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


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


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


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

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

knowledgesource.From Virtually Zero to $3. It continues to keep you in the rat race that you are trying to get out of.5 Million in My First 18 Month in Real Estate leverage myself out of that business and work on it rather than in it. where it brings in more money than it costs. As time progressed. I really started to research and study. well through the internet and thought that this could be my thing. I looked at other models that worked but they were all not my 6 . 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 for what else that I could do to change my position. So that is what I looked for. I did not have a lot of money at this point. but I needed a lot more money to be able to do what I want to do and replace my income. 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 my clients: I had some clients that were doing really. When I started to look at the characteristics of what I now call a cash cow. all not my thing. Multiple negative flowing properties will just worsen the situation. I needed something a little bit more secure that would as a conservative accountant suit me. All of these things just did not suite but more quickly. they had certain characteristics. then at least I would be heading in the right direction. I looked at shares and options. 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 looked at clients who were network marketers or multi-level marketers and thought that maybe I can do that but again it was not my thing. I did do that but it did not happen quickly enough for me at that point in time. 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. I had made my $40.000 property settlement stretch a fair way. but it wasn’t. 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 managed to buy some properties in the early stages without it costing me any money to get into www.

I know it is bit heavy to begin with but it is one of those things that you just have to do. It does not matter what the market is going to do. Compare that to America and all of the litigations that goes on over there. where you are not paying too much tax and that your assets. 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. but New South Wales as www. Whenever you have an imperfect market place with imperfect knowledge and imperfect 7 .com.From Virtually Zero to $3. We live in a very litigated society. New South Wales is the third most litigated State in the world. as you accumulate them. It was about balance and balancing your portfolio and knowing what you need next. You have the perfect opportunity right now to make your own little money machine in the property market. The market today is different but in many ways is very much the same. It was not about one or the other. But when I just focused on cash cows I eventually ran out of equity so I could not keep using this strategy. I will start with some fundamentals so that you can get an idea on where you should be starting and the type of things that you should be starting with such as asset protection and tax issues. I love the real estate marketers as it is at the moment. 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. You can put yourself in a position where you are tax efficient. it is not surprising that the first and the second place go to California and Texas. I had to do some growth strategies as well and that was the key.5 Million in My First 18 Month in Real Estate the deal and that gave me a bit of a leg up. We have a market that is dynamic and changing and in economic terms what we call an imperfect market place. are actually protected. To do business in this society. Fundamental economics and an imperfect market place = Opportunity to make profit. you have got opportunities to make profit. In fact.knowledgesource.

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

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. you still have to do it. www. there was six taxpayers for every pensioner. a wealth asset on the Real estate is your Plan B every single time because it is the thing that grows your wealth. Everyday millions of innocent people are forced from their homes by a disaster called ‘work’. It is going to be hard. When you look out sound economic models. you have always got a buffer and you have always got a Plan B.From Virtually Zero to $3. 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. if you love your work.000 a year. which means. I have made some mistakes. keep doing what you are doing. 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. That is $269 a week! The baby boom explosion that we had post 9 . This way if for any reason at any point in time. you have got something to fall back on. You have your basic needs covered but you are choosing build an additional base. No matter how you feel about what you do now. but at the same time. Eight out of 10 Australians will retire with less than $14. it is the thing that is solid behind you. as it stands now. Not every decision that I ever made has been fantastic. when there were 18 taxpayers for every pensioner now means that in the 1990’s. If it has not been lost it means that I learned from it. that I am highly unlikely to ever make that same mistake again.knowledgesource. they expect there will be only one taxpayer for every pensioner. in the 1950’s and 60’s. you cannot do what you love doing in your work. but it is not impossible and the climate we have in the market right now is so opportune to do exactly that. By 2020. and it is the thing that is going to always be there. Real estate and investing is your vehicle to change this situation. fantastic! Use it. build yourself portfolio.

1. 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. You can read books but the reality is you do know it until you have experienced it. This is what you have got to do. There are a number of things that you can do to help change this situation. Be Tax smart and Tax efficient in your investing You have got to be tax smart and tax efficient in investing. 2. They are not necessarily achieving it but they are trying and this is why. www.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.knowledgesource. I am not going to try and teach you all of it. you do not know it until you are street smart. whether it is properties or a business. 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. it could be anything. this is something that you have to know because you are the one that has to stand up and take 10 . I do not even know all of it myself but I do know the stuff that I deal There are lots of ways of doing things. This means the assets that you already have as well as those that you are going to accumulate in the future. As an astute successful investor. Protect what assets you do have and those you may accumulate in the future You have got to protect your assets. The tax act would probably stand about two meters high if you piled it on top of each other.From Virtually Zero to $3. 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. Dealing with people whether they are professionals or not. Acting in ignorance will not help you or the problems that we have in society. I call it being street smart.

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

if you are heavily into negatively geared investment properties. 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. The lower the level of debt.From Virtually Zero to $3. so debt can be a factor with that. then you might be looking for a cash cow to help fund or support that activity. www.knowledgesource. the size of your portfolio and what the mix of your portfolio is. that I need? Where is the balance? This is a factor of you. If you are negative gearing. it means you have got debt if it is rent or not. your personality. Or you could also be looking for a chunk deal that you can turn over relatively quickly. 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. the higher the level of income from that property. a deal that makes you a chunk of money. For 12 .5 Million in My First 18 Month in Real Estate looking at your situation and saying.

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

From Virtually Zero to $3. You think with a wheelbarrow. 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 has come to a number of my seminars and I consulted for him to see what we could do for him. 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. you would be relatively safe: Warning: Not intended for the highway use An electric hair dyer: Warning: Never use hair dyer while sleeping. I was in Auckland and I was flipping through the newspaper and it had a very similar article about products and how these warning stickers have now have to be placed on them and one that really stuck with me was one was for a multiple pronged fishing lure! You can imagine the fishing lure – ‘harmful if swallowed’ was the warning on the lure and another. should not be used orally’. He went on to invite him to take part in a charity golf game on Magnetic Island to which Mark agreed. Mark is sitting his the office on a Thursday afternoon.knowledgesource. A laser ink cartridge: Warning: Toner not intended to be consumed. duh… An electric iron: Warning: Never iron clothes while being 14 . So you can get lawsuits from anything! I would like to tell you about Mark Shanahan. In 1994. Sleeping pills: Warning: May cause drowsiness. He lives in Townsville. it wasn’t until after the www. read ‘Warning: Once used rectally. a digital thermometer.5 Million in My First 18 Month in Real Estate An electric router: Warning: Not intended as a dental drill. So he turned up for the charity game and teed off as the third player in his imagine this.

when he still wasn’t feeling that well. www. he had lost his company and all of his assets. It is a very sad story but a true story. Now at the time he went off to go and play golf with his bank manager he was happily married. It was too late for Mark. 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. unable to know where your life is going or anything else.6 million. So 10 years plus 12 years equals 22 years of your life where you are unable to accumulate wealth. on top of the legal bill and the $2.6 million in debt. Ten years of his life had been put on hold. 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.6 million which he did not have. owning real estate. Many weeks after the incident back in 1994. He was not sure what to do and sought legal advice where he was told not to worry. He lost everything he had for playing a game of golf. In Australia the three main areas of litigation come from owning civil business.From Virtually Zero to $3. Now. unable to do anything yet. he is now on hold again for a further 12 years because they have 12 years to recruit the $2. But for 10 years it continued to drag and he had built up a legal bill in excess of $500. it would go away. 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. and personal actions involving motor vehicles. he had become totally penniless and the high court awarded against him to the sum of $2. Mark went to his local insurance broker and got his insurances reviewed. Mark of course was really sorry about what had happened because he sincerely did not see him down the other end of the green. because somebody told him it was a good had a couple of kids. owned a 15 .000. that he went to the hospital and discovered that he has a fractured skull and was really hurt. he was not negligent.5 Million in My First 18 Month in Real Estate game.

