoint himself the trustee of bankruptcy and distribute all income and assets to the bankrupt estate and distribute it amongst the creditors. sacked my friend’s husband’s company as trustee and appointed his own company as trustee. They sisters wanted the property sold and they convinced their parents that it was a good idea. 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.From Virtually Zero to $3. That is the importance of the appointership. Trustees The appointer could be mum and dad and they could be the beneficiaries. very sad case.

From Virtually Zero to $3. I am now in business with someone else. guess what? All the personal assets of the trustee are now up for grabs. they won’t get any of that million dollars. 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. but the best strategy is to not be there as an individual at all and appoint a company as trustee. But. The company is a $2 shop company that does not trade. I am not in business with Derrick anymore. individual or corporate. so they sue the trust directly. They should own their shares in a personal family www.000? They can’t go to the beneficiaries so they go up the line and if the trustee is an individual. It will protect their principal place of residence or anything else that they may have in any other structures. We own this business 50/50.knowledgesource. It gets taken into my will and all the rest of it. So. this structure is useless unless you use specific wording in your trust to guard against that. I am not going to go into business with someone else unless they protect their side. 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. it does not have any assets and cannot trade insolvently because it does not trade. so it is clear ownership of this business. you then only expose yourself to losing one property. They can sell their half independently from my half because I only own half the company.com.au/dymphna 26 . If lawsuits took place and they sued the owner of the property and the owner of the property is now the trust.5 Million in My First 18 Month in Real Estate of years and this trust actually owned the house in Brisbane that had the illegal step height that I mentioned earlier.5 million. They cannot go to the directors because they are not doing anything wrong. This is because now the lawsuit would be suing the trust not the beneficiaries. Again you have got trustees. not the rest of your empire. let us say they win the lawsuit and they are awarded $1. What are they going to do about the outstanding $500. So that is the end of the line. So again. Hybrid Trusts A hybrid trust is a combination of a discretionary trust and a unit trust. To illustrate this. It does not do anything. As soon as anything happens to this person. their spouse can step in and it goes to their estate.

000 positive cash flow so is a positively geared investment property.au/dymphna 27 . The one on the Gold Coast is mutually geared.000 a year to keep. www. The one in Sydney is negatively geared.From Virtually Zero to $3. because of the beneficiary group and the discretionary side of things. so it does nothing at the moment. So for tax purposes and income purposes. We have protected the properties by putting them in different structures so if anything happens on any one of the properties. the only thing that is exposed is whatever you own in that particular trust. That means that you can put money into any of your company’s trusts or anywhere else you see fit.knowledgesource. it would affect the other properties. It does not affect your principle place of residence or anything else that you own elsewhere. but as well as the units. The one in Dubbo gives us $10. For business purposes. my own. It will cost us $30. it is net zero for tax purposes.com. one in Dubbo and one on the Gold Coast. Example: We have got a company and directors of the company and we are going to buy three properties. 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. We are going to buy one in Sydney. we can put money anywhere we want which is fantastic for reducing tax. we have also got beneficiaries. Superannuation is basically a form of a trust. 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.5 Million in My First 18 Month in Real Estate discretionary trust as would I.

From Virtually Zero to $3. therefore it is clearly divided from the others and there is no overlapping. 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.au/dymphna 28 . But to get around this. you would put a company on top of each one because your company is your separate legal entity.knowledgesource. www.5 Million in My First 18 Month in Real Estate There is a school of thought that says in this structure.com.

It is a registration thing.knowledgesource. They could also be set up as hybrid trusts.From Virtually Zero to $3. Companies cost more money to keep however trusts do not cost money to keep other what it costs to do their tax returns. Let us have a look at a typical business and investment structure: www.5 Million in My First 18 Month in Real Estate It is a practicality thing as to why you might choose the earlier one to this one. I would not go that way.com.au/dymphna 29 . but that is overkill and unless there were three separate businesses.

etc. a coin collection. units in other businesses. we know what income each of those trusts have. It is the ultimate owner. It is protected.knowledgesource. does not do business. It is the ultimate. For tax purposes.From Virtually Zero to $3. has no employees. shares in other companies.au/dymphna 30 .5 Million in My First 18 Month in Real Estate Going back to those three properties that were purchased (Sydney $30. This trust would be the one that owns the shares in the trustee company. If there is a business. the business would not be under the same structure as our investments. Dubbo + $10. they pass the income through to the beneficiaries. does not own a car. www. but rather than pay tax in their own right. 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. gold. The income is passed through these vehicles.com. It does not interact with the public.000. through it you can own shares. Then we could also have a piggy bank trust that would be the ultimate owner of everything.000 and Gold Coast 0) now we have directors that through a trustee company goes out and buys the three properties. 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.

000 to do something with. so that if we take any more income.000 off against one of the others so we distribute the $10.000 and it pays the tax on it. First of all we write the -$30. So now.com. At this point we have done everything that we can possibly do to minimize our tax payable in the business. We still make $100.000 www. So we have maxed ourselves out.000 from our $100.$30. Then we take $20. Tax would be about $24. It also can’t 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. We give our children that are under the age of 18. It cannot be given to the piggy bank trust because the piggy bank trust is purely a pass through vehicle.knowledgesource.000 business trust which now becomes $80.au/dymphna 31 .000. + $10. Let us have a look at the flow if this income for tax purposes.From Virtually Zero to $3. The three property trusts now all have a zero tax implication but we have still another $80. We put the maximum amount we can into superannuation which can also be a tax deduction and we pay the kids.000. which is going well.000 so that trust also becomes zero.000 to the $-20.000.000. we pay ourselves a maximum salary.5 Million in My First 18 Month in Real Estate To add to the example. with no earned income.000 and 0). 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. The company is the corporate trustee. let us say that in this business that we have. $772 because that will be tax free.000 but we would still have to pay tax on it before we do.000 out of one trust and into the other so we now have two trusts with zero and the trust with -$30. we have got that plus we still have the properties (. we are going to be in the top tax bracket. so that leaves $56. as they have already been paid salaries and don’t need any more.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. We could invest or buy property with the $80.000 and distribute the $20.000 becomes $20.

Do not buy a car. Because your debt is going up as your property goes up your protection is going up also. It also talks about Rodney Adler and Ray Williams. ever let anything hold you in there. It is the perfect vehicle. transferring the Rolls Royce. it talks about some high-profile business crashes.From Virtually Zero to $3. and take out mortgages for protection. ever. do not buy any asset directly.000 as a deposit in that trust to buy that property.knowledgesource. and do not do anything else in that company because it compromises this integrity. www. 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. 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. for tax purposes. It tells of one of the founding directors of One. Mercedes and the $7 million family home into the wife’s name. you did not really want another property this point in time but you wanted an extension on your PPR (Principal Place of Residence).Tel who transferred the $6 million family mansion solely into his wife’s name. Let us say. The rest of the money would be lent from a bank or a financial institute. but like the piggy bank trust do not ever. The $56. tighten out further registered mortgages for asset protection purposes. former directors of HIH Insurance. Its sole purpose is to pay tax and lend money in the structure. through a company and trust’s name.000 would be enough for a deposit on another property.au/dymphna 32 . The company’s sole job is to pay tax.5 Million in My First 18 Month in Real Estate sitting in the bucket company which can be used to invest and buy more property. it has friendly debt. do not have employee.com. In a newspaper article a few years back. 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. do not interact with the public. To purchase this new property we would form another trust and use our $56. They would have had full recognition and knowledge of pending litigation. lend money in the structure. etc.

knowledgesource. Another important thing that is usually taken care of when you do your will is an Enduring Power of Attorney. because my father (he was 51 when I was born.000 worth of interest and www. if you haven’t reviewed your Will for a number of years. so I did not know much about his financial situation) who in his early 80’s. had a stroke and became incapacitated. These assets probably still exist and are protected today even though he went through the Bankruptcy and Criminal Law Court. 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.From Virtually Zero to $3. An Enduring Power of Attorney is basically a single page document. the bank accounts were frozen because she had no authorization.au/dymphna 33 .com. well before any bankruptcy proceedings. He was pretty old school.5 Million in My First 18 Month in Real Estate The article also goes on to talk about other failed entrepreneurs in Australia. pretty much everything and my mother was very reluctant to take over that role. where the man in the family controls all of the finances and he owned all of the assets. He could not speak or communicate in any way. the bank accounts. 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. The car registration was in his name. it needs to be reviewed. this is really close to my heart. This is why it is so important to do it early not when it is nearly too late. One in particular was Mr. Now. but not dead. because they were in his name. At the time of his stroke. Get it right from the beginning and grow your tax efficiency accordingly. Allan Bond. Dad was in the middle of selling one property and buying another so the family incurred $25. that if you are incapacitated. who divested $60 million into trust at the height of his power. somebody else can act on your behalf. that in most cases says.

as in direct descendants or a www. Now here are some statistics for you: 48% of all marriages are likely to end in divorce:9% within the first five years. so a Prenuptial Agreement can be very important. Asset protection is effective for our current society with all litigation and legal issues. who hooks up with some guy that you may not approve of and they strip the assets from the trust and move on. 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.5 Million in My First 18 Month in Real Estate penalty taxes because the property could not settle on the due date because Mum was not authorized to sign.com. You can safeguard against this by establishing a ‘Bloodline™ trust’ where the beneficiaries are required to remain within the bloodline. 22% within 20 years and 39% within 30 years.knowledgesource. Imagine passing your assets down to your child who is relatively young. 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. 19% within 10 years. We talked about Australia following the footsteps of America. but they do now— straight out of the American courts. 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.From Virtually Zero to $3. I can’t stress enough the importance of having an Enduring Power of Attorney in place. Succession planning and the ownership of an asset is very. Prenuptial Agreements never previously held up in Australia. That whole experience cost my family an exorbitant amount of money simply because that was the way things were always done. The other thing is that it not might be you that creates the area of concern. You need to be aware of how these things play out so that you can protect yourself at all levels.au/dymphna 34 .

“A C-Corporation is another you. but if you want to have a little bit of say as to what is going on after you have gone. Now. so you actually have control. you need be as poor and penniless as possible on paper…. Primarily. They have SCorporations and C-Corporations in America whereas we only have companies. then you do not want to do business as a private citizen. When you do business. we do not have C-Corporations in Australia. While you are alive you could be the discretionary trustee or a director of corporate trust.com. If you are serious about doing business. I call anything with your name on it ‘a target for predators and lawyers’. you want a clone of you actually doing the business. Although it is not really relevant while you are alive.5 Million in My First 18 Month in Real Estate blood connection depending on what you specify of the primary beneficiary. want to own everything in their name. on the other hand.’ they call it.. the assets that are put into a testamentary state. You can also have a testamentary Bloodline™ trust. it is worth thinking about. 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 www.knowledgesource. The poor and the middle class. A C-Corporation has the ability to be a clone of you.au/dymphna 35 .From Virtually Zero to $3. That is too risky. ‘Pride of ownership. So substitute the word company in the following extract. you would still have your home in your name. The family asset that you have at that point in time can then only be passed within the bloodline. You do not want to do business or own anything as a private citizen…. especially in this day and age of lawsuits. If you want to be a rich private citizen. the trustees formed and from there a Bloodline™ trust created. It is not just an extension of you. so that upon your death.” Extract from Rich Dad’s Guide to Investing by Robert Kiyosaki It is a beautiful statement and never a truer one.

com.knowledgesource. your company at that point of signing the contract and entering into that agreement and settling on the property. Think about why you are doing something first. you can actually put ABC Proprietor Pty Ltd as Trustee for the Wombat Trust on the contract.au/dymphna 36 . you will have to pay stamp duty to do this but may be a worthwhile option. in New South Wales. In other states. What we then need to do is to determine that in New South Wales. and it clearly identifies the trust from which you are acting. ABC Pty Ltd entered into a contract on behalf of the Wombat Trust to buy XYZ Property. If you are putting something in to a company with a trust underneath it for instance. not just because you want to save $2000 or $3000 tax. it will not say ABC Pty Ltd as Trustee for the Wombat Trust. you will need to do a company unit that essentially says. Do not do it the other way around. just make sure that one way or another you identify the trustees that are buying www. If it is acting on behalf of the Wombat Trust. and insurance and potentially through structures but only as last resort. on that present day. is acting on behalf of the Wombat Trust not the Alpha Omega Trust or any other trust that you might have. Do it because it is the right thing to do from an investment perspective first. then decide how you are going to structure it for asset protection and make it the most tax efficient. What name do I put on the title? The name that you should put on the contract can vary from state to state. external debt. 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. With assets that you already have sometimes it is worth while transferring them into another structure. Whichever state you purchase in.5 Million in My First 18 Month in Real Estate you sell it. the titles office only accepts the legal entity. Once you have decided that the investment decision is right.From Virtually Zero to $3. New South Wales and Victoria are a little bit different to some of the other states. Look to have your property protected through internal debt. So for example the title on the deed will say ABC Pty Ltd for instance.

So.From Virtually Zero to $3. The company had contractors and employees and in the process of the excavation.knowledgesource. is something you also might want to keep separate. you should have. it depends on what you want to do. 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. One of the most important things in property investing is being market ready. LLC’s predominantly. It is the trust that lodges the tax return. The company that was actually doing the construction did not own anything nor did they employ anybody. What if I find a great deal and I do not have to structure yet? Well. Having plant and equipment. the ownership of which is an asset. all of your properties from your businesses and all of your endeavors from each other to reduce their exposure to risk.au/dymphna 37 . 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 didn’t progress any further. It was owned by a separate company and trust. but also legal entities that are appropriate in the other countries such as America.com. Being market ready is so much more www. 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. 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. There was a construction case in Sydney a number of years ago where this construction company was digging on some land. What you are primarily doing is separating all of your properties from each other. 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.5 Million in My First 18 Month in Real Estate the property. but it is the company that is the legal entity.

Home Offices Another tax deduction is if you are running a home office. Although depreciation is fantastic you do need to be aware that when you sell the property. First of all.From Virtually Zero to $3. To claim any depreciation on your tax return you will need a qualified quantity surveyor’s report. the rate you could claim was 4%. If you had a property that has had a major renovation since July 1985. 1985.5% and that is where it has remained ever since. but in July of 1987. 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. 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. On July 18.5 Million in My First 18 Month in Real Estate than just deciding that you are going to start investing. desks. even the brief case that is use to carry all of those kid’s papers to and from school. When the law was first introduced. the professional library. for the depreciating value of the building or fixtures and fittings that might be inside that particular building. It is finances.com. you will be able to claim some depreciation as a tax deduction regardless of whether you have spent any money or not. they reduced it to 2.knowledgesource. the computer. structuring. for instance if you are a teacher and you mark papers or prepare classes at home. It is the tax deduction on your properties.au/dymphna 38 . so much more than just being ready to invest. getting your tax returns up to date. depreciation is a tax deduction for not spending any money. saving and lots of other things. the filing cabinets. 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. 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. Tax There are a number of tax laws that you should know if you are going to be a property investor or in business. So if your building that you bought as an investment property was built after that date. If you are renting your www.

These are the sorts of things that you can claim for a home office. if you own the property. if you were an employee of that entity that owned this development and as an employee. will be subject to capital gains tax on the same percentage as what was claimed.knowledgesource. if you visit the construction site to things. or building units. If the travel allowance is paid in accordance with what the tax officer has set down to be a reasonable rate for rural Queensland.com.au/dymphna 39 . when you sell that property. all of your travel would be tax deductible. 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. whatever. However. breakfast. went to check on this site. which would normally have been exempt. one-tenth of the gain that you make on your own home. 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. your business now is property. But again. lunch and dinner and an additional amount for incidentals (the tables can be downloaded from the Australian Tax Office website). if you own your property. it becomes your place of business rather than a home office even if it is the same one-tenth office size. So you have one structure that is subdividing. if you are an IT consultant and you actually work or conduct your business from home.From Virtually Zero to $3. However. Let us say you are a property investor or you take it a step further and are a developer. it includes set amounts for accommodation. but additionally. Travel Expenses Firstly. the tax deductions for that entity are suddenly now much broader. the amount will go on your employment summary (or group certificate) and you can claim www. Travel Allowances If your employer agrees to pay you an allowance.5 Million in My First 18 Month in Real Estate home you could claim one-tenth of your rent but. then regardless of how much money you actually pay for your accommodation. A place of business is different in that it means that you can claim all the same things as a home office. you cannot claim one-tenth of your interest bill.

so you claim it as a fully expanded amount in your tax return. 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. It becomes part of the sale price which affects your profit. it is now a new property and there is a GST charge on new property. or directly after its completion? You have now. You received it as a travel allowance for doing that amount of work. Alternatively if www. you are in effect selling a new property. 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. You need to be doing this stuff automatically. That can be thousands of dollars unnecessarily.au/dymphna 40 . GST If you do a major renovation on a property and you substantially change the nature of your property. So there are all of those types of things that you need to become aware of so that you are not ignorantly selling Aunt Bertha’s property two years and one day later and having to pay capital gains tax. you contracted the builder to build house and then you decide to sell it after either living in it or renting it. However. 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.knowledgesource. when you sell it. had you sold it two days earlier inside that two-year timeframe. because it is paying within the accorded limits. What if you bought a house and land package. Therefore. 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.5 Million in My First 18 Month in Real Estate that entire amount on your taxable income without requiring any substantiation. 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.From Virtually Zero to $3. You can do that for up to 21 days away. 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. you would not have had to pay any capital gains tax at all.com.

au/dymphna 41 . Many years ago in my early years in my accountancy practice. 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. So one of the security measures that miners employ are not dogs.knowledgesource. He is the one that has to pay GST on it. Looking at this. I had a lot of clients at Lightning Ridge. 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. you do not have to pay GST on the property because the builder was the first sale to you. You have to pay more in stamp duty because of the higher value when you bought it. If you bought the property as house and land package from the builder complete. and this is not going to be a Chihuahua.From Virtually Zero to $3. but black snakes. but it is not the first sale. So for an opal miner. 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. if you needed security for instance and you had a business where you might need a guard dog to guard your property.com.5 Million in My First 18 Month in Real Estate 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. vet bills etc. www. anything associated with that security would then be a tax deduction including dog food. A security measure needed for an opal miner to protect their opals is to protect from what they call ‘ratters’. Other deductions How can you claim a tax deduction for dog food? It is a funny question but it is a valid one.

You buy them to create income. it might be doing some hard yards on it or it might be building something.com. This is called a chunk deal because what you do is you create a chunk of money.From Virtually Zero to $3. income properties or what I call cash cows. The first property that put $2. Then next one that put $5. I call them chunk deals. Now it might be as simple as shuffling paper. When I was going through my early years. what I am talking about is having a property that you do something to. did not have to get out of bed for. That meant that following 12 months I then starting investing and in that 12 months that was the time www.000 a year in my pocket made an enormous difference.000 a year positive cash flow in my pocket made an enormous difference to me. You create that chunk of money in any economic climate.5 Million in My First 18 Month in Real Estate Income Properties What I would like to cover now is income. as much as possibly could to try and cement in my head the strategy that was right for me. learning. Cash cows give you lifestyle. In my initial 18 months of property investing. It came in regardless of anything else that I did. there are only two kinds of property. Cash cows are a property that produces more income than they cost you. getting out there and doing as much as I possibly could to learn. doing something. Predominantly. that is your purpose for doing it. 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. You are doing something to a piece of real estate to make it worth more. The other type of course is growth properties. When I am talking about chunk deals. cash cows were the things that made the difference in my portfolio. That $100 a week from that second property was $100 a week that I did not have to work for. gaining experience.au/dymphna 42 . There are ‘income properties’ or what I call ‘cash cows’ or there are ‘growth properties’. whatever.knowledgesource. Cash cows are there to produce an income stream for you. creating something. Changing something. 6 months was of training.

You need to know this because that is your first peg in the sand. and say okay. When you get enough of those that you have got your basic needs covered. Because when you can do that.knowledgesource. They began with negative but have done exceptionally well. Then you have got choices. 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. I needed income coming to me regardless of what else I did. This is your first point that you can aim for. 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.com. that started with nothing. then you have got lifestyle. that is $100 you do not have to work for.From Virtually Zero to $3. it will make a huge difference on your lifestyle. I have had lots of students that have gone through with me. When you create that income. 12 months worth of investing. I just figured that if I could just get out there and accumulate enough of them then I would have my income replaced. How many people can honestly tell me that they are in that position. Then you can choose what you want to do. 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. The income that I was working 40 to 60 hours a week for. Put the $100 a week that you have created in your pocket or www. Absolutely nothing. So that those little properties put $20 a week extra in my pocket or $100 extra in my pocket.5 Million in My First 18 Month in Real Estate that it took to totally replace my accounting income. very similar to myself. let us say. an extra $100 a week. Some of them started with less than nothing if you can have less than nothing.au/dymphna 43 . Put your peg in the sand and say ‘this is my level of income that I am shooting for first’. 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. What I quickly realized was that what I wanted was income. that they know how much income they need to cover their basic living expenses? Not many. I am not saying it is impossible. 6 months worth of thinking and learning.

this gives you choices. You need a combination of the two. effectively. a friend gets an illness. what you are doing is you are tying yourself to an alternate income stream to support it. your shooting point that you are going to go for. Or you might love doing what you are doing. creating equity.au/dymphna 44 . if you only focus on cash cows. If you only focus on growth deals. you get an illness. The Rule of Two www. Creating chunk deals. That can be a secondary issue. whatever. What gives you wealth are growth properties. When you get to that point where you have got your basic needs covered.5 Million in My First 18 Month in Real Estate reduce a bit of debt meaning you have got more money available when you need it. not in the short term so it is that balancing act that you have to put into place. Creating that benchmark on the side means that if anything should ever happen.knowledgesource. You could work full time on your real estate.From Virtually Zero to $3. then life becomes a choice. you could stop working and still live the lifestyle that you live. you are going to run out of equity or the ability to continue to invest. I do not care how big your pocket is right now. something happens. you could go in and work in a foreign mission. greater portfolios the longer you have them. you are still in a position of security because it does not affect your lifestyle. You could choose to go and do anything you want. growth properties that continue to grow and expand and build into much bigger. 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. This should be your starting point. You could go and work part time. What you need to maintain your lifestyle as it is right now is passive income. That is what gives you wealth. If you hate doing what you are doing. getting out there and manufacturing and making it happen. Mostly. You are going to run out of the ability to continue to exist because if you only focus on growth deals.com. the job does not exist anymore. you are going to run out of cash flow. You have got your basic needs covered. growth properties do not cash flow. This gives you lifestyle. This gives you your freedom. Anything that you do on the side is a bonus. Neither can happen in isolation. the company goes broke. It does not give you wealth.

000 is $200 multiplied by two is $400.7 because it takes into account the depreciation of the tax deduction. 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.5 Million in My First 18 Month in Real Estate Let us have a look at some income deals. Then you multiply this figure by two. $200. it does not matter because I made it up. Eg. if you have the purchase price and you divide it by 1.You need to be getting $400 a week or more from that property to make it positively cash flowed. But this is how it works. for not spending any money and being able to get a tax credit back on that. you take off three zeros and you are done). There are a few things you can do to assist in working out this process. 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.000 property.000 x 2 1. 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.knowledgesource.000 divided by 1. Eg.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. Purchase Price 1.com. When I talk about the Rule of Two I am talking about pre-tax. I have a rule called the ‘Rule of Two’ and if you have not heard of it. The final figure will vary depending on how much the rates are.au/dymphna 45 .From Virtually Zero to $3. It will come in as a rule of about 1. 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.6 to 1. you have got $200. www.000 (for those of you who are mathematically challenged. The Rule of Two says this. This is just the rule of thumb.000 x 2 = Weekly Rent So if you buy at $200. you have got yourself a cash cow.

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. I said who actually rang up about it? 10 people put up their hands. This is an ad that was in a newspaper a number of years ago when I was speaking up in central Queensland.000 of that will be secured on the property that you are buying and $40.000. I said what happened to the rest of you why did you not ring up about it? It sounded too good to be true.000 will be secured on your other property.000 (in this case 20% of the property) sitting around in cash. They could have been like me. you will be borrowing $200.000 Cash Positive $11. A www.000. which one of you bought it? All the hands went down. I have got a cash cow in my hands. we are talking about paying interest on $200. you have no debts and you have got $40. This is a rule of thumb only. 10 out of the 75% that saw the ad.com.From Virtually Zero to $3. My philosophy is that unless you have got $40.knowledgesource. Too slow. $160.au/dymphna 46 . I acknowledged the ones that rang up and were too slow. you have paid off your house. the $40.000.000. I did ring up about it but that was after lunch on a Saturday and they had already gone. But those that did not even try were giving up a pension.$135. 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. Immediately you have now got a reference point to say I am in the money. you are still paying interest on 100%. I was speaking to an audience of 175 people on a Monday night.5 Million in My First 18 Month in Real Estate The Rule of Two is also based on paying interest on 100% of the mortgage so if the mortgage is $200. I was one of them.000 out of equity out of another property to go and buy this particular property. If you are taking your $200. it does.400 Does this make the rule of two? Yes. Fantastic.000 in savings. All returning $100 per week. Either way. Urgent sale . 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. On the Monday night. it is still 100% borrowing.

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 . So those people who did not even try were giving up a lump sum benefit of half a million dollars. That is what a direct cash cow is. To buy an $11. 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. There is the ‘direct cash cow’ and there is the ‘indirect cash cow’.400 pension. They do not fit the Rule of Two.5 Million in My First 18 Month in Real Estate pension for life for as long as they wanted to own that property. it would just be shuffling paper.everybody. For some of them. Properties that they have driven past everyday for the www. From the day you buy it. I have seen literally hundreds of these deals go by under people’s noses.400.400 index pension not only for life but for generations ahead would cost you in excess of half a million dollars. An index pension because it will continue to increase in value because the rents will ultimately go up from $11. nothing more. it puts money in your pocket. They are going to be muddled in amongst everything else and maybe it is your own ignorance that stops you from identifying the opportunity.au/dymphna 47 .com. it is like the one I just explained.From Virtually Zero to $3.knowledgesource. When I say a direct cash cow. Quite likely that will be the case. There are two types of cash cows. Why wouldn’t you be excited about an $11.

he thought. that picture had now become a completed building with a for sale sign up again. What he drove past everyday was an opportunity at a number of levels. It was on a busy road and one day when he was driving past he saw a sign on it. after continuing to drive past this same building every day. increased the value of the property immediately. So that was a chunk deal. A week or so went past and he saw a sold sign. It was sold again a week later. 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. Never identified that it was a potential indirect cash cow. it was a very old. he noticed that there was a sign on it again. Let me describe this deal to you. Some idiot did. five remaining. really ugly factory. The opportunity to buy it was there at any point in time but he never recognized this property as an indirect cash cow.au/dymphna 48 . Then about nine months later. The sign was up there and it said nine for sale and then eight remaining. but this is zoning to build a certain style. last one available and finally all sold. Getting that through the council to say that you can build that particular building there. there were now beautiful new commercial buildings.5 Million in My First 18 Month in Real Estate last 10 years on the way to work but never identified that it was a possibility. he knew it was a piece of rubbish. you could not really call it a factory.knowledgesource. www. It was more of an old shed.com.From Virtually Zero to $3. He thought it was interesting that anybody would want to buy what he thought was a piece of rubbish. But this time it had an architectural designed picture on the sign and what it might look like if you built something there. He thought. Then some three months later. When he first started to drive past that 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. they are selling it again. He had an opportunity to get in there and buy it initially and get what we call a DA on the property.

This is where I want you to start tuning yourself. He went in and he produced nine commercial premises.5 Million in My First 18 Month in Real Estate 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. a direct cash cow could be in a regional area. By doing this they could take their profit from those properties. not only have you increased the value of the property but you have increased the rent and now it might be a cash cow. 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. but first there are characteristics that you are going to have to start to look for. in some cases. This could be anything and this is where the opportunity to make a cash cow is now. If they did that. This is a complicated structure and it is a little bit more advanced but this kind of deal could have been a little house. www. The next person who came in had the opportunity to manufacture a cash cow.com. 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. This kind of deal could be a subdivision.From Virtually Zero to $3. Let us have a look at some of these characteristics. take the money that they made and pay down the debt that remained on the remaining premises that they decided to keep. 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. Some of you may not be comfortable with that. in the indirect cash cow market. 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. 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. 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.au/dymphna 49 .knowledgesource. First of all. These are the hidden ones that you would not necessarily pick up on unless you tune yourself into them.

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. I actually gave up a property. It is also www. You should be managing your management agency. they are not managed as well as they could be. but they live right around the corner from you no matter where you live. It is not a product of where that property is this can happen anywhere. I let the tenant get away with blue murder. in my opinion. Is the town or suburb sustainable? Is it reliant on any one particular industry and if anything should ever happen to that industry. But they have this idea that just because you might buy in a rural area. those properties are under market rental. that will be okay too. Typically. whether it be a mining area. Some more so than others. typically. What you have got to do when you look at any regional area. what drives employment in the town. 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.From Virtually Zero to $3. I always manage my properties through a property manager and I manage my managers. The issue is not your tenant. Regional areas generally do have a high yield. You can get a rat bag tenant anywhere. 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. when you go out of your own suburb. are we going to be in trouble? What drives the town. you are not managing your manager efficiently. 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. not your tenants.knowledgesource.com. I will not manage any of my properties. The issue is your management agency. 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.5 Million in My First 18 Month in Real Estate Take that a step further. that you are going to get a rat bag tenant. This is pre-resource boom.au/dymphna 50 . If you have got a rat bag tenant. a rural area or whatever. particularly if the owner is a little bit soft like I am. The reason I say that is because when I see people who manage their own properties. Rat bag tenants live in rural areas. Typically. just down the road.