They went in a little bit negative because it was a good idea for tax and rather than pay to set up a structure.From Virtually Zero to $3. it was informed knowledge. Because of this the insurance company was required to only going pay out three fifths of his $80. because they had it all in their own name all to save a little bit of tax. A few years ago in Bridgeton. They got the building inspection report which said that the back step was an illegal item that had to be fixed. It was considered criminal negligence and therefore not covered under their insurance policy. they can access not only the assets of the business but any assets that you own in that same name. but an assessor came out to look at the damage his assessment implied that he was underinsured. for your business. Another similar case was with a balcony down in Victoria a couple of years ago. So you take out public insurance and you do your best to cover Then there is property ownership.000 and he put a claim for $80. This is the type of thing that can 16 . They now lost their house. That is how insurance companies work. a young couple invested in a property.000 claim.knowledgesource. if it is upheld. but if something should happen whether it is bad credit or a legal issue. their investment house and their own house. 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. He was insured for $300. They got sued because of the illegal step and they lost because they knew about the problem and they did not fix it. You would think this would be fine. The insurance company believed that he should have been insured for $500. So if you have your business under your own name or if you are sole proprietor or in a partnership. Unfortunately this was not the end of the story. I had a case on the Sunshine Coast where there was a fire in a warehouse. they can then go after your assets as the individuals of the partnership or the individual.000 so according to the assessor they were definitely underinsured. he would have to pay the remaining two-fifths that he was underinsured himself.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. They decided that they could fix that themselves but it never ended up getting done.000 not $300. they just bought under their own name. The inevitable happened someone slipped on the back step.

So again. we are following in the footsteps of America when it comes to litigation.5 Million in My First 18 Month in Real Estate pay. Number one priority. 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. settle out of court because if you go to court you will lose everything. the next door neighbor’s landlord wanted reimbursing for the twofifths that the insurance company did not pay.knowledgesource. Another case on the Sunshine Coast is a gentleman I know. A foundation on the coast had really looked after his wife during her treatment so he was very committed to the foundation. He was quite wealthy and had a nice home. There was also damage to the next door neighbor’s property. a couple of canal properties and businesses and he wanted to give something back to those who had helped his wife. He decided he would build this very unusual house on his land behind the Sunshine Coast and he would give it back to the Sunshine Coast as a rehabilitation retreat for people while they were He was told to give her anything that she wanted to make it go away. 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. he would have gone bankrupt. If that fire had burnt down a house in the street. All in all it up ended up costing him an additional $120.000. health care and legal bills. 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. Fortunately he had a good business and he was able pay this and to move on. It is a very sad case on both sides where the only person who really wins is the 17 . have a look at your insurance policy reconfirm what you are covered for and make sure that you are not actually underinsured. So yes. www. 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.From Virtually Zero to $3. His wife had recently died from cancer. He went to every barrister in Queensland and they all told him the same thing.

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

For instance. if you have a home and it is worth $500. That is where internal mortgages can start to be a form of asset protection but it is important to have it set 19 .000 and it has a debt of $200. www.000 registered mortgage with one of your other companies. If somebody tried to sue your company they would get nothing.From Virtually Zero to $3.5 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.000 but you may also have a $300.

If anything goes wrong. Hybrid. The shareholders are limited. Company Now. belongs to them. A company is a structure that has directors and it has shareholders. all you can do is lose your $10. and did not benefit from all the money he took off to the Bahamas. you can lose the whole lot. You will not lose any more than that. I would be equally liable for that debt.5 Million in My First 18 Month in Real Estate Structures • • • • • Sole Trader Partnership Company Trusts – Unit. So partnership. but you can have partnership with companies where this is not the case. Derrick pinches everybody’s money and runs off to the Bahamas.000.From Virtually Zero to $3. it means that you trade in your own name. I will be equally liable for the actions of Derrick even though I may not have known about it. they cannot come after you as a shareholder and ask that you pay their debt. the previous example is that of the partnership of individuals. That part comes from a limited liability. Partnership Derrick and I go into business together. Any credit that BHP has.000 worth of shares in BHP and BHP goes down. you are doing business in your own name and own assets in your own name. they have a limited 20 . So if you have gone and bought $10. Because we are in partnership together. You can have partnerships of trust which come under a different category. www. 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. Companies are a separate legal entity. had nothing to do with it. Discretionary Superannuation Funds Sole Trader If you sole trade. They come under the same category as if you did it directly in that structure.

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

I am the trustee and I have a number of beneficiaries of the trust. you basically do not have any asset protection because should you get sued and you lose. 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. as in the case earlier. Again. As an example for a unit 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. If you have units in your own name. Discretionary Trust So let us have a look at a discretionary trust. the trustee is the one that controls the trust.knowledgesource. you have a trustee. even if you have unit trust but you own units in your own name. 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. There are others that are better. Now. So. The trustee is given the job to manage that book of rules. it would not affect my half of the business per se. the unit holders. we have got a trustee but instead of having unit holders. maybe he embezzled money or was a major bankrupt. those units can be taken away from you just as easily as market shares will be taken away from 22 . it is a book of rules that says things have to be dealt with this way. In a unit trust. we can have a trust where for instance an item is the asset of the trust and because I am a control freak. I do not want to give him any of the income from that item and because I am the trustee and I have www. Derrick and I.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. They are the manager of the trust. it is an outdated vehicle. but not mine. A trust is basically is just a book of rules.From Virtually Zero to $3. we have actually got beneficiaries. A trustee in bankruptcy would be appointed on his side. because Derrick did the dirty on me. 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. Now. if you are in a trust on its own.

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

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

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

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

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

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 28 . you would put a company on top of each one because your company is your separate legal entity. www.knowledgesource.5 Million in My First 18 Month in Real Estate There is a school of thought that says in this structure. But to get around Virtually Zero to $3.

com. Let us have a look at a typical business and investment structure: www. I would not go that way.knowledgesource. It is a registration thing.From Virtually Zero to $ 29 .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. Companies cost more money to keep however trusts do not cost money to keep other what it costs to do their tax returns. but that is overkill and unless there were three separate businesses. They could also be set up as hybrid trusts.

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

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.$30.000 business trust which now becomes $ 31 .000 and distribute the $20. It cannot be given to the piggy bank trust because the piggy bank trust is purely a pass through vehicle.000 to do something with. let us say that in this business that we have.000 and it pays the tax on it. So now. so that leaves $56.000 from our $100. First of all we write the -$30.000. At this point we have done everything that we can possibly do to minimize our tax payable in the business. + $10.000 out of one trust and into the other so we now have two trusts with zero and the trust with -$30.000.000 off against one of the others so we distribute the $10. $772 because that will be tax free. so that if we take any more income. We give our children that are under the age of 18.000.knowledgesource. The three property trusts now all have a zero tax implication but we have still another $80.000 becomes $20. Tax would be about $24. 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 $0.000 www.000 but we would still have to pay tax on it before we do.000 to the $-20. We put the maximum amount we can into superannuation which can also be a tax deduction and we pay the kids. we are going to be in the top tax bracket. So we have maxed ourselves out. We could invest or buy property with the $80.000 so that trust also becomes zero. as they have already been paid salaries and don’t need any more. The company is the corporate trustee.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 $ We still make $100.From Virtually Zero to $3. with no earned income. we pay ourselves a maximum salary.000 and 0).5 Million in My First 18 Month in Real Estate To add to the example. Then we take $20. we have got that plus we still have the properties (. Let us have a look at the flow if this income for tax purposes.000. which is going well.