Do you know how much difference that would have made to my life back then? Enormous. I could not afford any lack of rent. Upstairs / downstairs rented out separately. In previous years. Houses that you can turn into multiple flats. I could not sign the contract quick enough. 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. It is a case of board up your windows and wait till the nickel price comes up and the mine reopens. At the time.knowledgesource.com. etc. the more likelihood that the property is going to be a positively cash flowed property. I could not sign it quick enough now but back then it was too risky for me. I always look at risk profile when I am making a decision. I could not withstand that and I said no. that property had a positive cash flow of $38. I am talking about a duplex. Strips of shops. to pay the repayment on that property and the property was supported by one small to medium industry. The property is worth a whole lot more now. is where you have two or three shops in a row so you have more income coming in from the one purchase.000 and I could not afford if that property was not rented. Multiple income stream properties could be blocks of units and things in the residential market but it could also be in the commercial market. probably a whole lot more income comes in from it. a triplex. Had that property come to me today. something that you can turn into a duplex or triplex or a fourplex etc. a fourplex or then you go to a six pack. strip of shops. That was the potential of this particular property.5 Million in My First 18 Month in Real Estate pre-me being very financially strong. I refused to buy the property. not to reduce the rent so that you get a tenant. You might be able to buy something that will you can turn into multiple income streams. Something that you could put another www. That property was for sale for $320. 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.au/dymphna 51 . The reason I refused to buy the property is because in my financial state at that point. So that is where you have got to look to the fundamentals.From Virtually Zero to $3. You should to.000 a year. when the nickel price was not so high. I had known that town.

knowledgesource. Most of you will be thinking in traditional mindsets. She then put a bit of a carpet down. Always www. If my student shares the opportunity to renovate it and increase the rental on the property. on average.au/dymphna 52 . a splash of paint. Something that you could potentially strata title or subdivide or build some storage facilities or rent out the shed for parking. In all she put in six slot machines. a coke machine. One on my properties in America gets rented out for storage. In the beginning my reality of how I thought things should be hindered my wealth. multiple income streams.com. While she increased the yield on the property for the traditional rental model that she had. It becomes a bit of a chunk deal on the side and then you may have something that is positively cash flowed. What else can you do to make this thing positively cash flowed? You have got to start thinking outside the box.5 Million in My First 18 Month in Real Estate residence on. then it could become a manufactured cash cow. from those vending machines. The students who predominantly rented these units invited all of their mates around. four dryers. she cleared an extra $500 a week in coins! Do not think that you have to think inside the box. 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. put in four washing machines. hindered my progress. They put in a lounge and a TV and this room became this little social Mecca where everyone used to hang out. a chocolate machine and one of those space invader machines. The garage gets rented out for storage for $100 a month. So have a look at how you can maximize your income streams. a pinball machine. hindered my success.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. By renovating you will increase the value of a property.From Virtually Zero to $3. One of my students bought a block of four units in a pretty sizeable regional town supported by number different industries. Think of what else you can do to create income streams. But this student did a bit more than that. It was a block of four for $230.

It affects your growth. Commercial generally has a higher yield on it than residential so the Rule of Two does not apply to commercial. it is lifestyle.knowledgesource. So if you have a property that has got a 10% yield on it. what is happening from fundamental perspective? That affects your yield.com. Remember how we talked about the Rule of Two. They pay for all that stuff. 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. Commercial Commercial is a little bit different. they pay for the body corporate. If you are talking about commercial throw the Rule of Two out the window. They pay for the rates. 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. they sometimes pay for the insurance. is it transport. It does not apply. It is called the Percentage Point Split. The lease has been set up and they pay for the maintenance and everything else on the property. I have got a new rule for you. and there is a high rental demand in mining areas at the moment. 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. They are allowing multiple income stream properties so that you get most people living around where the transport hub. What makes people live in an area? Is it employment. Whilst most of you may be just thinking mining areas. 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.5 Million in My First 18 Month in Real Estate look for areas where there is a higher rental demand. where they do what I call ‘infill housing’. What you end up paying for as the owner of the property is the interest on the mortgage. you are returning 10% on the commercial property and you are paying 8% www. what happens is the tenant normally pays for all of the outgoings.From Virtually Zero to $3. In commercial.au/dymphna 53 . as the case may be.

or talking to somebody on the phone when you are talking about commercial. Derrick is out of work. Smith. The other thing that affects our cash cows in the commercial market is the business environment.From Virtually Zero to $3. But.au/dymphna 54 . He has hurt his arm. Because.000. literally heaps of properties around at the moment that are under market rental. He has been doing it for 20 years. how much possible income have you got? $20. strengthen the position of your tenant. you have got to think about your tenant. So if the property was worth one million dollars.knowledgesource. Primarily. you have got to pay a lot of attention to the well being of your tenant. If your tenant is losing money. First let’s look at the residential market. this is now. that is the rule that you should be thinking about when you are out in the field or on the internet. He is got a number of properties. what is your Percentage Point Split? Two percent. it is not their problem.com.5 Million in My First 18 Month in Real Estate interest. For example: You have little Mr. You can help their business and thereby. Under market rental Under market rental. They are going broke. Now. strengthen your ability and be able to keep the market rentals. poor Derrick. you have got a vacant piece of real estate. Mr. if Derrick went somewhere else. they are going to go out of business. There are. he manages his property. particularly if they are managing the property themselves. He will keep his rental at a $100 a week which is what he has being paying for the last 10 years. and have a more enduring positively cash flow property. and he is got Derrick living in one of them and Derrick has hurt his arm. Now. 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. it is your problem because you would not have that tenant for very long. he has been a good tenant and he looks after things and he does this and does that and whatever else. he would have to pay current market rentals. they are going to be properties that have been owned by the one owner for a long period of time. So. www. Smith would not want to increase his rent because. that is even worse. You can improve the well being of your tenant even if they do not seem to know what they are doing. what happens is. But. typically.

I absolutely support it. but choose where you put that money. Mona moaned. She started to pay the rental but would moan that she was going to leave. not only to find a property that she could pay $140 a week for. I inherited one tenant. the current market rental at that time was about $220 a week. fantastic. but she eventually moved on. Mona was paying a $140. if I am a charity.5 Million in My First 18 Month in Real Estate I had a property that I bought with exactly this situation. Hang on a minute! I do not care what ‘situation’ she is in. I want the choice to be able to give. In the same way as residential. has to pay $220 for that unit somewhere else. 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 Mona had it all over this agent. Dear old Mona. her name was Mona. Now. nearly $4.au/dymphna 55 . 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. she would wince at everything. It was so appropriate. You are not a charity in that regard. It was managed by an agency.. than Mona. if she goes somewhere else.000 a year that I was not getting from Mona. They may have a www. Mona. that she would find somewhere else. No one in the agency was going to say ‘wait a minute. In the commercial market it is more apparent because their leases may often be longer. go and do it. It was a block of five units on the Sunshine Coast. $80 a week. So bring things up to micro financial if the rents are lower than they should be. Now.. but a lot do not. 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. in this case.com.000 a year to who I consider to be the most needy and to me Mona was not that person. there are opportunities in the commercial market with under market rentals. So. 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’. Mona had paid a $140 since she moved into the block some six or more odd years ago. If you want to be charitable and you want to give money.From Virtually Zero to $3. but a property of similar ilk that she could pay $220 a week for. So why would I let that situation continue? There were other more needy causes that I could choose to give my $4.knowledgesource. But Mona found it very difficult. and that this was not fair at all etc. and she carried on for so long. Typically.

I will not go into this in a great detail because it is a little bit risky.000 a year at a 10% return.5 Million in My First 18 Month in Real Estate fixed 3% increases and over time you will end up with 3% not being enough to keep up with the actual market rental.com. Leases and subleases Leases and subleases is where you have a great opportunity to look at the leases. Market rentals might have been going up at 6%. when the lease comes. That is how the price is set. But what happens if that property really should have been bringing in $30.From Virtually Zero to $3. a factor of your rent. It is set on how much are you getting on the property.000. Have a look for these opportunities. You just made $100.knowledgesource. There are opportunities like that everywhere so look out for that in the commercial market.au/dymphna 56 . commercial prices are set by the yield. unlike in the residential market where it is set by comparable sales analysis and things like that. The cap rate in that area is x percentage therefore the value of that property is x.000 by doing nothing other than bring your rental up to market value and getting what the property is really worth.$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. You compound that over a number of years and what you are doing is being a charity all over again.000. It is a factor of yield. 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 where you have an opportunity to take out a master lease and then sublease the same property out.000 and it was being rented for $20. 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. you renegotiate the lease up to $30. www. There may be an opportunity to buy in because in the commercial market.000 . Guess what the property is worth now? $300. Let us say you had the opportunity to buy a piece of commercial real estate for $200. very quickly. 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.

The rents go up and you end up paying more than you would have if you just rented the property in the first place. I am not tough enough to do it. It was a block of five units but that property put $27. They are ugly units but they are in an area that is a good. The income on the property is $57. Example 1: Block of 6x2 Bedroom Units $430. I do not want to be leasing it up to somebody else. So the only way I will use this strategy is with somebody else. It has been supported predominantly by rural industry but they are always going to be rented.5 Million in My First 18 Month in Real Estate Lease options Rent demise and lease options are your typical wrap deals. it is just not for me.000.knowledgesource. Are you are going to get much growth out of it? Probably not. It has 0 vacancies.000 to $20. It was in a mining town and that it was the ugliest thing you could possibly imagine.au/dymphna 57 .com. Does it matter? Absolutely not. whoop? Probably not.From Virtually Zero to $3. I once bought a property and it probably looked worst than this. They come under the three different forms primarily and they each have right ways and wrong ways of doing them. solid little town. strong. so does it really matter if it is in whoop.000 a year into your pocket. Zero Vacancy A block of six units at $430. Is this cash cow? It is. This property puts about $15. Did that property ever go www. 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. absolutely works. The only way I will go into a wrap deal is with somebody else who wants to do the work.500 per year.500 a year into my pocket year after year after year.500 a year. I have nothing against this strategy. My personal bias is that I want to own a property.000 Currently returning $57. This is not really a strategy that I personally use.

5 Million in My First 18 Month in Real Estate up in value? Not a lot. I bought this property for cash flow.From Virtually Zero to $3.au/dymphna 58 .knowledgesource. It could have bought properties that would have quadrupled in value with the same money but did I care. www.000 for it. I paid $250.com.

000. This investor’s reality returns $110-$120 p/wk per unit.knowledgesource. Its purchase price was $290. representing an 18% gross return (gross not net). This property returns $945 plus per week. Over Christmas it has100% occupancy. secure fencing and a car-park for car accommodation. The figures are based on a 25% vacancy rate and $180 a week. 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.00% gross returns. Example 3: Price: $950. www. This is based on a $290.000 so the yields would be even higher. 20 UNIT ACCOMMODATION VILLIAGE KAWANA Features: A/C.5 Million in My First 18 Month in Real Estate Example 2: $945 plus per week represents 18. Entertainment room and spare land on this block.From Virtually Zero to $3.com. Games room.au/dymphna 59 .000 Rent (p/wk): $110-$120 p/wk per unit. 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.000 purchase price and there are some left from $265. 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). Laundry. 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.

is in a university campus 20 unit accommodation village. 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.000. 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.From Virtually Zero to $3.000 all rented between $110 and $120 a week. 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. you are different’. they were minus $186. I will tell you some more stories because many buyers will say to me ‘but you are an accountant. a home loan. That would be almost $300.knowledgesource. in total $186.000 $ 7.000 that you would need to look at in equity from somewhere else to be able to buy this property. That is a lot of rubbish. But this property puts in excess of $20.000 worth of debt.5 Million in My First 18 Month in Real Estate This one here. Someone without the kind of programming that I had will find it a lot easier.000 www. This is what they did. Is that a cash cow? Yes it is.000 a year in its owner’s pocket.000 $ 5. 20 units priced at $950.500 $ 30. How much money would we need to buy this property? How much equity will we have to have? 30% at least.au/dymphna 60 .000 $ 5. All of those things made it harder for me because I had to desensitize myself to what was normal and acceptable.com. So sometimes you have to take the longer view. So they were in 0. you are an economist.000 $ 10. a personal loan.000 $112.000 $ 2. Credit cards • Bank of Qld Visa • Commonwealth Visa • ANZ Visa • Myer Card • AGC C/Card • American Express Personal Loan Home Loan $ 15.

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

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

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

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 year’s 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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it was $25. I believe that there was probably an additional $20. www.500.000 for hook up.knowledgesource. which in my opinion they paid too much for.000 that they could have made if they had had a little more experience but it was still a great result.com. Their next purchase was a property in a little town in Queensland. 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. The purchase was a residential block for $2.000 for the removal house and another $37.From Virtually Zero to $3.500. It was rented for $180 a week and revalued on completion at $150.5 Million in My First 18 Month in Real Estate off their old debts and getting rid of what they had previously accumulated. So they made $67.au/dymphna 64 .000 for removal and set up and $8.000 profit.000 renovation the total cost of the house was $82. Then they bought a removal house.000.000 to $30.

000.000 Profit $ 80. Sometimes you can also get the house rewired with new electrical in the price as that is often something that needs to be replaced. Reno costs $ 15. It is much harder to get insurances and make sure you get all of the correct licensing in place.000 and that is $102.000 Rent $520 / week.000 with a rental return of $27. They completed a small renovation for $10.000 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. 1 ½ bath for $60 000 delivered and stumped Small Reno $ 10. So they spent $15.000 for the renovations on this one.com. It was revalued post renovation for $250.000 A similar one for $155.knowledgesource. thank you very much.000 profit on that property.000 was renovated into a five bedroom boarding house. Deal 5: Price $155.000 Revalue $ 175.000 They bought it! Move a 3 bedroom. It is very important that these things are investigated thoroughly. So they did a similar deal in the same town.au/dymphna 65 .000 Profit $ 102. Revalue (post reno) for $250.From Virtually Zero to $3.000.000 Renovated & turned into 5 brm boarding house. They moved a three bedroom house for $60. have fire alarms installed and all other fire requirements that are necessary. They purchased some land for $3. Boarding houses can come with complications.5 Million in My First 18 Month in Real Estate Deal 4: House block – Same small town Asking price $ 3. You must be very aware of the fire ratings.000 and had the house revalued $175.040 per www. delivered on stumps.

From Virtually Zero to $3. It now had an additional value of $80.com.5 Million in My First 18 Month in Real Estate annum.knowledgesource. www.au/dymphna 66 .000 as well as positive cash flow.