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

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

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

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

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

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

getting your tax returns up to date. On July 18. When the law was first 38 . It is the tax deduction on your properties.From Virtually Zero to $3. the professional library. they reduced it to 2. So if your building that you bought as an investment property was built after that date. but in July of 1987. 1985. saving and lots of other things. structuring. even the brief case that is use to carry all of those kid’s papers to and from school. so much more than just being ready to invest. If you have a separate office that is one-tenth of the size of the house that you live in then you can basically claim one-tenth of the electricity as well as the depreciation on the carpeting in that office. the rate you could claim was 4%. the computer. First of all. you will be able to claim some depreciation as a tax deduction regardless of whether you have spent any money or not.knowledgesource. Home Offices Another tax deduction is if you are running a home office. for instance if you are a teacher and you mark papers or prepare classes at home. depreciation is a tax deduction for not spending any money. 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. If you had a property that has had a major renovation since July 1985. 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. It is finances. Tax There are a number of tax laws that you should know if you are going to be a property investor or in business. the filing cabinets.5 Million in My First 18 Month in Real Estate than just deciding that you are going to start investing. To claim any depreciation on your tax return you will need a qualified quantity surveyor’s report. for the depreciating value of the building or fixtures and fittings that might be inside that particular building. 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. Although depreciation is fantastic you do need to be aware that when you sell the property.5% and that is where it has remained ever since. desks. If you are renting your

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

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. What if you bought a house and land 40 . 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. so you claim it as a fully expanded amount in your tax return. You need to be doing this stuff automatically. You received it as a travel allowance for doing that amount of work.knowledgesource. GST If you do a major renovation on a property and you substantially change the nature of your property. You can do that for up to 21 days away. it is now a new property and there is a GST charge on new property. because it is paying within the accorded limits. had you sold it two days earlier inside that two-year timeframe. That can be thousands of dollars unnecessarily. 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. 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. Alternatively if www.From Virtually Zero to $ However. you are in effect selling a new property. you contracted the builder to build house and then you decide to sell it after either living in it or renting it.5 Million in My First 18 Month in Real Estate that entire amount on your taxable income without requiring any substantiation. or directly after its completion? You have now. It becomes part of the sale price which affects your profit. when you sell it. If you decide to sell it one day after the two years since great Aunt Bertha died you will have just made a fatal mistake. It also applies to international travel and the rates are all set down depending on what country you are in etc. 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. These are the types of things that you start to bring in to your reality. you would not have had to pay any capital gains tax at all. Therefore.

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

learning. creating something. It came in regardless of anything else that I did. When I am talking about chunk deals. there are only two kinds of property. Then next one that put $5. In my initial 18 months of property investing.knowledgesource. You create that chunk of money in any economic climate.000 a year positive cash flow in my pocket made an enormous difference to me. That $100 a week from that second property was $100 a week that I did not have to work for. income properties or what I call cash cows. as much as possibly could to try and cement in my head the strategy that was right for me. what I am talking about is having a property that you do something 42 . When I was going through my early years. did not have to get out of bed for. it might be doing some hard yards on it or it might be building something. Now it might be as simple as shuffling paper. Predominantly. The other type of course is growth properties. Cash cows give you lifestyle. That meant that following 12 months I then starting investing and in that 12 months that was the time www. whatever. 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 doing something. You buy them to create income. getting out there and doing as much as I possibly could to learn. You are doing something to a piece of real estate to make it worth more. that is your purpose for doing it. cash cows were the things that made the difference in my portfolio. This is called a chunk deal because what you do is you create a chunk of money. There are ‘income properties’ or what I call ‘cash cows’ or there are ‘growth properties’. Cash cows are a property that produces more income than they cost you. gaining experience. I call them chunk deals. Cash cows are there to produce an income stream for you.5 Million in My First 18 Month in Real Estate Income Properties What I would like to cover now is income. Changing something. 6 months was of training. The first property that put $2.000 a year in my pocket made an enormous difference.From Virtually Zero to $3.

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

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

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. When I talk about the Rule of Two I am talking about pre-tax. The final figure will vary depending on how much the rates are. Eg.000 is $200 multiplied by two is $400. 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.000 (for those of you who are mathematically challenged. it does not matter because I made it up. 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. 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. The Rule of Two says this. $200. if you have the purchase price and you divide it by 1. 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. you take off three zeros and you are done).000 x 2 1.000 x 2 = Weekly Rent So if you buy at $200. you have got $200.000 property.7 because it takes into account the depreciation of the tax deduction. you have got yourself a cash 45 . There are a few things you can do to assist in working out this process. I have a rule called the ‘Rule of Two’ and if you have not heard of it. Eg. Then you multiply this figure by two.000 divided by 1. This is just the rule of thumb.You need to be getting $400 a week or more from that property to make it positively cash flowed.From Virtually Zero to $3.6 to 1. But this is how it works. It will come in as a rule of about 1. Purchase Price 1. for not spending any money and being able to get a tax credit back on that.knowledgesource.5 Million in My First 18 Month in Real Estate Let us have a look at some income deals.

000 in savings. If you are taking your $200. which one of you bought it? All the hands went down. Either you will be borrowing $200. Too slow. This is a rule of thumb only.400 Does this make the rule of two? Yes.knowledgesource. 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.000 Cash Positive $11.000.000. All returning $100 per week. I acknowledged the ones that rang up and were too slow. you are still paying interest on 100%. it does. 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.From Virtually Zero to $3.000 out of equity out of another property to go and buy this particular property.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 said what happened to the rest of you why did you not ring up about it? It sounded too good to be true. My philosophy is that unless you have got $40.000 (in this case 20% of the property) sitting around in cash.000 of that will be secured on the property that you are buying and $40. we are talking about paying interest on $200. I did ring up about it but that was after lunch on a Saturday and they had already gone.000. you have paid off your house. I was one of them. the $40. you have no debts and you have got $40. $160. A www. I have got a cash cow in my hands. 10 out of the 75% that saw the ad. This is an ad that was in a newspaper a number of years ago when I was speaking up in central Queensland. On the Monday night. it is still 100% borrowing. Fantastic.000. But those that did not even try were giving up a pension. They could have been like me. 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. I said who actually rang up about it? 10 people put up their hands. Immediately you have now got a reference point to say I am in the money. Urgent sale .000 will be secured on your other 46 .$135. I was speaking to an audience of 175 people on a Monday night.

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

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

He went in and he produced nine commercial premises. take the money that they made and pay down the debt that remained on the remaining premises that they decided to keep. 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. Let us have a look at some of these characteristics. This could be anything and this is where the opportunity to make a cash cow is now. I get a lot of that particularly from people who live in the city. 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.knowledgesource. Some of you may not be comfortable with that. These are the hidden ones that you would not necessarily pick up on unless you tune yourself into them. The next person who came in had the opportunity to manufacture a cash cow. in the indirect cash cow market. 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. a direct cash cow could be in a regional area. in some cases. 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. This kind of deal could be a subdivision. www. This is a complicated structure and it is a little bit more advanced but this kind of deal could have been a little house. 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 If they did that. but first there are characteristics that you are going to have to start to look for. First of all. 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 49 .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.From Virtually Zero to $3. This is where I want you to start tuning yourself.