Begged & borrowed – settled with cash.000 with the rent at $200 a week. Between signing contract and bank valuation another house 4 doors down sold for $160. Just in time a friend came to the rescue and they did settle and it was immediately revalued at $160.500 $164. Lots of hiccups with this house. Deal 7: Purchase Price New Kitchen Legals Total Cost Re Valuation Profit $ 15.000.000 Rent $200 /w Immediate Profit $35. 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.000.000. Approached bank to finance within hours of settling.knowledgesource. They agreed to buy a house under market value for $125. They put in a new kitchen for $7.000.com. They could not get the finance by the settlement date as the bank backed out and did not approve their loan.500 a few extras.000.au/dymphna 67 .hours before an extremely delayed settlement. www.5 Million in My First 18 Month in Real Estate Deal 6: Agreed to buy house (under market value) $125. total cost of $164. Lender Cancelled Settlement.000 and revalued it immediately at $220.000 $220. Purchase price was $155.000 Another joint venture.From Virtually Zero to $3.000 Another joint venture. Had unconditional approval from non conforming lender .500 $ 1. a profit $56.000 $ 56.000. They made an immediate profit of $35. it was a great deal but they had a lot of hiccups. 000 $ 7. they still could not do one on their own.

but it is not going to be easy.au/dymphna 68 . They did not have any money.com. www.From Virtually Zero to $3. you can make it happen and you can make it happen surprisingly quickly. It works for them because they could do the work. Like them. They could do the work and make it happen.knowledgesource.5 Million in My First 18 Month in Real Estate 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.

500 JV 4 $102.000 The second place they bought on their own was a one bedroom house for $63.000. They paid $65. It desperately needed a renovation. 1 Bathroom House on large corner block Asking Price $ 67. $12.000 so they put a tenant in place for $125 as it already had a profit of $12.000.000 Next they bought a three bedroom and one bathroom house on a large corner block.000 $ 48 $ 80 $ 49 $ 61 $270 Cash Flow / wk / wk / wk / wk / wk www. It was revalued at $130. This was their first own deal. They spent $22.000 Desperately needed renovating. They did this all that in 12 months.knowledgesource. The agent estimated the real value to be about $75. New everything except bath tub & Toilet.000.000 JV 5 $ 80.From Virtually Zero to $3. The asking price was $67.5 Million in My First 18 Month in Real Estate Deal 8: 3 Bedroom. Joint Venture Summary Property Profit JV 1 $ 78.000 Paid $ 65.au/dymphna 69 .000 Renovation took 3 ½ mths. It is not a lot but it means that there is a future. Painted everything! Reno Cost approx: $ 22.000 JV 3 $ 67.000.000 JV 2 $ 80. Deal 9: Bought a 1 bedroom house for Agent estimated real value at Tenant in place for Profit $63 000 $75 000 $125 / week.com.500 and renovated over 3 ½ months and then rented it at the end for $220.000. Rented for $220 / week Re-valued House $130.

they are the JV’s and obviously.500 $578 / wk Now. She came to me after the event and said that although she didn’t 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. Anyway. I was talking about growth strategies at one of my workshop events spoke about how to actually do a development approval.5 Million in My First 18 Month in Real Estate JV 6 $ 35.000 $ 82 / wk Own 1 $ 47. She said her best friend’s parents have a property on the outskirts of a small town in Victoria and all the developers have wanted it. How to actually submit the paperwork with all the councils. The parents agreed and as part of the agreement she did it together with www. 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 said that they wanted subdivide themselves but didn’t know how to go about it so she thought that she could maybe do it for them. They had been offering them as much as $1. to speak to me throughout the process and she ran into any difficulties. it would be worth much more.2 million to buy the property to develop it. She asked them to give her six months to try and get the development approval for them. she went to her friend’s 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.000 $ 82 / wk Own 2 $ 12 000 $ 20 / wk Total $557.com. I said if she was prepared to stick her neck out and make that happen. that has to be shared but basically.knowledgesource. Another one of my students did a no money down deal as well.000 $-42 / wk JV 8 $ 47. to let me know.800 $ 11 / wk JV 7 $ 56.From Virtually Zero to $3. 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. She said that she could do that work for them and that if she managed to obtain development approval on that land.au/dymphna 70 .

She and her best friend now had $100. It took her nine months to do.000 got split between her and her best friend.5 Million in My First 18 Month in Real Estate her friend. any increase in the value.000 to start their own property portfolio to buy their very first homes. 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. but she increased the value of the property by $400. that she could create by doing that development would be split 50/50.com. Part of the deal also was that any profit.000.2 million that they were being offered for their property.From Virtually Zero to $3.$200.000 out of the deal . That meant that she got $100.000 went to the parents and the remaining $200. Would that not be a really good kick start to get into your first property at the age of 19? www. But her share would be split with the daughter. their daughter and through this process she would learn how to do this also.knowledgesource. any extra money that was made over the $1.au/dymphna 71 . her friend so their daughter was getting a quota and learning the process.

800 income coming in. NSW Commercial Office $175. www.000@7. When you start with commercial properties.000 is $6790.5%) Mgt Fees ( @ 8%) Passive Income $175. ROI or Return on Investment of 11.800 $ $ $ 0 650 $ 13. Upstairs was actually residential but it was all under a commercial lease and rented together. The passive income on this particular property was just over $7. In this instance they used applied knowledge to make it happen.5 Million in My First 18 Month in Real Estate Example: Reginal.000 that was rented for $400 a week. In this case the tenants paid the rates but they did not pay the insurance and there was no body corporate. 3. it does not have to be with millions of dollars. the percentage point split is 3.88% 2 Bedroom Unit Upstairs + Commercial Shop downstairs Analysis: Purchase Income Rates Insurance Interest ($175.knowledgesource.88%.000 spend is not too bad but is it going to cost 30% equity because it is commercial.025 Another story starting with no money. New South Wales for $175.From Virtually Zero to $3. If you are paying 8% at the bank.000 Current Rental $400/wk ROI 11. There was $20.025 passive income for a $175. Everything was done through their solicitors. This was a little commercial property in Reginald.com. $7.au/dymphna 72 .000 $ 20. 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.125 0 $ 7.88% of $175.000.88%.

000 worth of equity? Is this deal good enough? This deal might require $58.500 (30% of $175. How do I get 12%? $7. It is going to cost $58.500 is required plus approximately 5 % in estimated costs to cover other bits and pieces involved in the purchasing of the property.com.au/dymphna 73 .000 or not. How do you compare two deals like that? The answer is in the calculation of an opportunity cost analysis. In this particular case we have got $52. to be able buy this property. This is where your opportunity cost analysis starts to come in.000 which is the passive income that we have got coming in for the opportunity cost of investing $58. 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.000 to get into this deal so that is $58. 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 into this deal as opposed to www.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. It is $20. 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. Your real return on investment is infinite because the entire amount was borrowed but what is important is your opportunity cost ROI.000 but the next deal might require $200.000. It is 12%.5 Million in My First 18 Month in Real Estate Let us look at those figures. So $52.knowledgesource.From Virtually Zero to $3.000 so in this instance you would not have to be registered for GST so it would not come into it. This is a calculation that gives you the ability to be able to compare one investment with another. it would depend on whether the owner is actually registered for GST as to whether that is plus GST.000) that is going to be required in equity or money from somewhere else.000 that I am choosing to put into this deal that I could be putting somewhere else. unless your income from your commercial property exceeds $75. In this case. opportunity cost ROI.

000. I am actually investing money through borrowing the lot.5% is going to pay the interest on the money where I borrowed the $58. gives you roughly 12%.From Virtually Zero to $3. But 7. I am actually getting a 19.5% yield. So it is 12% return investment. So $7.au/dymphna 74 .5% return.5%.5%. my real yield on this property is actually 12% plus 7. I need to ask myself if I could a 12% yield somewhere else because really if I am paying 7. Since I have no money to invest. www.000 divided by $58. So you need to think where else could I place that money and get about 19.000.com.5 Million in My First 18 Month in Real Estate another deal. 12% after paying interest on my money.knowledgesource.

I saw an ad to sell their sign business and this little piece of land for $300.050 Positioned at the entrance to a thriving retail/commercial estate.400 The place you could get more return would be in another property deal.000 plus GST promising a 10% return on your money. www. This particular property is a handkerchief sized piece of real estate on the corner of an industrial estate.5 Million in My First 18 Month in Real Estate Analysis Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $175. 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. This is a rock solid investment that will continue to perform. So they went to the council that owned it and actually negotiated to buy the land free hold. Then what they did is they erected signs and went about and started selling signage to the local businesses.900 $ 58. You are not going to get it anywhere else but I am biased. This little handkerchief piece of real estate used to be just a hedge.a.00 + GST MAROOCHYDORE Unique investment opportunity on a dedicated signage site located on the Sunshine Coast yielding 10% nett p. They sold enough signage so that in a few years’ time.000 $ 7.knowledgesource.com.From Virtually Zero to $3. In some instances. . UNIQUE INVESTMENT OPPORTUNITY Sale by Negotiation $300. but somebody that was thinking out of the box like I obviously wasn’t decided that this piece of real estate could be something they could do something with. There was a particular property that was one of those properties that I drove past for 10 years on the way to work.025 Infinite?? 12% $ 52.au/dymphna 75 .000.500 $ 5.$30.

not gross. There it is: $30.knowledgesource.000 income coming in.com. 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. She is a New Zealander and this property was actually in New www. Only in five years time. People driving the other way can see those signs.$510 a week return on a $250.000 purchase price and it cost you 7. I know and he said I can get more out of this.000 . Passive.5% or 3% roughly on your $300. $300. would you be interested? Yes. You would get 2. There was a lady in one of my mentoring programs who bought a property. on something that was totally hands free and you did not really have to do very much with it at all. Buying sight unseen Always do you due diligence. It is an opportunity that everybody including me drove past and missed and it is a cash cow in a high growth area. I am not a great believer in buying a property that I have not seen.000 worth of income. $10. 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.5% or 8% let us say to pay the interest on your $300.5 Million in My First 18 Month in Real Estate If you were offered a deal that had 10% return on your money. I am going to sell signage on the other side particularly the front ones and he actually erected one on the other side. Now. 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 person who bought this business.000 a year so it is now $40. This is a perfect example. your property is going to be trashed and you will have to replace everything. Which now makes that property worth $400. the interesting thing with this one is that it is a business model.000 return. There is nothing on the backs of those signs.au/dymphna 76 .000 purchase This is the same amount of money as what it would cost to buy a four bedroom apartment in a university complex. Or that somebody that I trust implicitly has not seen.From Virtually Zero to $3.000. He was able to increase the income on this property by a third.

a property is for sale for $550. Advertisement Block of 4 x 2 x 2 Price $550.000 and the rent on it was really good.knowledgesource. The vendor however said that this was not a problem and that he would provide the finance – at a 10% interest rate. It did not so she had no out. it was now burnt out. 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.From Virtually Zero to $3. It had positive cash flow and sounded fantastic. There had been little fire that burned out the street so naturally she wanted to get out of the contract. It was a block of four units that she could buy for $176.it should have said ‘subject to finance sufficient to complete to buyer’s satisfaction’. building and finance clause in there.au/dymphna 77 .com. try crying! Example: Here are some other scenarios.000. That is the only reason she got out of that contract so worse case scenario. A typical example is 100 km out of Brisbane. 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.000 Brisbane: 105km (direct line) “Perfect Investment” Both sets are excellently maintained with one block www. 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. 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. She wasn’t overly concerned because she thought she could easily get out of the contract due to the finance clause.5 Million in My First 18 Month in Real Estate Zealand. Previously I mentioned under market rentals and things like that. Unfortunately her contract only said ‘subject to finance’ . She had to legally accept his offer of the finance. In the contract she made sure she had a pest. if in doubt.

However in this instance they did actually only put in 20% which means they have obtained finance as a residential property.From Virtually Zero to $3.com.320 a week. first of all.knowledgesource. 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. 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.au/dymphna 78 . Under six units is normally considered residential depending on which bank you are dealing with but complexes above six. 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%. 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.150 a week and could probably be increased to $1.5 Million in My First 18 Month in Real Estate undergoing a refurbishment in the last five years. Fully tenanted and showing excellent returns and located in a top class east side location. 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. but because it is eight units it is considered a commercial deal. www. It does not sound like a lot but when we look at that.

From Virtually Zero to $3. rates and management fees leaves $9.000 with the income just under $60.4%. you need to work out what the opportunity cost ROI is.150 $127.5 Million in My First 18 Month in Real Estate Analysis Purchase Income Rates Insurance Interest ($550.150 which is the equity that you have put in from somewhere else. The fact that you are paying 7. This is pretty good but the property was under market rental.com.000 $ 17.150 First of all.5%) Mgt Fees ( @ 8%) $550. The opportunity costs of putting $127.800 $ 3.5% somewhere else means you are going to get a return of around about 14. $9366 divided by $127.366 Passive Income This property was $550.500 $ 900 $ 41. Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $ 550.4% $ 110.au/dymphna 79 .250 $ 4.784 $ 9. Taking out the costs such as the interest rate.320 so that is $170 a week extra.9% real return on the property.366 as passive income.366 Infinite?? 7.150 a week as the current rent and it could $1.000 $ 59. Our opportunity cost ROI. is the passive income.000. Remember that we have $1.150 into this deal as opposed to using that equity somewhere else comes in at 7.000@7.000 $ 9. www. We are going to have to put in 20% plus our costs that we will round off at 5%.knowledgesource.

Why would I be interested in this ad if it was among thousands I have seen on realestate.knowledgesource.76% return.76% $110.150 $127.com or any of the others that are out www.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.com. or by adding extra dwellings.000 What a ripper! This two bedroom with study. Maximum return Look for maximum return on your property where ever possible. 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.L.000 $ 17.com or domain. Set to the front of an approximately 825m2 block with two road frontage. All these things create more income.5% interest you would be actually paying on the deal it makes the return on that property in excess of 20% return.au/dymphna 80 .From Virtually Zero to $3. a duplex.499 Infinite?? 13. Advertisement: 438 Creswick Road. Ballarat Central Two Road Frontage Close to Lake and CBD $125. more cash cows. If you add the 7.D. Be quick.000 $ 17.5 Million in My First 18 Month in Real Estate Analysis reworked Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $550. to maximize the income from any one property. weatherboard home in need of a bit of T. whether it be a parking facility.C is located in a prominent central location within walking distance of Lake Wendouree and the C. Consider putting in storage facilities and things like that.B.

000 www.000 property that they owned with a mortgage of $380. Case study: Ian & Helen Age 40’ish. Assuming I can. Married 3 Kids Financial Position when they started with Dymphna Helen working 6 days as hairdresser and a Ian. Helen was my hairdresser. Alternatively. assuming that is fitting in with the council guidelines of an 825 square meter block.000 $210. It may or may not. that means it is probably bigger depending on the council requirements in that area. I might go and build some storage facilities on the land.000 and this $590. 800 square meter block. Because this property has a two lane frontage.000. That is actually what happened with this block. $18 an hour and that was their financial position at that point in time. I can build another residence on the back. This was a multiple use property.au/dymphna 81 . depending on the council. a Fireman PPR value Mortgage Equity Survival Mode! I would like to mention Helen and Ian. By fixing it up. She earned $18 an hour when she came to one of my mentoring programs. It means that I can fix it up and compound my return. That also gets my attention.5 Million in My First 18 Month in Real Estate there? ‘Two road frontage’ absolutely peaks my attention. 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. They had a $590.From Virtually Zero to $3.000 $380.knowledgesource.com. 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. The total equity at that point in time was $210. I can increase the value of the property and I can increase my yield on the property. Needs TLC (Tender loving care) – that means it is a renovators delight.

000 property in good condition.000 Good condition.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. They had signed a contract at $228. Currently rented $ 230/wk Est.000 They bought an $110.000 if they would fix it rather than the vendor. but they purchased it for $138.000 $138. In their own words they were in survival mode.au/dymphna 82 . That was why he was selling. They fixed a few things up and brought the estimated market value up to $240. 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.From Virtually Zero to $3. 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.000. post negotiation.knowledgesource. 2 titles List Price Purchase Price Immediate Costs Rented at Estimated value $228.000. market value $240.5 Million in My First 18 Month in Real Estate was where they started with me.000!!! $ 55. they were in their 40’s. good part of town. in a regional area and rented it for $230 a week. The vendor walked away from the problem because he did not want to do it. It was listed for $228. Deal 1: Purchase Price $110.000 Then they bought an ugly block of four units that was on two titles.com.000 $ 660/wk $550.000. doesn’t need repairs. www. Deal 2: Block of 4.

000 $120.com.000.From Virtually Zero to $3. Deal 3: Land New residential subdivision Sold for Time Frame 8 mths $83. www.au/dymphna 83 .000 Then they bought a block of land off the plan stage. They revalued the property after a few renovations and other bits and pieces and the retaining wall which cost $55. one of an eight stage development which they sold within an eight month timeframe for $120.5 Million in My First 18 Month in Real Estate The property was rented at $660 a week.000 and with the problem fixed it was now worth $550.000 as well as being positively cash flowed.knowledgesource.

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

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

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

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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A girl I know. She fixed them up and rented them out.9% Case Study: Natasha – age 19 .com. Natasha who was 19 at the time and in party mode when I first met her but prepared to give anything and go.000 and $6. one for $4.au/dymphna 87 . www.From Virtually Zero to $3.000 + $6.000 for the other. The improvements cost her $3. The rental on them was $440 a week.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.000 $3.520/yr $4.Party Mode Cash cows come in many different shapes and sizes. Purchases Improvements Rental Income Park costs Passive income $13.knowledgesource.5 Million in My First 18 Month in Real Estate Insurance & other ROI $ 900 26.000 but she could not borrow to buy them so had to have the savings help from her father. She bought two caravans.

au/dymphna 88 .500 $ 100/wk $ 40. create more income streams. it is going to be positively cash flowed and by www.knowledgesource.From Virtually Zero to $3. think outside the box constantly! Equity down. Hughenden – Cash Cow Purchase Rental Income Current value $ 35. obviously. think laterally. improve for a higher yield.500 and was rented for $100 a week.000 which she did herself with the help of her father. that is the slow method but basically if you are putting money in.000 $130.com. The current value is $130.000 and the rental of the property was $160 a week. It was a cash cow from the beginning.5 Million in My First 18 Month in Real Estate Ravenshoe – Reno Purchase Reno cost Current value Will rent for $ 62. Characteristics of a manufactured cash cow • • • • • • • • Under Market Rentals Improve for Higher Yield .000 Then she did a similar kind of deal but the next property did not really need much of a renovation. The renovation cost her $15.000 $ 160/wk She then went on to buy a property in her hometown for $62. make it.000 $ 15. Creative management. reduce your debt for a higher yield. build it.000. It cost $35. The value immediately after buying it was $40.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.000 so although it was not much under market value it gave her a bit of a boost.

So that property produced. He looked at the prices of sending his daughter to university and he found that they were exorbitant. They don’t. which may cost www. close to Uni.5 Million in My First 18 Month in Real Estate selectively selling over a period of time it can help you to create more income. She then subleased all the other rooms for $100 a week. She gets $12. Plenty for the daughter to be able to have some spending money while at university. This is an example of a business that was not making very much money. It was a large house and he converted the garages into two more bedrooms. His daughter was going to university in Brisbane. Look at what it is needing.300 passive income per year. You have got to start to recognize those kinds of deals. A new entrance. 3 Bathrooms. after renting out the other rooms a $12. This property here was a property that a gentleman on the Sunshine Coast owned. How do you get the real estate to ring you with that kind of deal. a commercial lease. Remember.knowledgesource. previously I mentioned when a business not making any money.000 for the house. so he decided to throw in a car. 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.com. Is it on a busy road? Look at the entrance.000 a year to live on while she is at university and it did not cost him anything. He did a lease with his daughter. So he decided to buy a property near the university. train & shops Purchase Price $265.300/Yr This was cheaper than putting her into housing at the university and he has an asset that is increasing in value.000 Converted to 7 individually rented rooms after garage Conversion Costs and some additional plumbing $15.au/dymphna 89 . Living area upstairs and down. He paid $265. DLUG.000 Rented to Uni Students at Positive cash flow $100/room $12. Large 5 Br house. it is your problem. you have got to chase it. That is not what you want when you are looking for a commercial property. She took out the lease with the ability to be able to sublease out the other rooms.From Virtually Zero to $3.

it was her thing.com. The project began and she negotiated on the land.From Virtually Zero to $3. It will increase the business. He would put in the money required to do the project but she was going to be the one to do the project.au/dymphna 90 . She had negotiated to buy a block of land that they could build 16 townhouses on which they did. 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. Of the five that she kept. He has been doing this for years and years and his daughter did not want to have anything to do with this business. the building and the DA through the council as well as the town planners and everybody else along the way. She took what we call a gap year before she went to university. She wanted to go to university and she wanted to be a teacher.000. not completely but mostly down on the remaining five. That is what she wanted to do. Another mate of mine.5 Million in My First 18 Month in Real Estate $25. from the day she was really little. he is a very successful developer. That property could be in a growth area that is positively cash flowed. She went to university next year and became a teacher. It will increase the profitability of the tenant in there. But the difference between her and the kid that would www. she agreed.knowledgesource. she used the money from the sale of the eleven to pay down the debt. She agreed. Right or wrong. He wanted to teach how how to do this. Again. It will increase the rents. Instead. She negotiated with the architects. where you have a property where you might build eight units and you might sell six and keep two. he was going to do this project together. They got it through council and built the townhouses and then she sold eleven of those townhouses and kept five. She wanted to be a teacher so he said to her. Equity down deals This is where I was talking about paying down debt earlier. 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. 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. You use the profit that you make on the other six to pay down the debt on the remaining two and keep them. a repaint and some signage will mean that the property is worth more.

knowledgesource. She had done it. So now. Is that not something that you think you would like to strive for? That is what cash cows can do for you. She has got that covered.com. She is doing it because she loves it.5 Million in My First 18 Month in Real Estate have gone straight out of university and gone into teaching is that she went into teaching with a passive income of $50.From Virtually Zero to $3. Se loves being a teacher teaching lower primary school children.000 that she could live on. She has got that done and dusted. not because she has to. 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 her basic needs more than covered.au/dymphna 91 . She went into teaching with a pension of $50. That is why you have got to be balancing this portfolio. she can do what she loves because she wants to do it. www. 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 did not have to worry about her income anymore. She has that bench mark that I spoke about in the beginning.000.

You are looking for a mortgage in your possession. You are looking for a rates defaulter a public or perpetual trustee kind of property. They paid $120. or for her lifestyle or any of those things. The current value of that property is now about $180. you are looking for a deal.000 and the rental on the property is $360 a week. 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.From Virtually Zero to $3. They bought a property in 2000 for $8.com. not for her. Gwyneth did one of my programs. Since they joined a coaching program they have bought as a result of that program a duplex for $90. Heywood. a financial pressure. Moving.000 $ 340/wk $ 90.000. You are not just looking for an average kind of property. a divorce settlement. Victoria Block of 4 units Rental Income Manufactured Growth of and increased rents to Profit Positive cash flow $160. Judy and Greg are a couple that are in my Platinum Program. passive income $100 week just to give you an indication of how things can start to add up. Then there was a triplex.000. Old Age. an ill informed seller or an agent. Illness.000 $ 8. The rent is $120 each.5 Million in My First 18 Month in Real Estate Discount buying • • • • • • Mortgagee in Possession Deceased Estates Forced Sales – Divorce. an old age. a default mortgage. The current value is $240. She did it because she wanted to motivate her lazy sons.000. Everybody’s trigger is different.000 $ 440/wk $ 90. you are looking for a deal. The current value of the property is about $250. Financial Pressure Rates Defaults Public and Perpetual Trustee Ill-informed Seller or Agent When you are buying.knowledgesource. an illness.au/dymphna 92 . which produces $170 a week passive income. This is their principle place of residence. The units rented for $340 a week.000. a moving. It may be an estate.000.155 www.

it could have been positively cash flowed and it would have continued to grow.00. If you use it for lifestyle. If you want to create real wealth. They see the money. 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. If you were trading. but it is accumulation that gives you real wealth.knowledgesource. Her two lazy sons are now full time real estate investors. Sometimes. not trading. They will continue to earn income. You accumulate because those properties will continue to grow. you do not sell.5 Million in My First 18 Month in Real Estate She manufactured growth by making those two lazy sons go down and renovate them. But they sold it and they made a great deal and that is great.au/dymphna 93 . It would have continued to exponentially increase their wealth. you have to sell but it should be the minority. not the majority. it is now gone. If you are selling properties. 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. and they think wow I did so well. you are creating income which you pay tax on. But they have got to do it again next year because they sold it.000 which produced her a passive income of $8. you might make a great profit and you sold it and you paid tax on it but guess what. If I kept it. they sell it. www. you are trading. etc.com. My motto and I want you to remember this is: Real wealth comes from accumulation. It worked. The profit on the deal was $90.000.From Virtually Zero to $3. not trading. it is completely gone. They will continue to do what they do.

do your own thing and you suddenly become conscious of the fact that you do not know how to drive. It is impossible for you to become rich if your internal language will not allow you.au/dymphna 94 . driving. as in your personal mindset towards money and wealth. you have to have your house in order.com. that is where pain can begin which is hard but the excitement about learning. My purpose is not just to wake you up. yet you understood the concept of where the car would take you. That is when you actually get behind the wheel and start driving. Just think of your first parallel park. you have to have your finance in order. 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 www. is where you reach a break through.5 Million in My First 18 Month in Real Estate Finance You need to be mindful of your internal language. 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. Then you begin to get really excited about the possibility of driving. you will get excited. Even at this age you knew that this machine would take you places.From Virtually Zero to $3. It is a deep hypnosis that we need to wake up from. you were unconscious and incompetent about driving. you have to have your financial plan. Then when you reach 15 or 16 years of age. you wanted to go places. I believe that all of us are hypnotized to work for money. and you have to have a greater understanding of how things work and that is what I am helping you to do. but to empower you. in this instance. in this instance it may have been your grandmother’s house. in order. 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. 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. When you become conscious of something. because you did not know how to drive.. Once you wake up you will get depressed. you develop a sense of independence. you have to have your accounts.knowledgesource. but as far as driving was concerned.

Imagine that you are at an investment seminar where you can talk about money and it is acceptable to do so. In Australia the belief is that if you get a good education you will get a great job.com. Take a percentage of each dollar that you earn and make it www. owing $200. we are unconsciously incompetent. the conversations we did or didn’t have at school or with our parents. In third world countries they have lots of kids. When I had my accountancy practice.000 in superannuation. Imagine that started asking people how their superannuation was doing. 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. so that you can get that fabulous job and from the moment you start to get money coming in. Let me give an example of how deeply hypnotized people are.knowledgesource.From Virtually Zero to $3.000 on it and they have about $150.au/dymphna 95 . Think about this from an investment perspective. but in Australia. the kids help to look after them in retirement. 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. because of the education we have.000.5 Million in My First 18 Month in Real Estate competent until you reach a point where you are on automatic pilot. the average client would be 46 years of age with a house that is worth $600. we all know that money makes money and we all know that investment opportunities are all around us but the truth is. but what would be a much better thing to instill in people is to go and get a good education. But then we grow up and we forget about it. the average family only has two kids and it doesn’t quite work in the same way. 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. 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. get that money to work for you. Most of us drive from work to home every day and don’t even know remember the process it is so automatic.

your wealth creation engine. 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. then you can switch from working for money to making your money work for you. some shares and perhaps some insurance. They start life in debt and end up working for money. The whole point here is to pay yourself first. Having done that.5 Million in My First 18 Month in Real Estate bring you an additional return.$15. you should buy some eggs? It would never happen.000 . the market place for investment is exactly the same as the market place for food. is shares. You will find a similar situation when you go into the market place looking for real estate. Then you will have what we call the petrol for driving the engine. to pay for the debt on the car.000 for that car and it will now be worth only $13. you have to have the money in the first place.000. The whole idea of having money work for you. You need to send your money into the market place so it will bring a return and get this. but taking those away I would like to propose that regardless of the bills that you have. 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.au/dymphna 96 . If you go to a financial planner. There are certain bills that are nonnegotiable such as your mortgage or car repayments etc. they are going to recommend a managed fund. but the truth is that five years later. 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. the next problem that you will face is what to do with the money that you have put aside. Everybody is trying to sell you their fish! www. 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.From Virtually Zero to $3. The truth is.com. 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. 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. that you pay yourself first. Send it to the market place to work for you.000 from the bank. they will have paid $40.knowledgesource.

knowledgesource. It means that there is so much money going around that surely if you put your hand up some money ought to stick. but at least you will have your money working for you. or food. Capitalism is going on. From there it is refrigerated and with another truck. a farmer had to milk his cows.au/dymphna 97 . you can command that money to go and work for you and diversify that money into more risk or less risk. today . 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. We spend it on gadgets and overseas trips. gets taken to the stores and cafés that use it to make your lattes. There is no such thing as investing without risk but if you start paying yourself first. we usually go and spend it.From Virtually Zero to $3. Imagine how many people get employed because of mobile phones. 20 years ago . or whatever.com. What you need to get is a balanced diet. Then at 46 years of age. then open a business that works with that because then you have that motivation. What happened? Capitalism did. www. Mobile phones. A few days ago.worthless. because we have two incomes. cleans it and puts it in a truck where it gets taken to a facility that puts it into bottles. The solution is capitalism! You live in the land of opportunity. we put the smallest deposit on the biggest possible house. The problem in today’s society is that the minute we save some money.5 Million in My First 18 Month in Real Estate 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. we buy everything on credit and we think it is alright to do. The milk was put it through a system that cools the milk. Then we have children. then another and suddenly we have child care and all of these additional bills to pay and the two incomes isn’t stretching as far as it used to. If you are passionate about hair. after working for 26 years. first one.$32 billion. you need to understand a little bit of everything. you find yourself looking at higher risk investments so that you can retire as soon as you can because your superannuation is not enough. We live in an age where anything is possible so the most important thing is to find out what you are passionate about.

they went to war for the freedom of ownership. 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. when I got my degree in economics.000. then you are in the top 6% of people alive in terms of wealth. Nothing that I read was because I actually wanted to read it. This is because in the beginning you will have paid mostly the interest upon the interest.000 in taxes and the only thing you truly meant to do was to borrow $100. to buy your house and we all think that is fantastic because it is the Great Australian Dream to own our own home.5%. English. Although you have borrowed $100.000. they put books in front of me. we fought for freedom. Our forefathers did not go to war for the freedom of speech. If you really think about it. your family. it is the Great Canadian. This is everybody you know. you will find that you will have paid the bank back.000 from the bank. your coworkers.From Virtually Zero to $3.com. so I went.000.000. and I read was because it was expected. Then the government comes along and gives you $7. That is why they went to fight.au/dymphna 98 . My parents expected me to go to school. it is something that we also need to take part in. to own land and the freedom to do as we please. American. This is what personal debt does to you. If you want to know anything about investing in property. there are tons of books on the subject. so the principal does not go down. That is why it is possible for you to read information such as what you are reading now. the teachers expected me to do an exam so I did.000 and pay $130. www. What sounds even scarier is. this is everybody that ever borrowed money. Capitalism is not something that we just need to understand.knowledgesource.5 Million in My First 18 Month in Real Estate The truth is. If you have a car key in your pocket and you can choose to have a hot water bath or shower at any time. The moment that realization came to me. in actual fact over that 25 year lifespan of the loan at 8. Debt Let’s say you have borrowed $100. the freedom to go into business. $241. for you to pay back that money you will have had to earn $371. I began reading the things that I wanted to read on all sorts of subjects. I realized that every single thing I had ever read was because somebody forced me. The reality of capitalism is all around us.