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

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

put in four washing machines. a pinball machine. What else can you do to make this thing positively cash flowed? You have got to start thinking outside the box. Think of what else you can do to create income streams. Most of you will be thinking in traditional mindsets. four dryers. hindered my success.knowledgesource. a coke machine. While she increased the yield on the property for the traditional rental model that she had. Something that you could potentially strata title or subdivide or build some storage facilities or rent out the shed for parking. then it could become a manufactured cash cow. It was a block of four for $230. But this student did a bit more than One on my properties in America gets rented out for storage. She then put a bit of a carpet down. The students who predominantly rented these units invited all of their mates 52 . In all she put in six slot machines.From Virtually Zero to $3. It is not quite a cash cow but it is getting there. So have a look at how you can maximize your income streams. In the beginning my reality of how I thought things should be hindered my wealth. multiple income streams. a chocolate machine and one of those space invader machines. The garage gets rented out for storage for $100 a month. They put in a lounge and a TV and this room became this little social Mecca where everyone used to hang out. One of my students bought a block of four units in a pretty sizeable regional town supported by number different industries. she cleared an extra $500 a week in coins! Do not think that you have to think inside the box. By renovating you will increase the value of a property.5 Million in My First 18 Month in Real Estate residence on. from those vending machines. Always www. a splash of paint. 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. hindered my progress. It becomes a bit of a chunk deal on the side and then you may have something that is positively cash flowed. If my student shares the opportunity to renovate it and increase the rental on the property. on average.000 and each of the units was rented out for $100 a week.

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

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

It was a block of five units on the Sunshine Coast. They may have a www. not only to find a property that she could pay $140 a week for. if she goes somewhere else. in this case. her name was Mona. It was managed by an agency. No one in the agency was going to say ‘wait a minute. if I am a charity. and she carried on for so long. but Mona had it all over this agent. But Mona found it very difficult. It was so appropriate.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. she would wince at everything. So. has to pay $220 for that unit somewhere else. So why would I let that situation continue? There were other more needy causes that I could choose to give my $4.000 a year that I was not getting from nearly $4. So bring things up to micro financial if the rents are lower than they should be. Mona had paid a $140 since she moved into the block some six or more odd years ago. She started to pay the rental but would moan that she was going to leave. but a lot do not. but she eventually moved on. Mona moaned. In the commercial market it is more apparent because their leases may often be longer. than Mona.000 a year to who I consider to be the most needy and to me Mona was not that person. I absolutely support it. I want the choice to be able to give. Now. the current market rental at that time was about $220 a 55 . You are not a charity in that regard. but a property of similar ilk that she could pay $220 a week for. Typically. I inherited one tenant. but choose where you put that money. 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’. that she would find somewhere else.From Virtually Zero to $3. Mona was paying a $140. 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. fantastic. Some of the clauses may be increases to market rental or have a review periodically to make sure they come up to market rental. If you want to be charitable and you want to give money.. Dear old Mona. 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. $80 a week. In the same way as residential. there are opportunities in the commercial market with under market rentals. and that this was not fair at all etc..knowledgesource. go and do it. Mona. Now.

Guess what the property is worth now? $300. unlike in the residential market where it is set by comparable sales analysis and things like that. You compound that over a number of years and what you are doing is being a charity all over again. Market rentals might have been going up at 6%. It is where you have an opportunity to take out a master lease and then sublease the same property out. That is how the price is set. Have a look for these opportunities. It is a factor of yield. you renegotiate the lease up to $30. The cap rate in that area is x percentage therefore the value of that property is x. It is set on how much are you getting on the property. You just made $100. when the lease comes.$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. There may be an opportunity to buy in because in the commercial market.000 Virtually Zero to $3. I will not go into this in a great detail because it is a little bit risky. 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.000. Leases and subleases Leases and subleases is where you have a great opportunity to look at the leases. 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. a factor of your rent.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.000 by doing nothing other than bring your rental up to market value and getting what the property is really worth. It is risky in that you are signing a contract where you will be liable for that lease and therefore responsible for it. www. There are opportunities like that everywhere so look out for that in the commercial market.000 and it was being rented for $20. Let us say you had the opportunity to buy a piece of commercial real estate for $200.000 a year at a 10% 56 . very quickly. But what happens if that property really should have been bringing in $30. commercial prices are set by the yield.

They come under the three different forms primarily and they each have right ways and wrong ways of doing them. It was in a mining town and that it was the ugliest thing you could possibly imagine.000 a year into your pocket.From Virtually Zero to $3. I am not tough enough to do it.000 Currently returning $57.000. Are you are going to get much growth out of it? Probably not.500 per I have nothing against this strategy. Did that property ever go www. Zero Vacancy A block of six units at $430. it is just not for me. It has 0 vacancies. whoop? Probably not. strong. Example 1: Block of 6x2 Bedroom Units $430.500 a year into my pocket year after year after year. It was a block of five units but that property put $27. The income on the property is $57. solid little town.5 Million in My First 18 Month in Real Estate Lease options Rent demise and lease options are your typical wrap deals.500 a year. My personal bias is that I want to own a property. absolutely works.000 to $20. They are ugly units but they are in an area that is a good. Is this cash cow? It is. I do not want to be leasing it up to somebody else. This property puts about $15. This is not really a strategy that I personally use.knowledgesource. I once bought a property and it probably looked worst than this. So the only way I will use this strategy is with somebody else. so does it really matter if it is in whoop. 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. Does it matter? Absolutely 57 . It has been supported predominantly by rural industry but they are always going to be rented. The only way I will go into a wrap deal is with somebody else who wants to do the work. The rents go up and you end up paying more than you would have if you just rented the property in the first place.

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

000. This is based on a $290. Its purchase price was $290. 20 UNIT ACCOMMODATION VILLIAGE KAWANA Features: A/ Entertainment room and spare land on this block. This property returns $945 plus per week. Over Christmas it has100% occupancy.000 purchase price and there are some left from $265.000 so the yields would be even higher. This investor’s reality returns $110-$120 p/wk per 59 .00% gross returns. 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.knowledgesource. Example 3: Price: $950.5 Million in My First 18 Month in Real Estate Example 2: $945 plus per week represents 18. Laundry. secure fencing and a car-park for car accommodation. www.From Virtually Zero to $3. Games room. covered entertainment-BBQ area. 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. representing an 18% gross return (gross not net). 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).000 Rent (p/wk): $110-$120 p/wk per unit. The figures are based on a 25% vacancy rate and $180 a week. 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.

This is what they 60 . you are an economist.knowledgesource. in total $186.500 $ 30. So they were in 0. That would be almost $300.000 all rented between $110 and $120 a week. a home loan.000 worth of debt.000 $ you are different’. I will tell you some more stories because many buyers will say to me ‘but you are an accountant. they were minus $186.000 $ 7.000 $ 5.From Virtually Zero to $3. How much money would we need to buy this property? How much equity will we have to have? 30% at least. That is a lot of rubbish.000 that you would need to look at in equity from somewhere else to be able to buy this property. a personal loan. Someone without the kind of programming that I had will find it a lot easier. But this property puts in excess of $20. 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. So sometimes you have to take the longer view. I mean in this one here it is positively cash flowed from day one but sometimes you have to take the longer view that it may not have positive cash flow the day that you buy it.000 a year in its owner’s pocket. 20 units priced at $950.000.000 www.000 $112.000 $ 10. All of those things made it harder for me because I had to desensitize myself to what was normal and acceptable.000 $ 2. 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. Credit cards • Bank of Qld Visa • Commonwealth Visa • ANZ Visa • Myer Card • AGC C/Card • American Express Personal Loan Home Loan $ 15. Is that a cash cow? Yes it is.5 Million in My First 18 Month in Real Estate This one here. is in a university campus 20 unit accommodation village.

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

Total Debt


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.


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!!


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


au/dymphna 64 .500.knowledgesource. The purchase was a residential block for $2. I believe that there was probably an additional $20. which in my opinion they paid too much for.From Virtually Zero to $3. Their next purchase was a property in a little town in Queensland.5 Million in My First 18 Month in Real Estate off their old debts and getting rid of what they had previously accumulated.000 profit.000 renovation the total cost of the house was $82.500.000.000 for hook up.000 for the removal house and another $37. it was $25. There are a lot of strategies here that can be used to reduce these kinds of costs but all in all after an additional $10.000 for removal and set up and $8. Then they bought a removal house.000 to $30. So they made $67.000 that they could have made if they had had a little more experience but it was still a great www. It was rented for $180 a week and revalued on completion at $150.

000 was renovated into a five bedroom boarding house. Revalue (post reno) for $250. So they did a similar deal in the same town.000 with a rental return of $27.000 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. Reno costs $ 15.000 A similar one for $155.000 Rent $520 / week.5 Million in My First 18 Month in Real Estate Deal 4: House block – Same small town Asking price $ 3. Sometimes you can also get the house rewired with new electrical in the price as that is often something that needs to be replaced.000. delivered on stumps. have fire alarms installed and all other fire requirements that are necessary. They completed a small renovation for $10. 1 ½ bath for $60 000 delivered and stumped Small Reno $ 10.000 Profit $ 80. It is much harder to get insurances and make sure you get all of the correct licensing in place.000 Revalue $ 175.000 for the renovations on this one. Boarding houses can come with complications. They moved a three bedroom house for $ So they spent $15. They purchased some land for $3.knowledgesource.000 Renovated & turned into 5 brm boarding house. thank you very much. Deal 5: Price $155. It is very important that these things are investigated thoroughly.000 and that is $102.000 Profit $ 102.000 and had the house revalued $175. You must be very aware of the fire ratings.000.000 profit on that property.040 per 65 .000 They bought it! Move a 3 bedroom.From Virtually Zero to $3. It was revalued post renovation for $250.

000 as well as positive cash flow. It now had an additional value of $80.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate 66 .knowledgesource. www.

000 $ 56. it was a great deal but they had a lot of hiccups. Lots of hiccups with this house. 000 $ 7.000 Another joint venture. they still could not do one on their own. a profit $56.000 $220. Between signing contract and bank valuation another house 4 doors down sold for $160.000.500 $ 1.500 $164.5 Million in My First 18 Month in Real Estate Deal 6: Agreed to buy house (under market value) $125.000.500 a few extras. They could not get the finance by the settlement date as the bank backed out and did not approve their loan.000 Rent $200 /w Immediate Profit $35. Approached bank to finance within hours of 67 .From Virtually Zero to $3. Just in time a friend came to the rescue and they did settle and it was immediately revalued at $160.knowledgesource. www.hours before an extremely delayed settlement. 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. Purchase price was $155.000.000 Another joint venture. Lender Cancelled Settlement.000. They made an immediate profit of $35.000 with the rent at $200 a week.000.000 and revalued it immediately at $220.000. Begged & borrowed – settled with Deal 7: Purchase Price New Kitchen Legals Total Cost Re Valuation Profit $ 15. They put in a new kitchen for $7. Had unconditional approval from non conforming lender . They agreed to buy a house under market value for $125. total cost of $164.

knowledgesource. Like them. They did not have any 68 . It works for them because they could do the work. you can make it happen and you can make it happen surprisingly quickly.From Virtually Zero to $3.5 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. but it is not going to be easy. They could do the work and make it happen.

Deal 9: Bought a 1 bedroom house for Agent estimated real value at Tenant in place for Profit $63 000 $75 000 $125 / week. It was revalued at $130.000 JV 5 $ 80. 1 Bathroom House on large corner block Asking Price $ 67.500 and renovated over 3 ½ months and then rented it at the end for $220.000.000 Desperately needed renovating.000. It desperately needed a renovation. The asking price was $67.5 Million in My First 18 Month in Real Estate Deal 8: 3 Bedroom.000. The agent estimated the real value to be about $75.000 JV 2 $ 80.000.000 Next they bought a three bedroom and one bathroom house on a large corner block. They paid $65. They did this all that in 12 months.From Virtually Zero to $3. Rented for $220 / week Re-valued House $130. Joint Venture Summary Property Profit JV 1 $ 78.000.000 JV 3 $ 69 .000 so they put a tenant in place for $125 as it already had a profit of $12. $ $ 48 $ 80 $ 49 $ 61 $270 Cash Flow / wk / wk / wk / wk / wk www. It is not a lot but it means that there is a future.000 The second place they bought on their own was a one bedroom house for $63. This was their first own deal.000 Paid $ 65.000 Renovation took 3 ½ mths. They spent $22. New everything except bath tub & Toilet.knowledgesource.500 JV 4 $102. Painted everything! Reno Cost approx: $ 22.

2 million to buy the property to develop Anyway. it would be worth much more. that has to be shared but basically.From Virtually Zero to $3. 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. Another one of my students did a no money down deal as well. She said that she could do that work for them and that if she managed to obtain development approval on that land.500 $578 / wk Now.5 Million in My First 18 Month in Real Estate JV 6 $ 35.000 $ 82 / wk Own 2 $ 12 000 $ 20 / wk Total $557.000 $ 82 / wk Own 1 $ 47. The parents agreed and as part of the agreement she did it together with www. 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. 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. I was talking about growth strategies at one of my workshop events spoke about how to actually do a development approval. I said if she was prepared to stick her neck out and make that happen. they are the JV’s and obviously. 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 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.knowledgesource. to speak to me throughout the process and she ran into any difficulties.800 $ 11 / wk JV 7 $ 56.000 $-42 / wk JV 8 $ 47. She asked them to give her six months to try and get the development approval for them. 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 70 . They had been offering them as much as $1. to let me know.

2 million that they were being offered for their property. Part of the deal also was that any profit. That meant that she got $100. She and her best friend now had $100.5 Million in My First 18 Month in Real Estate her friend.000 to start their own property portfolio to buy their very first homes.000. that she could create by doing that development would be split 50/50.000 out of the deal . But her share would be split with the daughter. her friend so their daughter was getting a quota and learning the process.000 went to the parents and the remaining $200.knowledgesource. any increase in the value.000 got split between her and her best$200. 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. any extra money that was made over the $ 71 . Would that not be a really good kick start to get into your first property at the age of 19? www.From Virtually Zero to $3. their daughter and through this process she would learn how to do this also. It took her nine months to do.

When you start with commercial properties.800 $ $ $ 0 650 $ There was $20. Upstairs was actually residential but it was all under a commercial lease and rented together.88% of $175. In this instance they used applied knowledge to make it happen.88%.88%. www.88% 2 Bedroom Unit Upstairs + Commercial Shop downstairs Analysis: Purchase Income Rates Insurance Interest ($175. $7.000 spend is not too bad but is it going to cost 30% equity because it is commercial. ROI or Return on Investment of 11. In this case the tenants paid the rates but they did not pay the insurance and there was no body corporate.000 Current Rental $400/wk ROI 11.5%) Mgt Fees ( @ 8%) Passive Income $175.800 income coming in.000@7.000 is $6790.000 $ 20. 3.025 Another story starting with no money. Everything was done through their solicitors.025 passive income for a $175. NSW Commercial Office $175. New South Wales for $175. This was a little commercial property in 72 . the percentage point split is 3. The passive income on this particular property was just over $7.000 that was rented for $400 a week.From Virtually Zero to $3.000.knowledgesource. 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. If you are paying 8% at the bank. it does not have to be with millions of dollars.5 Million in My First 18 Month in Real Estate Example: Reginal.125 0 $ 7.