It is because most people. So knowing that the average mortgage is $300.com.000 each.000 mortgage.knowledgesource. The debt that is taxdeductible does not hurt as much. you bought a house. That’s three minutes for free www. If you call your accountant and say “I love you”. 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. I would say they should build a chain reaction first and once the chain reaction is up and running. The government has changed the rules which means even more work. I would suggest that you always have a debt elimination process in place. 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.000 in tax. The government gave you $7. it is if you are not investing. you are accumulating capital but in the background you have a debt elimination process that is quietly working away reducing your debt.000 but think about the return on the money from the government’s perspective as far as investments are concerned. debt is debt.000 multiply all those numbers previously mentioned times three. then buy their own home. you only see the total sum later. saying that they are worth $70. but you only ever pay for the house after you have paid tax.000. There are a lot of books out there saying there is good debt and bad debt as far as I am concerned. There is the perception that renting is a waste of money. Why do I want you to do that? Because your accountant is stressed and overworked. he is going ask who you are and when it comes to your file. when they buy a house.5 Million in My First 18 Month in Real Estate the Great Human Dream for that matter. just to manage to pay your $300.au/dymphna 99 .From Virtually Zero to $3. let their chain reaction buy the house that they are going to live in. Is it a dream or a nightmare? When you go and buy a house. he is going to remember your call and he might spend three minutes more on you. The distinction is that there is debt that is non tax-deductible and tax-deductible. So you have to gross over $1 million which means paying $400. there is not enough time to do what needs to be done. They invest in you $7. you are totally emotionally driven. 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”. If a young couple came to see me. In other words.

who told you he was making $150. you do your taxes.knowledgesource. the more they give their accountant the flexibility and ability to tax plan for them. only makes $90. Australia is a tax haven.au/dymphna 100 . However. Accounting is a game of perception. 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.com.000 of it in your pocket because the $100. not his either. you may have been promised $100. Part of the problem is that most people do not know how much tax they are actually paying. Moreover.000 but you only end up with $70. The truth is. the money is already gone but if you look at taxation strategically you can work towards getting some of that money back.5 Million in My First 18 Month in Real Estate and maybe where they pick up just another detail that saves you some tax. by the time you go to see your accountant. It is not your accountant’s fault that you have the wrong expectation about them when they are looking for possibilities while still remaining compliant. 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. very few people look at their taxes from a strategic point so a lot of possible tax savings are lost because they haven’t positioned themselves well in relation to it.From Virtually Zero to $3. it is every person’s right as a citizen. In that new job. it’s leased. 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. All year you barely think about tax. you cannot expect them to get the greatest possible tax deduction. 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. It has nothing to do with luck and if they have to pay more. it is because they didn’t put enough in. Most accountants are a www.000 is the gross figure and what you are being paid is only the net figure. that hot guy that were dating. yet so many people view getting a little money back as merely being lucky.000 a year. There is nothing wrong with the accounting profession.000 and that flash car he is driving. and then tax time comes along and because it is the law. Tax planning is not the privilege of a select few. but essentially it is too late.

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. 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. Where previously as an individual you may have paid $300 to your accountant and paid $12. then it may well cost you more money.5 Million in My First 18 Month in Real Estate 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. Obviously there is a lot more work in preparing and strategizing a company tax return as to an individual’s return and the price will be reflected accordingly. Unify against debt.From Virtually Zero to $3. Most people know that you can pull equity out of your own home and go on a holiday or buy a car. you will start to become more competent. What I am saying is pull the equity of your own home and go and buy another house.000 in tax.000 ahead. Tax laws change all the time and this can make a huge difference as well. if the accountant spends extra time strategizing and charges you $12.000 in taxes.600 because the accountant was able to spend more time on your return. The banks lend me money and they can’t wait to give me more.000 can then go straight in to your mortgage to reduce your personal debt. It is dependent on the time that they spend working on your tax assessments. but it will also save you money in tax. it is a capitalist society. Every bank will try to collateralize everything you have. Please understand the power of emotional drive. In other words they try to link any loans with existing assets and take control of everything you own.000 and are therefore $18. Why? Because I can. I knew I was going to be a multimillionaire.knowledgesource. you may now only pay $22.com. When you start to become conscious of the effects that these things can have on you.000 instead of paying the $30.500 – that’s saving of $3. 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. That $18.au/dymphna 101 .000 tax payable.200 to your accountant but your tax has been reduced to $7. www. so it is fair to say that if they spend more time strategizing your assessments. Or in the instance of a company where paying $6.000 to your accountant may result in $32. now you may pay $1.

So overall the more that you invest the less tax you will pay.5 Million in My First 18 Month in Real Estate When you want to invest and set things up financially you can go to your bank and get $100. 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.knowledgesource. but because they are exposed to more risk.000 is used as security by that bank to ensure that you are not going to run away with the money they lend you. walk away and do not do business with that bank. Get rid of it ASAP. If you have any personal debt this is the debt that you are going to target first. 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.From Virtually Zero to $3.000 of the equity from your house. use it to pay down your personal debt. If a bank does not allow you to separate the loans. The less tax you pay the more you will drive your debt down. In actual fact they do not lend money.com. they sell money. Now that you can concentrate on one property you will pick up speed in paying that one www. The $100. So if you have any investment shares or property that has dividends or income.au/dymphna 102 . The reason for this is because if you default on your loans. The more you invest the less tax you pay. Imagine if you could pay your house off now and all of your financial intelligence then can focus on your investment property. You put in 20% and they lend you 80% and they take control of everything because they lend money for a return. 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. So if someone is paying you rent park the money as long as you can. 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 less debt you have the more you invest… and it goes on when you become unconsciously competent. they could come after you and your house. The less debt you have the more you invest. The less tax you pay the more you drive your debt down. My own house is protected.

no matter what your age is. 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. www. save $200.com. you are a building a chain reaction.au/dymphna 103 . save $20 a week. if you can only save $20 a week. However big or small.From Virtually Zero to $3. with which to buy number three.5 Million in My First 18 Month in Real Estate off. What you are doing driving capital. you now have the income of the first property and the second property. Drive capital. it will build a chain reaction. If you can save $200 a week.knowledgesource. Make a decision.

That chunk of money is important because you have got a number of opportunities which you can do with that chunk of money. you have earned yourself a chunk of money.5 Million in My First 18 Month in Real Estate 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. Or you can do all of that and put it into another investment property. plus an ‘x’ factor. That ‘x’ factor may be shuffling some paper or it might be time. It might be building something or creating something.knowledgesource. That ‘x’ factor means that at the end of the day. It might be renovations. the purchase price. that might be the right strategy for you or you can do all of that and not sell it. draw the equity out and go and do another investment property or go on your merry way doing other style of investments. You could revalue the property. It might be changing the appearance of something. It will www.au/dymphna 104 . 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.com. It might be changing the nature (use or zoning) of something. It has got to say volumes about this whole process. That has got to say volumes about property. 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. 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. It is basically. 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. Think about that.From Virtually Zero to $3.

www.com. Whether by drawing the equity out.5 Million in My First 18 Month in Real Estate depend on whether you really need all of the money or if drawing the equity out is going to be sufficient.From Virtually Zero to $3. It all comes down to your ability to be able to work out your circumstances.au/dymphna 105 .knowledgesource. But that is the stuff that all comes down to a mathematical equation. what is right. you are actually going to still be in a mutual position or a positive position in whether your current serviceability can actually withstand that. It is not that hard.

if that property doubled in value. with those kind of ratios.. If you divide that number by 72 then it will give you the number of years it will take to double in value.000. you can work out if it may be in the future. 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. if it is going to increase by 8%..2 years. what do you think the rent would be on that kind of ratio? Probably about $600 a week.com. blah. it will take 7. Not only is this really useful to work out how much your properties are expected to grow over varying periods of time.. Because if you are out in the field and you are looking at a particular property and at the moment. the thing you remember is 10%. If you are looking at a property and you have got this real estate agent jabbering in your ear.2 years for that property to double in value.5 Million in My First 18 Month in Real Estate The Rule of 72 There is a rule called the Rule of 72.2 years What you do is you take 10 and divide it into 72 and you get 7. 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. 10% ÷ 72 = 7. 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.000 and you know that the current rent on this property is $300 a week. you are just going to sit on it. it is worth $250. This is really handy. then at that ratio it will be a positive cash flow property.au/dymphna 106 . telling you that the property is in such a good area and that it has increased by 10% and blah.2 years.6789%.From Virtually Zero to $3. It gives you an indication. or by 14% or by 22.knowledgesource. it is really useful to work out. so if that property doubled in value and you were getting $600 a week and you bought it today for $250. For instance. It is a really handy tool to use while out in the field. If you get a 10% growth on this property. how long is it going to take for this property to double in value? 7. while it is not positively cash flowed now. It does not matter what figure you pick. as to how long it is going take before that property would start to become positively cash flowed www.

au/dymphna 107 .5 Million in My First 18 Month in Real Estate as well as how long it is going to take for that property to increase in value and double in value.com.From Virtually Zero to $3.knowledgesource. www.

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

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 can’t 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 doesn’t 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 area’s 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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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. views. Let us have a look at areas that are going to give you potentially a better than the average return on your investment. It happens in Sydney and it happens in Melbourne. Let us look at properties in lag growth areas. rapidly increasing in value. in Perth and Brisbane. it is for no apparent reason that this suburb is lower than that suburb in median prices. Have a look for that when that happens and look for areas where that is in existence. this is really apparent when you look at one suburb. next to another. Have a look for that strategy. This is not hard to do.knowledgesource. But for whatever reason. Transport. www. let us look at transition zones. the suburb beside it does not. For some reason.au/dymphna 111 .com. Employment. Infrastructure. one could come down slightly and generally what happens is the other comes up to meet it or at least get a lot closer.From Virtually Zero to $3. 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. Building Trends Adverse public perception Media attention Do Your Due Diligence Look for Emerging Economies – Do your own Micro Economic Analysis Prime Location – water. a suburb starts to go up in value.5 Million in My First 18 Month in Real Estate 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. There were these two suburbs what were going berserk. it happens everywhere. You have got a lag effect. What do you think is going to happen over time? Possibly. sometimes.

it makes sense. The fact is when you look at the broader picture you will see that is not happening everywhere.5 Million in My First 18 Month in Real Estate But the one in the middle did not. or television.com. 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. if you did not know that was in existence then of course you won’t be able to take advantage of these opportunities. There was a lag there of about three to six months. the whole of Melbourne did not go up by 30 or 40%.From Virtually Zero to $3. if you did not know that this was something you should be looking for. open your eyes.what is your life going to be like? It can only be as good as you allow it to be. For me that is so much fun. Think about what you are you exposing yourself to? Feed your brain.knowledgesource. 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.au/dymphna 112 . I am never more energized than when I am talking about real estate and making real estate deals or doing stuff. 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. But if you did not look. Property works slowly and you can be a really slow thinker and still make a lot of money in the property market. 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. When you look at growth. it is not rocket science but if you are not alert to it. www. get those blinkers off and start to have a look around. this little micro economy. When you are looking at property. micro economics start to become very important. But this target little area did because of what had happened. if you have your blinkers on and all you do is get up and listen to the crap on the radio. The great thing about property is that it actually reacts slowly. When you think about it. 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. you go to work do your things and you come home still listening to the crap on the radio .

normally prime kind of properties vary dramatically to what is on the other side of the street. You have got to recognize that opportunity as a lag. admittedly.au/dymphna 113 .000 but the house across the road was still $350. one side of the street. 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. There is money to be made in that.000. still too much of a lag.5 million. Prices then start to increase around the surrounding CBD and www. It may have nothing to do with real estate. If there is a golf course. but the $300. Jump on top of the pebble in the pond effect. Desperate Housewives is not going to further your financial stability.000.000 property. a view it may be a million dollar property. Just watch the change in your attitude and your performance even in your daily work. It changes. The house across the road then moves up to about $650/ $850/ $950. while directly opposite.5 million property. The canal front property moved to $800. a canal.000 . Brisbane. the house across the road moved up and came up to $500. What happens is you get a ripple effect. without these features you have only a $300. Prices start to increase and start to go out from the center. You become more of a receptor.5 Million in My First 18 Month in Real Estate 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. 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. I have seen properties. it is not on a golf course.000 property is in a very good area. but watch how you start react to people. Ask yourself how much television you watch. Eventually. Melbourne. look at your motivations and listen to what you are thinking.000 and across the road. you have got the $1.From Virtually Zero to $3. When they first started to move. you could buy a canal front property for $650. it does not even have to be a suburb.000. Lag effects Lag effects can happen in a street. you change.000 and the canal front property went up to $1. it does not matter where it is. downtown Sydney. It does not have a view.com.$900. The house across the road started to move as well but you could still buy one for $350.knowledgesource.

Clason who wrote the book was actually a guy who mapped the original map of North www. to buy. where they can continue their learning through higher learning education places. What is actually happening? People are moving into that area. What you look at here is the core economic factors that have an impact. It ripples out from a lot of different areas. But that is okay. 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.5 Million in My First 18 Month in Real Estate ripples out to the other suburbs spreading even further out to the regional areas and their towns. 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. one of my favourite books.From Virtually Zero to $3.that is how it works. If you open your eyes to that effect. Fundamental analysis This is my favorite topic. George S. Newcastle and Coffs Harbor follow suit.com. that just allows you to be a slow thinker and get in on it.au/dymphna 114 . 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. talks about the ancient Babylonians and its camel traders and merchants. how you can make money out of that situation. The pebble in the pond effect . for places to spend their money at shops. For example. but the core fundamental issues behind it are just amazing. There will be a lag. When you have an economic event. It creates a little epicenter all on its own. where they can go to hospital when they get sick. Sometimes it goes up and down the coast where you look at it from the CBD area and you will see it happening. for infrastructure. Eventually it gets there. where they can send their kids to school.knowledgesource. you will see it happening all around you and you can take advantage of it. They are creating more demand for houses to rent. The Richest Man in Babylon. If you live in Coffs Harbor or Port Macquarie and you see Sydney going berserk it is only a matter of time until Gosford. population.