This is where your opportunity cost analysis starts to come in. How do you compare two deals like that? The answer is in the calculation of an opportunity cost analysis. So $52. This is a calculation that gives you the ability to be able to compare one investment with another.000 that I am choosing to put into this deal that I could be putting somewhere else.000 but the next deal might require $200.From Virtually Zero to $3.000 worth of equity? Is this deal good enough? This deal might require $58.000 worth of income but you do not have to be registered in the commercial market for GST and collect GST and pay GST etc.500 (30% of $175. In this particular case we have got $52. It is $ which is the passive income that we have got coming in for the opportunity cost of investing $58.000 or not. How do I get 12%? $7. to be able buy this property.000) that is going to be required in equity or money from somewhere else. it would depend on whether the owner is actually registered for GST as to whether that is plus GST.5 Million in My First 18 Month in Real Estate Let us look at those figures. 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. In this case. Your real return on investment is infinite because the entire amount was borrowed but what is important is your opportunity cost ROI.000 so in this instance you would not have to be registered for GST so it would not come into it. It is going to cost $58. opportunity cost ROI.000. This does not apply to residential property as you do not have to be registered for GST in residential properties regardless of how much the income is worth over $75.000 to get into this deal so that is $58. unless your income from your commercial property exceeds $75.500 is required plus approximately 5 % in estimated costs to cover other bits and pieces involved in the purchasing of the property. 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 into this deal as opposed to www.knowledgesource. It is 73 .

www.000 divided by $58. gives you roughly Million in My First 18 Month in Real Estate another deal. I am actually investing money through borrowing the lot.5% return.000. So $7. Since I have no money to invest.5% is going to pay the interest on the money where I borrowed the $58.000.5%.5% yield. 12% after paying interest on my money. I am actually getting a 74 . So you need to think where else could I place that money and get about 19. So it is 12% return investment. my real yield on this property is actually 12% plus 7. But 7.From Virtually Zero to $3. I need to ask myself if I could a 12% yield somewhere else because really if I am paying 7.5%.knowledgesource.

From Virtually Zero to $3.knowledgesource. Then what they did is they erected signs and went about and started selling signage to the local businesses.00 + GST MAROOCHYDORE Unique investment opportunity on a dedicated signage site located on the Sunshine Coast yielding 10% nett p. 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. www. . There was a particular property that was one of those properties that I drove past for 10 years on the way to work. 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. I saw an ad to sell their sign business and this little piece of land for $ $ 58. This particular property is a handkerchief sized piece of real estate on the corner of an industrial estate.025 Infinite?? 12% $ 52. In some 75 .000 $ 7. This little handkerchief piece of real estate used to be just a hedge. You are not going to get it anywhere else but I am biased.500 $ 5. They sold enough signage so that in a few years’ time.050 Positioned at the entrance to a thriving retail/commercial estate. UNIQUE INVESTMENT OPPORTUNITY Sale by Negotiation $300.000 plus GST promising a 10% return on your money.$30.5 Million in My First 18 Month in Real Estate Analysis Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $175.400 The place you could get more return would be in another property deal.a. So they went to the council that owned it and actually negotiated to buy the land free hold. This is a rock solid investment that will continue to perform.

not gross. on something that was totally hands free and you did not really have to do very much with it at all. There was a lady in one of my mentoring programs who bought a property.$510 a week return on a $250.000 return.From Virtually Zero to $3. I am not a great believer in buying a property that I have not seen. Now.000 a year so it is now $40. She is a New Zealander and this property was actually in New www. I know and he said I can get more out of this. the interesting thing with this one is that it is a business model.000 purchase price and it cost you 7. You would get 2. The person who bought this business. 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.000 income coming in. your property is going to be trashed and you will have to replace everything. $10. There it is: $30.000 .knowledgesource.5% or 8% let us say to pay the interest on your $ 76 . Buying sight unseen Always do you due diligence. 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. People driving the other way can see those signs.000. He was able to increase the income on this property by a third. It is an opportunity that everybody including me drove past and missed and it is a cash cow in a high growth area.5% or 3% roughly on your $300. Passive. Or that somebody that I trust implicitly has not seen. 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. Which now makes that property worth $400.000 purchase This is the same amount of money as what it would cost to buy a four bedroom apartment in a university complex. would you be interested? Yes. $300. This is a perfect example. There is nothing on the backs of those signs.000 worth of income.5 Million in My First 18 Month in Real Estate If you were offered a deal that had 10% return on your money. Only in five years time. I am going to sell signage on the other side particularly the front ones and he actually erected one on the other side.

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

first of all. 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. There is a total return of $1150 per week potential to increase rents to $1320 per 78 . but because it is eight units it is considered a commercial deal. It does not sound like a lot but when we look at that. 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. 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%. Unit blocks of this caliber rarely come on the market so act quickly.From Virtually Zero to $3.320 a week. www. However in this instance they did actually only put in 20% which means they have obtained finance as a residential property. 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.knowledgesource.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. Under six units is normally considered residential depending on which bank you are dealing with but complexes above six. Fully tenanted and showing excellent returns and located in a top class east side location.

you need to work out what the opportunity cost ROI is. rates and management fees leaves $9. is the passive income.000 $ 9.366 as passive income. The fact that you are paying 7.366 Infinite?? 7.5%) Mgt Fees ( @ 8%) $550.5 Million in My First 18 Month in Real Estate Analysis Purchase Income Rates Insurance Interest ($550.366 Passive Income This property was $550.000 $ 59.150 which is the equity that you have put in from somewhere else.000 $ 17.4%.250 $ 4.5% somewhere else means you are going to get a return of around about 14.000 with the income just under $60.150 $127.784 $ 9. Taking out the costs such as the interest 79 .9% real return on the property.4% $ 110. $9366 divided by $127.knowledgesource. Remember that we have $1.320 so that is $170 a week extra.000.From Virtually Zero to $ Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $ 550. The opportunity costs of putting $127. www.150 into this deal as opposed to using that equity somewhere else comes in at 7.000@7.150 First of all. This is pretty good but the property was under market rental. We are going to have to put in 20% plus our costs that we will round off at 5%.800 $ 3.500 $ 900 $ 41. Our opportunity cost ROI.150 a week as the current rent and it could $1.

Why would I be interested in this ad if it was among thousands I have seen on realestate.499 Infinite?? 13. If you add the 7.D.5% interest you would be actually paying on the deal it makes the return on that property in excess of 20% return.000 $ 17. a or any of the others that are out www.150 $127.B.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.L.knowledgesource.76% $110. more cash cows. Advertisement: 438 Creswick Road. or by adding extra dwellings.5 Million in My First 18 Month in Real Estate Analysis reworked Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $550.000 $ 17. whether it be a parking facility. All these things create more What a ripper! This two bedroom with study. weatherboard home in need of a bit of T. Ballarat Central Two Road Frontage Close to Lake and CBD $125.76% return. Be or 80 . to maximize the income from any one property. Consider putting in storage facilities and things like that. Maximum return Look for maximum return on your property where ever possible. Set to the front of an approximately 825m2 block with two road frontage. 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.From Virtually Zero to $3.C is located in a prominent central location within walking distance of Lake Wendouree and the C.