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. when he was doing this. You need to be taking part of that. housing.au/dymphna 115 . That is what he did for a living but his passion was writing about fundamental economic issues. these were the conditions and these were the types of businesses that went in. You need to be recognizing in the early stages that this is taking place and jump on the bandwagon. How when you can make one person richer by a dollar. that one dollar building an incredible amount of wealth.From Virtually Zero to $3. schools and hospitals. One of the lessons talks about the effect of a dollar and the circulation of a dollar. Start to recognize that something similar happened last year in such and such place and when that happened. having money come in. When you have something like that. the types of houses that went in. You have got a model to create money because it is quite likely that what happened in the other instance may happen again. is amazing. By recognizing the similarity it allows you to potentially duplicate what happened somewhere else. people coming in with demand for infrastructure and demand for property. www. rental. They can trade with other economies and that brings an influx of funds back into that community and more money starts circulating. they spend more and the people they spend more with are richer accordingly. That book. 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. That is the core of economics.com.5 Million in My First 18 Month in Real Estate America. He wrote about them in a biblical kind of way so people would read them and he published them paying for them himself. When you start opening your eyes and actually watching it and seeing it happen around you.knowledgesource. you cannot be anything but excited about it because there is a huge opportunity there. you have an activity. He lived in the early 1900’s. 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. when you look at the lessons behind it. Somebody eventually collected all of these papers together and compiled them into a book called the Richest Man of Babylon and printed it. I think he died about 1958. you have an event that is an explosion.

I was not looking for Desperate Housewives either. welfare centers or other kind of centers. rebates would be given to encourage more housing in this area and this was all on television. being able to take advantage of what was happening in this town. where are they spending money? I buy property in the US. roads and transport and the hub as well as a lot of other things had to be changed to accommodate this. The program talked about this multinational company coming to a particular suburb in Phoenix. but if I had not been tuned to the fact that I wanted to watch this program.From Virtually Zero to $3. 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. do you think I would have ever made any money on that? No. I remember sitting in a hotel room on a Sunday morning clicking through my television’s. The flow on effect was that it was going to effect people’s wages.au/dymphna 116 . Money was going to be spent by the governments. 800 channels. Where is the money going? Where is it being spent? Governments. So you should follow the money.com. 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. 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. I buy property all over the place. I found this little local channel that was talking about what was happening in the local area and I thought this might be handy.5 Million in My First 18 Month in Real Estate Money follows money. www. 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. A number of years ago when I was in the US. Where is private industry going. like a lump of gold just got dropped into my lap. what are they doing.knowledgesource. This first program that came on was amazing.

where are they spending money? Governments. building trends. Take advantage of that. Provide it.5 Million in My First 18 Month in Real Estate Open yourself up to those kinds of premises of what is happening.000 below market value. they are mainly a migrant population who want a certain style of property. 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. Consequently. People are moving into southeast Queensland but they tend to be coming from the rest of Australia.knowledgesource. you do not want to buy there. you get eaten by sand flies that carry you alive. When people are moving into a particular state or area. all the areas around it were going up in value and this place is still at least $100. They did a big spraying exercise and whatever else and there really has never been a problem since. But what happened. the amount of money that can be made is phenomenal. look at the movement across the country. Adverse public perception This is where you look at what is happening in the short term. Private industry. where are they coming from and what kind of housing needs are they going to need or want.au/dymphna 117 . on the Sunshine Coast there is a particular place that about 15 years ago used to have a big problem with sand flies.From Virtually Zero to $3. But all the locals started saying. Charge them a market rental for providing them for the service. They have a different set of attitudes and they have a different set of requirements.com. give it to them. www. Employment. When you start opening your eyes to this. People moving into Victoria or maybe moving from overseas. Follow the money. people from Sydney came up and said this is pretty good. They tend to live in certain areas. we will have some of this. About that time. the house prices in that area remained low for a very long time. the local council took some action and got rid of that problem. The boom came. For example.

The worst thing you can do is not have an opinion. Ask everybody.5 Million in My First 18 Month in Real Estate People from Victoria came up as well. 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. Get information from everybody. I talk to the real estate agents. Same thing. www. They do not know the public perception. I want to know everything about everything from everybody.au/dymphna 118 . I was in a small town in Kentucky in America. Watch the media attention and watch the markets and how they react. The prices went up. Talk to people. Look for emerging economies. As a foreigner I do not have any preconceived ideas about any particular town over there and neither do you. Filter through what you are being told and form your own opinions and be responsible for your own opinions. They need to extend the runway so it was the airport authority that was doing it.knowledgesource. Yes. But always do your own due diligence. Public perception is something that never lasts. I talk to the waitress. So they needed to have larger planes be able to fly into this town which was why the airport needed to be extended. do your own microanalysis. there is a conglomerate buying up a lot of land at the end of the runway. Media attention could be good or bad depending on what is happening. There is always a window of opportunity but you will always have an evening out of the market.com. I do not know what they are going to do with it. Take advantage of them if you can. They did not know about the sand fly problem that used to be there. Exactly the same thing happened in Auckland where there used to be sewage plant. the prices eventually go up. 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. I talk to everybody. I talk to the lady behind me at the K-Mart line. I am like this big sponge. Do not believe what you are told just because she was a nice looking girl that told you at that time. public perception and an influx of outside funds. Have a look at the fundamentals. It happened to be closed down 10 years ago. They will probably ruin it like they always do. Always back up what you are being told. So when I am in an environment like that. 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 asked a few more questions.From Virtually Zero to $3.

So depending on how liquid you want your assets. what you are normally finding is an area that is in transition. those kinds of things.From Virtually Zero to $3. or renovated. so it was mutually or positively geared. They have already made their money and you are the piggy in the middle who has paid it. more people will come in and the general socioeconomics of this town was going to go up. but not a huge amount. built.000. 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. They are not run down. Never. They are fixing their gutters.au/dymphna 119 . they are improving their property.000. You start to see movement in the market and that gives you an opportunity to take advantage of that. You have got people that are starting to take pride in their property. That is what I did. That means no money down.5 Million in My First 18 Month in Real Estate What do you think that is going to do to this town? Prices will increase. proximity to amenities.knowledgesource. When you see rising renovations and constructions in an area. it would probably be worthwhile. they are rebuilding. 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 www. they could be better areas to focus on. It is proportionate to the dollar that you have got to put in to actually make it happen as well.com.$15. I bought a block of four. When you are looking at prime locations like water. you have still got a 15% return on your money . views. these are properties that will always sell first. They will always be in higher demand.000. It was a little bit positive. 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. ever buy in a stage eight of an eight stage development. they have landscaping. If you are getting a 15% return on a million dollar property. You started to see buildings being transformed. 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 else’s effort plus you have got the opportunity to get in there and do some work and exponentially increase its value yourself. neutrally geared with the seller financing. This is an area that is improving. and it did not cost me much to get or to hold on to it. Things were starting to happen. But if you bought another place that only cost you $100. I got into the deal without any money down. how much are you getting as an increase? $150. All of that indicates an area in transition so in that area.

what you are doing is riding on the back of their bucks or their dollar because they will force the market. 2 children aged 3 & 6 yrs Employed as a disabilities carer Husband employed as a postman. You cannot go wrong.5 Million in My First 18 Month in Real Estate that has got big pockets with big bucks to spend on advertising and marketing. Case Study: Suzanne Position pre Dymphna two day conference June 2004 PPR value $320. They will make that market increase because of their advertising and effort in the marketing of the whole process. But it has not cost you a lot to do that.000 Mortgage $256.000 Married.000 and after seven years it goes to $500. 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. www. However. 10% is what you predict a particular area to do and you are putting in your 20% or your 10%. 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. you start to have a look at.000.knowledgesource.au/dymphna 120 . 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. you have got to work it into your overall strategy.From Virtually Zero to $3. you would have made $250. You are just riding the wave with them. If you look for areas that have got a 10% growth strategy. If you are putting in a 20% deposit and claiming depreciation along the way. Such areas. If you bought something at $250. it is going to be at least neutrally geared if not positively geared by the end of that five year period. These are the kind of circumstances where sometimes negative gearing is the right thing to do.000 and would you be pretty happy with yourself. When you are in that situation.com.

au/dymphna 121 . This is what Suzanne did in 18 months. three and six.000 and it had a mortgage of $256.000 in eight months which was how long it took her to do that.5 Million in My First 18 Month in Real Estate Suzanne is from Melbourne.000 $645. It was three units in Ballarat and she basically renovated and strata titled them. She started with her principal place of residence of $320.000.000. she bought for $270. Deal 2: Laverton Joint venture deal Two house – 4 bed. Deal 1: Price Cost of project End value Profit Time $270. The cost of the project was $185.000 8 months Chunk deal process: Block of 3 units in Ballarat. That is a pretty modest start. 2 bathroom per house Purchase $170.From Virtually Zero to $3. which gave her a profit of $190. Came with plans and permits to build 2 more units on the block. Victoria.000 and the end value when she finished doing things to it was $645. She was married with two children.000 $190. She worked as a disabled carer and her husband was a postman.000 for both Rental income $400 per week total Positive Cash flow $140 per week www. 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.knowledgesource.com.000.000 $185.

was $140 a week because of the way she structured the loan. The rental was $400 a week and the positive cash flow in this one just as it sat. www.5 Million in My First 18 Month in Real Estate This property in Laverton was a joint venture deal. the purchase price of $170.knowledgesource. just for buying it. both with four bedrooms. It was two houses.From Virtually Zero to $3. two bathrooms per house.au/dymphna 122 .com.000.

The current value.000. Deal 5: www.au/dymphna 123 . at the end of the 18 months was $335. This property is now worth over $1 million.knowledgesource.000 $ 1.00 profit.000 $335.000. I spoke to recently and she said the rental on that now is $2. Additionally she had passive income at the end of the 18 months that was $1.625 per week.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.000. It was four dwellings on half an acre in Victoria.100 per week.000 The next deal cost $245. The cost of the project was $70.149 p/week + $ 50 p/week This deal was in Kalgoorlie.com.000 Time 6 months Profit $120.000. Victoria. The end value was $435. it was a 23 unit complex purchased for $295.000 End Value $435. Rental on the property was $1.From Virtually Zero to $3.000 after just six months time which resulted in a $120. Plan: Renovate each house and subdivide so that each house is on a separate title. Cost of project $ 70. Deal 4: Kalgoorlie 23 units complex Purchase price Current value Rental per week Positive cash flow Est.000.000 Four dwellings on ½ an acre in Newborough.5 Million in My First 18 Month in Real Estate Deal 3: Price $245. washing machine income $295.625 p/week $ 1. subdivided them and then put them under separate titles. She renovated each house.

www.000 it was sold for $70.000 in five months resulting in a $28. when you add up the income on these this deals.000 $ 90 p/week $ 23 p/week This next deal was in Western Australia.000 5 months $28.000 $ 510 p/week $ 210 p/week The next deal was also in WA. Deal 6: Purchase price Current Value Rental Positive Cash Flow $27. The purchase price of this property was $210.000 a year! Will that make a difference in your life? Particularly.000 profit. Qld Residential block of land Purchase price Sold Time Profit $42.000 The Suzanne did a little land deal out in Blackwater.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. It was purchased for $27.000 $70.From Virtually Zero to $3.au/dymphna 124 . she is investing all over Australia. The rental was $510 a week which resulted in a positive cash flow $210 per week which is $10. Queensland.000 $55. Deal 7: Purchase price Current Value Rental Positive cash flow $210. Purchased for $42. 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.com.000.000 $310.knowledgesource.5 Million in My First 18 Month in Real Estate Blackwater. remembering that Suzanne lives in Victoria.000 with the market value at the end of the 18 months at $310.

885+ p/week $180. This is the difference that you can make and you only have to do it once. you will eventually run out of equity. do you think her journey was hard? Probably. if you just focus on income.knowledgesource.From Virtually Zero to $3. How much Desperate Housewives do you think she watches? None . do you think she will ever have to do that again.000 a year Now.com. She was earning a total passive income of $2885 a week which had a growth income of about $190. 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.5 Million in My First 18 Month in Real Estate collectively including growth Suzanne has created a net income of $150. no.6 billion a year industry. It gets easier and easier and easier. every time you do it. This is the life. Yes.000+ p/year Now this was the tally. 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. Renovations and rehabilitations The renovation industry is $3. it can be done and look. This is what you can do in such a short period of time. now that she is in that position.000+ p/year $150. www. Because. She is working part time as disabled carer and she is trying to fit this in around everything else that she does.and that is what it takes. she has got two small kids.au/dymphna 125 . your paradigm.000+ a year! This amounts to such an enormous difference to your lifestyle. In fact. working as a postman. Her husband is doing his bit as well. but it can be done.000. Suzanne’s portfolio so far: Total income Total gross income Total net income $ 2. Because she paid a PA to look manage things and everything else it amounts to a net figure of about $150. 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. your everything.

. I actually did not need the money. I didn’t have the money so I had to put the deposit on my credit card so I could go and get 90% borrowing on this.000. My darling real estate agent. It was totally dilapidated so I spent $45. but I bought it for $30.500 $ 6.000 and that also went on my credit card.000 profit. it would have been the right decision. 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.knowledgesource.000 $280.From Virtually Zero to $3.000 $ 1. I got misled.5 Million in My First 18 Month in Real Estate Renovation 1 Purchased Renovations Sold $135.000.000 3 months I bought another property.000 renovating it and sold it a year later for $290.000 for nearly $100. It was totally run down. 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.000 had I kept it? I was too shy. If I needed the money. So believe it or not I put $3. but that time.000.com.000 To create equity I bought a property for $135.500 $51. Renovation 2 Purchase price Purchase Costs Renovation Renovation time Sold Profit Time frame $ 30. www.000 13 days $82. Now. on my credit card and that was my deposit to buy this property. The renovation costs $6. talked me into it. who is still one of my good friends.000 $ 45.. I needed the equity. I can borrow equity and use it.au/dymphna 126 .