From Virtually Zero to $3. I can increase the value of the property and I can increase my yield on the property. 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. Alternatively. $18 an hour and that was their financial position at that point in time. I might go and build some storage facilities on the land. Helen was my hairdresser. By fixing it up.5 Million in My First 18 Month in Real Estate there? ‘Two road frontage’ absolutely peaks my attention. This was a multiple use property.000 $210. Assuming I can. a Fireman PPR value Mortgage Equity Survival Mode! I would like to mention Helen and Ian. assuming that is fitting in with the council guidelines of an 825 square meter I can build another residence on the back. She earned $18 an hour when she came to one of my mentoring programs. that means it is probably bigger depending on the council requirements in that area. Because this property has a two lane frontage. The total equity at that point in time was $210. That also gets my attention. That is actually what happened with this block. depending on the council. Needs TLC (Tender loving care) – that means it is a renovators delight.knowledgesource.000 $380. Case study: Ian & Helen Age 40’ish. 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.000 and this $ 81 .000 property that they owned with a mortgage of $380. Married 3 Kids Financial Position when they started with Dymphna Helen working 6 days as hairdresser and a Ian. It may or may not. They had a $590.000. It means that I can fix it up and compound my return. 800 square meter block.000 www.

Deal 2: Block of 82 . market value $240. post negotiation. It was listed for $228.knowledgesource. in a regional area and rented it for $230 a week.000. In their own words they were in survival mode. but they purchased it for $138. The vendor walked away from the problem because he did not want to do $138. They had signed a contract at $228.5 Million in My First 18 Month in Real Estate was where they started with me. good part of town. 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. Currently rented $ 230/wk Est. Deal 1: Purchase Price $110.From Virtually Zero to $3.000 if they would fix it rather than the vendor. www.000!!! $ 55. they were in their 40’s. That was why he was selling.000 They bought an $110.000.000. 2 titles List Price Purchase Price Immediate Costs Rented at Estimated value $228.000 $ 660/wk $550. doesn’t need repairs.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 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 Then they bought an ugly block of four units that was on two titles.

au/dymphna 83 . Deal 3: Land New residential subdivision Sold for Time Frame 8 mths $83.000 as well as being positively cash flowed.From Virtually Zero to $3.5 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 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 $ www.000. one of an eight stage development which they sold within an eight month timeframe for $120.000 $120.

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.


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


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


000 but she could not borrow to buy them so had to have the savings help from her father.000 $3. The rental on them was $440 a week.520/yr $4.000 + $6.9% Case Study: Natasha – age 19 .knowledgesource. Purchases Improvements Rental Income Park costs Passive income $13.000 and $ She fixed them up and rented them out.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. Natasha who was 19 at the time and in party mode when I first met her but prepared to give anything and go.From Virtually Zero to $3. The improvements cost her $3.000 for the other. A girl I know.5 Million in My First 18 Month in Real Estate Insurance & other ROI $ 900 26. one for $4.Party Mode Cash cows come in many different shapes and sizes. 87 . She bought two caravans.

000 so although it was not much under market value it gave her a bit of a boost. improve for a higher yield. think outside the box constantly! Equity 88 .From Virtually Zero to $3.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. The current value is $130.500 $ 100/wk $ 40. reduce your debt for a higher yield. It was a cash cow from the and was rented for $100 a week. make it.000. think laterally. obviously.5 Million in My First 18 Month in Real Estate Ravenshoe – Reno Purchase Reno cost Current value Will rent for $ 62.000 $130.knowledgesource. create more income streams. The value immediately after buying it was $40.000 $ 15.000 $ 160/wk She then went on to buy a property in her hometown for $62. The renovation cost her $15.000 Then she did a similar kind of deal but the next property did not really need much of a renovation.000 and the rental of the property was $160 a week. Hughenden – Cash Cow Purchase Rental Income Current value $ 35.000 which she did herself with the help of her father. it is going to be positively cash flowed and by www. Characteristics of a manufactured cash cow • • • • • • • • Under Market Rentals Improve for Higher Yield . build it. that is the slow method but basically if you are putting money in. It cost $35. Creative management.

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

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

She has her basic needs more than covered. 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 has got that done and dusted. 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. not because she has to. She has got that covered.From Virtually Zero to $3. She did not have to worry about her income 91 . She is doing it because she loves it. She has that bench mark that I spoke about in the beginning. Is that not something that you think you would like to strive for? That is what cash cows can do for you.000 that she could live on.knowledgesource.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. Se loves being a teacher teaching lower primary school children. So That is why you have got to be balancing this portfolio. She had done it. She went into teaching with a pension of $50.

From Virtually Zero to $3. Then there was a triplex. a financial pressure.000 $ 8. an old age. a divorce settlement. a moving. The rent is $120 each. You are looking for a rates defaulter a public or perpetual trustee kind of property. Victoria Block of 4 units Rental Income Manufactured Growth of and increased rents to Profit Positive cash flow $160.000 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 The units rented for $340 a week. She did it because she wanted to motivate her lazy sons. Since they joined a coaching program they have bought as a result of that program a duplex for $90.000. Heywood.000 $ 440/wk $ 90. Gwyneth did one of my programs. They bought a property in 2000 for $ 92 . You are looking for a mortgage in your possession. a default mortgage. or for her lifestyle or any of those things.155 www. you are looking for a deal. Moving. Financial Pressure Rates Defaults Public and Perpetual Trustee Ill-informed Seller or Agent When you are buying.000. not for her. This is their principle place of residence. The current value of that property is now about $180. The current value of the property is about $250.000. an illness.000 $ 340/wk $ 90. They paid $120. an ill informed seller or an agent. 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. you are looking for a deal. It may be an estate. which produces $170 a week passive income.5 Million in My First 18 Month in Real Estate Discount buying • • • • • • Mortgagee in Possession Deceased Estates Forced Sales – Divorce. The current value is $240. You are not just looking for an average kind of property.knowledgesource. Everybody’s trigger is different. Illness.000. Old Age.

com. not the majority. They see the money. If you were trading. you might make a great profit and you sold it and you paid tax on it but guess what. but it is accumulation that gives you real wealth. But they have got to do it again next year because they sold it. it could have been positively cash flowed and it would have continued to grow. It worked. Sometimes.000. they sell it. it is now gone. The profit on the deal was $90.From Virtually Zero to $3.000 which produced her a passive income of $8. If I kept it. you are creating income which you pay tax on. If you want to create real wealth.00. It would have continued to exponentially increase their wealth. They will continue to do what they do. Her two lazy sons are now full time real estate investors. you are trading. You accumulate because those properties will continue to grow.5 Million in My First 18 Month in Real Estate She manufactured growth by making those two lazy sons go down and renovate them. and they think wow I did so well. My motto and I want you to remember this is: Real wealth comes from 93 . But they sold it and they made a great deal and that is great. not trading.knowledgesource. If you use it for lifestyle. If you are selling properties. not trading. you do not sell. This is a trap that a lot of real estate investors fall into particularly those in the game in the construction industry like builders and plumbers and electricians etc. They will continue to earn income. etc. you have to sell but it should be the minority. 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. www. it is completely gone.