I made the mistake of selling! Renovation 3 Purchase price $ 59.000 in equity – tax free because it wasn’t sold.5 Million in My First 18 Month in Real Estate The renovation time took 13 days. my darling husband and my brother went off and did this. learning this time and not selling it but through revaluation allowing access $34.From Virtually Zero to $3. Again. the average person could not have done that in 13 days and it was not me either. Now. 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.500.000 Cash back in pocket for next deal $ 34.com.000 (after $4.000 The next renovation was a property purchased for $59. After three months it was sold for $51.000.au/dymphna 127 .knowledgesource.000 rebate for repairs) Renovation Costs $ 10.” Roger Staubauch www. “Opportunities just usually disguised hard work so most people do not recognize them.000 renovation and I rented it out for $445 per week. understandably.000 profit at $82. We didn’t have a lot of time but we had this window of opportunity in which to get it done and so we did.000 Rented $ 145 p/week Revalued $105. The renovation cost $10.

Since then she has put a new peg in the sand. we stuck to that philosophy.From Virtually Zero to $3. www.au/dymphna 128 . Case Study: Wanda Wanda has been part of a number of my courses.5 Million in My First 18 Month in Real Estate 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. 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. 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.knowledgesource. She did not want a lot of debts. give you accelerated growth. She was 53 when she started with me and she had a very distinct plan. manufacturing growth and making a chunk of money like the one I am about to explain. 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. Risk was very important to her. Now. After two years she has $5 million worth of property with $3 million worth of pure equity.com. 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.

her superannuation that she planned live on when she retired and she was paying down the debt on these properties very quickly.000. But this was the deal: Deal: Waikato University’s doorstep! Purchase price $1. This particular buyer focused on a certain type of property which I like. yes put a contract on it. She worked full time over two years where she did most of this at night.com.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. She was not prepared to look at anything else.000. She found a medical suite not far away from the car park and she bought for $150. giving her $130.000 that she now had in her hand to pay down debt on one of her co-properties. This was her safety net. That is the strategy that she did creating a chunk of money.5 Million in My First 18 Month in Real Estate She wanted to pay down the debt on a number of properties that she wanted to own long term. This next deal that was sent to me by one of my buyer’s agents in New Zealand. So guess what? He picked up the phone to ring somebody else. You cannot normally borrow on a car park so she bought it and paid cash. she sold the medical suite and the car park together as a unit for $300. This is just one of the possibilities. A car park came available on its own for $20. I was too slow of getting back to him. Within three months. so I was not the one saying.au/dymphna 129 .000 each Profit $430. the properties that she wanted to keep in the long term. for the rest of her life and with no debt.From Virtually Zero to $3.000. paying it down on debt on the coproperties. 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. Then she went shopping to try and find an office that she could marry up with it.000 Time Span 3 months www.knowledgesource. She recognized where the area was that she liked to invest in and would not go outside of this area. because I was not available.

000 to $300. They were all three bedroom units but they were at random market rental.5 Million in My First 18 Month in Real Estate $1. but that were already Strata titled so they were already broken down onto individual titles. all that kind of stuff and he hired young butchers that were very good at cutting meat and were good at selling.From Virtually Zero to $3.au/dymphna 130 . were currently rented at $250 a week.000 for the stock and typically would then sell it in three to six months. You can apply the same to a business. As a butcher he would go in and buy a butcher business that was losing money. That is not bad work for three months and he did it part time on the side while doing whatever else he did. They should have been rented the $300 a week. 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. Then he cleaned it up. He would buy a business for like $20.62 million was the purchase price of 10 units. he would normally get rid of all the old stuff. What the buyer did was negotiate a long contract. big signs. nice bright colors. He had a particular way of presenting his meats.knowledgesource. sometimes 12 months for anywhere from $150. That is good money. The buyer that bought this negotiated a three month contract on it and then went about selling off those properties.000 each. Buying growth While in the US. His business boomed. 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 had a particular philosophy as to how a butchery business should run. Karen had a particular interest in Florida and these are some of the properties that she had picked.com.000.000 without taking any money out of his own pocket. no renovation nor anything individually for $205. He sold all of them on simultaneous settlements within the three months and put into his pocket $430. Number one. He is a butcher but what he does can be applied to a whole realm of businesses. Growth Pick: www.

www. Why do you think she would be interested in this property? Because across the road was a beautiful house that was worth $950. So when she entered the property market.000 $ 14. The rental on the property was $14. we had to define some deals so that she did not have to actually do anything or break one single nail with.4%.000 and her calculated estimated growth was 20-30% based on the fact that this property was across the road.400 a year which has a return investment of 5.com.knowledgesource. She would do anything not to break her fingernail.000. Case study: Kemorine Kemorine is a model.5 Million in My First 18 Month in Real Estate Price Rental ROI $265.From Virtually Zero to $3.400 / year 5.4% The purchase price on this one was $265.au/dymphna 131 .

Advertisement: Myrtleford House $10.From Virtually Zero to $3.000 $460. She paid the consultant $10.000 Kemorine bought a property which was $275.000 to do the strata title. 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. 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. without too much challenges. So I started to have a look and found a house in Myrtleford.5 Million in My First 18 Month in Real Estate Deal 1: Purchase price $275.000.000 profit.000 Strata titling costs $ 10. Each property went up.000 $ 750 p/week $ 10.000 FOR SALE AND REMOVAL www.000. A couple of years ago I led a few groups in Victoria.000 Current rental $ 600 p/week Current value of 2 bedroom units in this condition Strata Titling Profit $ 95.000 $110. She paid a consultant to strata title the units so she did not have to do anything herself.000 by merely only signing her name. Deal 2: 5x2 bedroom units Purchase price Rental Income Strata cost Value post strata titling Profit $340.au/dymphna 132 .knowledgesource.com. So just by shuffling paper and signing of few documents she made a profit of $95. The block of units was already renovated beautifully and they were rented out for $600 a week.000 She bought another one very similar which was a block of five units at same deal and $110.

000 for mine. even if I could only get $120. So I am now up to $85. Case study: Julie. One I found that would have been similar at the time was $140.au/dymphna 133 .000.000 so with land and removal costs which would be about $10. At $10.com.000. 39 divorced with 1 child Before starting with me Julie had no savings. and then maybe another $10. aluminum clad. I could still make $45. two bedroom house.000 it was aluminum clad with two bedrooms.00 reduced from $150.000 to move it onto the block. nothing very much different from the other property. a low maintenance. heating and I could make mine fairly similar. GREAT BARGAIN. First of all I have to find out how to go about it. 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. Now. Look for the opportunity all the time.000.000.000. no property. that sounds fair. it was not really flash but wasn’t too bad either.000 to connect it to all of the facilities etc. 1 bathroom and a laundry. It would be another $10. no debts.From Virtually Zero to $3. Land in Myrtleford sold at the time for about $40.000 it would cost up to about $65. Deal 1: www.000 making it $75. because I did not know. There was another one for $138. this weatherboard dwelling with tin and aluminum cladding consists of kitchen / lounge / dining in an open plan living area.000 for landscaping. but a good job.5 Million in My First 18 Month in Real Estate Easily transported. no settlement. Okay. 1 large and 2 small bedrooms. Now I needed to find out what houses in Myrtleford were selling for. Look for these deals. floor boards throughout. It was a two bedroom house that was quite pretty with timber floors.knowledgesource.

when I visited her and I walked around the property.000 Partly finished renovations – currently unlivable Paid $320. Julie bought a property in the town where she lived which was in Western Australia in Port Hedland. Case study: Rob & Kylie Purchase Price $295. she said nobody ever paints the back of the house in Port Hedland but.000 End value $950. but was $230. It was pretty ugly and run down.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. She renovated it doing most of the work herself so it only cost her $1200 so it looks good now. It needed $100. she managed to increase the value of the property by $50.000 Intention to subdivide and build a duplex on site. Upon questioning her about this. But the thing is.000 Rented for $ 300 p/week Renovation costs $ 1.knowledgesource. she had only painted the front of the house.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.com.5 Million in My First 18 Month in Real Estate Port Hedland $230.au/dymphna 134 .000 spent on it to make really nice but it would then be valued at $950. Manufactured Growth example: Purchase price $340.From Virtually Zero to $3.000 www.000 Renovation $100. It required major renovation.000 and she did make some money on it.200 + hard work Across the road from the beach and Spoilt Bank Yacht Club Current estimated value $350. She also has some room at the back of the property to put a duplex and to subdivide it.000 and it rent for $300 a week.

000. renovation and new tenant Valuation $1.000 to build. Example: Old Pizza Hut Building Sold $ 680. It was one of those opportunities that you would have driven past everyday and missed.000 Another example is an old Pizza Hut building.000 6 weeks Kylie is in my Platinum Program and her and Rob did a renovation on a $295. The original Pizza Hut roof is still underneath the new built up façade 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.au/dymphna 135 .From Virtually Zero to $3.300. and in the contract phase they built up the façade.000 New façade.com.knowledgesource. long contract. 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. John bought a development block that had on it a little old house that needed renovating for $367.000.000 Current rental on existing house $ 220 p/week Medium density development block on Ballina Island. They put it on an extended settlement.000 back in their pocket in the way of equity after it was revalued at $390.000 $390.000. Case Study: John Ballina Development $367. Tenant wants to stay. Just after settlement the building was revalued with the new tenant in place www.5 Million in My First 18 Month in Real Estate Renovation costs Revaluation Profit Time $ 20. I drove past it. On completion the duplex and the house was rented and the whole block was revalued in excess of $750. It put $75. He also built a duplex out the back that cost $190.000 house which cost $20.000.000 $ 75.

5 Million in My First 18 Month in Real Estate for $1. 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. changes your life. Think about that. that ripple effect. opportunities are when you see the block with the for sale sign. sharing the knowledge. before the deal when it was ugly. You will never know if a vendor is going to say ‘yes’. Good negotiation skills will allow you to purchase property at much lower prices than you might otherwise.knowledgesource. a building inspection clause. 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’. You cannot lend somebody a hand to get to pull them up unless you are in a position of strength yourself. Those savings alone will enable you to buy properties saving in the long term way more than the $3. www.From Virtually Zero to $3. look for some opportunities.com. That is what gives me the biggest thrill. So please open your eyes to this kind of possibility as you drive past. 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. If you do not ask. Find other plan. Doing this. Do something with it. passing it on to other people. You cannot help somebody unless you are successful yourself.au/dymphna 136 . you have already got a ‘no’. it changes your circumstances making your life better. These guys have impacted an amazing amount of young people in their town by their success.3 million. Remember that flexibility is always on your side. Have a finance clause in there. Sharing Knowledge Sharon and Andrew started with me a number of years ago and they have done numerous courses with me. So if I can help you to get in that position of strength you can pass it on like pebble in the pond. 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. Negotiation skills One of the things that my course can teach you are techniques of actually how to negotiate.000 you will be paying to be part of my program and work with me for a year.

5 Million in My First 18 Month in Real Estate My reason for doing all of this is my kids and my husband Brian.au/dymphna 137 . maybe you like stamp collections. I produce 2. 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. maybe you like boats.600 lettuces a week. some of them we consider exceptionally wealthy. the only thing he doesn’t do at the moment is milk a cow which I am trying to convince him to do. You have got to open yourselves up to the possibilities. This is a financial model that I put together to support my lifestyle decision. private use for the business model. he grows my organic vegetables. Or. to the realities that are there. He hates milking cows he tells me. completely surrounded by rainforest. From there I run a commercial farm that I can take advantage of for tax purposes and everything else. Or. As you move forward you will be able to do exactly the same.knowledgesource. maybe you like airplanes. which produces sufficient income to pay for full time farm manager to be there plus a part time assistant. maybe you like crystals. he does the landscaping. So spend some time doing that stuff. travel. whatever that is. He looks after the garden. That gives me the flexibility to go away. I have set up a profit center on my property where I live. I love it. where they are heading and what they actually want. a major ingredient for their success has been an awful lot of money spent on education. and every single one of them will tell a major component.com. Your possibilities shift. I am a country girl. 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. www. 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. I do not know. Think about what you are going to achieve. do whatever I want and farm is maintained. he mows the lawn. I grow hydroponic lettuces. 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.From Virtually Zero to $3. because if you do not know you cannot have it. But I have set it up in such a way that I got a profit center operating. I know from experience and I know from my friends. but when you start to think in business models and you start to think from profit centers you will paradigm shift. We live on a beautiful property that I have cased out on the Sunshine Coast. You cannot achieve it. he grates the road.

because she did not go on the trails and the tourist tracks. She just came back from China and she was very emotional about her trip to China. Because.com. 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. Many years ago. how people lived. But.au/dymphna 138 . I would love to be able to make that difference in your life so that you can pass it on.knowledgesource. and she was in the process of negotiating with Western Societies to be able to adopt some of these children into the Western Societies. but it is always consistently going on. expanding.5 Million in My First 18 Month in Real Estate Some of them have learnt through courses while some it has been through learning from other people. and so amazing for me to have been a little part of making it happen. That is how you continue to increase your wealth and have more success. I had a lady come to me in my accountancy practice. so special. and she was of Chinese descent. she could make much of a difference unless she was financially secure herself. she was also smart enough to recognize that she could not do very much. She saw first hand some of the tragedies that happened. and this affected her so profoundly. This sort of thing is so rewarding. she actually went back where her family came from. She needed to be in a position of relative strength to be able to achieve that. and what their reality and paradigms were. 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 www.From Virtually Zero to $3. I would love to have you part of the team. many years to come. I would love to have you as part of that relationship for many. 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. that is how you continue to get ahead. She saw little baby girls being killed at birth. 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. She wanted to change the lives or the potential lives of those little baby girls. She also saw the results of a policy in China called ‘one baby policy’. so deeply that she wanted to make a difference. It never stops. little baby girls were not favored as much as little baby boys. continually learning and growing and experiencing.

the lady down the street. 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 am privileged to have been able to see the effects of my work. I had the privilege to be able to help that one lady in that one society. 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. they started to change their financial position by creating passive income. It changed to an attitude of hope. I want you to think about what difference you are going to make. I saw the difference that. She taught her sister. They created businesses.5 Million in My First 18 Month in Real Estate little baby girls that she helped in some way that I might have had a little part in there. She taught the country women’s association. 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. I helped her initially and then her husband joined in as well. her aunt.From Virtually Zero to $3. Wherever you are at right now.knowledgesource. that woman and her husband made. That town’s attitude changed. The town had lost hope. www. it was crumbling under itself. They now own a factory. What are you going to do to pass it on? Somebody very. communally. 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. The town had lost hope.au/dymphna 139 . The farmers did not have the money to buy the bread so the grocers did not have the money to pay the supplies. The difference that you are going to make when you are in a financial secured position. That is so special. no money.” I say the same thing to you here now. They realized that it did not have to be this way. That is amazingly special to me. 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. She was a farmer’s wife. She went on to teach the same skills to other people in her little country town. not able to even send their kids to the off the land or to private schools or anything else. The whole town was dying. They employed the kids so they now have a future too. Together.com. They set up this craft business with the wool industry and they exported to other countries and suddenly they have got this little industry.

I hope I will see most of you come with me in that journey and make that difference to be part of the process.au/dymphna 140 . I cannot wait to see your journey and the outcomes of what happens. many years to come.com.knowledgesource. and to be part of that relationship for many. www.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate I hope I have been able to pass some of that on today.