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

owing $200.000 on it and they have about $ Million in My First 18 Month in Real Estate competent until you reach a point where you are on automatic pilot. the kids help to look after them in retirement. but in Australia.000 in superannuation. so that you can get that fabulous job and from the moment you start to get money coming in. In third world countries they have lots of kids. They would tell me they would like to retire at 55 and then I become the person who is going to tell them that they are going to run out of money if they retire at 55. In Australia the belief is that if you get a good education you will get a great job. Most of us drive from work to home every day and don’t even know remember the process it is so automatic. 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 95 . but what would be a much better thing to instill in people is to go and get a good education. 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. because of the education we have.knowledgesource. 50% of the people would probably say that they did not know because we are unconscious and incompetent when it comes to superannuation at that point in time. But then we grow up and we forget about it. we all know that money makes money and we all know that investment opportunities are all around us but the truth is. get that money to work for you. Let me give an example of how deeply hypnotized people are.000. Imagine that started asking people how their superannuation was doing.From Virtually Zero to $3. the average family only has two kids and it doesn’t quite work in the same way. the conversations we did or didn’t have at school or with our parents. Think about this from an investment perspective. Imagine that you are at an investment seminar where you can talk about money and it is acceptable to do so. we are unconsciously incompetent. When I had my accountancy practice. Take a percentage of each dollar that you earn and make it www. the average client would be 46 years of age with a house that is worth $600.

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

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

If you want to know anything about investing in property. for you to pay back that money you will have had to earn $371. when I got my degree in economics. Although you have borrowed $100.000. My parents expected me to go to school. Our forefathers did not go to war for the freedom of speech. This is because in the beginning you will have paid mostly the interest upon the interest. to buy your house and we all think that is fantastic because it is the Great Australian Dream to own our own home. so the principal does not go down. I began reading the things that I wanted to read on all sorts of subjects. The reality of capitalism is all around us. Capitalism is not something that we just need to understand. I realized that every single thing I had ever read was because somebody forced me. and I read was because it was expected. 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. they put books in front of me. your family.000 and pay $130. Debt Let’s say you have borrowed $100. That is why they went to fight. This is what personal debt does to 98 . in actual fact over that 25 year lifespan of the loan at 8. English.knowledgesource.From Virtually Zero to $3. you will find that you will have paid the bank back.000.5 Million in My First 18 Month in Real Estate The truth is. Then the government comes along and gives you $7. it is the Great Canadian. your coworkers. then you are in the top 6% of people alive in terms of wealth.000 from the bank.5%. This is everybody you know. there are tons of books on the subject. the teachers expected me to do an exam so I did. Nothing that I read was because I actually wanted to read it. That is why it is possible for you to read information such as what you are reading now.000 in taxes and the only thing you truly meant to do was to borrow $100. it is something that we also need to take part in. $241. to own land and the freedom to do as we please. What sounds even scarier is. The moment that realization came to me. they went to war for the freedom of ownership. we fought for freedom. If you really think about it. American.000. If you have a car key in your pocket and you can choose to have a hot water bath or shower at any time.000. the freedom to go into business. this is everybody that ever borrowed money. so I went.

au/dymphna 99 .com.000 multiply all those numbers previously mentioned times three.000 each. If a young couple came to see me. 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. it is if you are not investing. 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”. he is going ask who you are and when it comes to your file. he is going to remember your call and he might spend three minutes more on you. debt is debt. you are accumulating capital but in the background you have a debt elimination process that is quietly working away reducing your debt.000 mortgage.5 Million in My First 18 Month in Real Estate the Great Human Dream for that matter. you are totally emotionally driven. let their chain reaction buy the house that they are going to live in. The distinction is that there is debt that is non tax-deductible and tax-deductible. you bought a house. Is it a dream or a nightmare? When you go and buy a house. It is because most people. you only see the total sum later. So you have to gross over $1 million which means paying $400.000 but think about the return on the money from the government’s perspective as far as investments are concerned. I would say they should build a chain reaction first and once the chain reaction is up and running. So knowing that the average mortgage is $300. saying that they are worth $70. The debt that is taxdeductible does not hurt as much. If you call your accountant and say “I love you”. just to manage to pay your $300.From Virtually Zero to $3. I would suggest that you always have a debt elimination process in place. In other words.000. The government has changed the rules which means even more work. They invest in you $7. That’s three minutes for free www. The government gave you $7. Why do I want you to do that? Because your accountant is stressed and overworked. There are a lot of books out there saying there is good debt and bad debt as far as I am concerned.000 in tax. then buy their own home. when they buy a house. There is the perception that renting is a waste of money.knowledgesource. but you only ever pay for the house after you have paid tax. 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. there is not enough time to do what needs to be done.

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. it’s leased. Moreover. However. it is every person’s right as a citizen.000 is the gross figure and what you are being paid is only the net figure. Part of the problem is that most people do not know how much tax they are actually 100 . and then tax time comes along and because it is the law. Tax planning is not the privilege of a select and that flash car he is driving. 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 is because they didn’t put enough in. the money is already gone but if you look at taxation strategically you can work towards getting some of that money back. Most accountants are a www. 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.000 but you only end up with $70.5 Million in My First 18 Month in Real Estate and maybe where they pick up just another detail that saves you some tax. Accounting is a game of perception. the more they give their accountant the flexibility and ability to tax plan for them. All year you barely think about tax. The truth is.knowledgesource. only makes $90. There is nothing wrong with the accounting profession. but essentially it is too late.000 a year. 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. you do your taxes. not his either. Australia is a tax haven. 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.000 of it in your pocket because the $100. who told you he was making $150. yet so many people view getting a little money back as merely being lucky. In that new job. So why is it that the majority of people do not invest? Because they never pay themselves any money first! If you do not provide the information for your accountant. you may have been promised $100. you cannot expect them to get the greatest possible tax deduction. that hot guy that were dating.From Virtually Zero to $3. by the time you go to see your accountant. It has nothing to do with luck and if they have to pay more.

The banks lend me money and they can’t wait to give me more. so it is fair to say that if they spend more time strategizing your assessments. In other words they try to link any loans with existing assets and take control of everything you own. you may now only pay $22. Most people know that you can pull equity out of your own home and go on a holiday or buy a car. What I am saying is pull the equity of your own home and go and buy another house.500 – that’s saving of $3.5 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. it is a capitalist society. 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. Where previously as an individual you may have paid $300 to your accountant and paid $12. you will start to become more competent. now you may pay $1. 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.000 in taxes. Or in the instance of a company where paying $6.000 can then go straight in to your mortgage to reduce your personal debt.000 tax payable. It is dependent on the time that they spend working on your tax assessments. Every bank will try to collateralize everything you have.200 to your accountant but your tax has been reduced to $7.600 because the accountant was able to spend more time on your return. I knew I was going to be a multimillionaire. That $18. When you start to become conscious of the effects that these things can have on you.000 to your accountant may result in $ 101 .000 ahead.000 instead of paying the $30. 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. Why? Because I can.From Virtually Zero to $ Please understand the power of emotional drive. then it may well cost you more money. if the accountant spends extra time strategizing and charges you $12. but it will also save you money in tax. Tax laws change all the time and this can make a huge difference as well. Unify against debt.knowledgesource. www. 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.000 in tax.000 and are therefore $18.

So overall the more that you invest the less tax you will pay. My own house is protected. The less tax you pay the more you drive your debt of the equity from your house. they could come after you and your house. The reason for this is because if you default on your loans. 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 . So if someone is paying you rent park the money as long as you can. Now that you can concentrate on one property you will pick up speed in paying that one www. 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. In actual fact they do not lend money. Get rid of it ASAP. 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.000 is used as security by that bank to ensure that you are not going to run away with the money they lend you. You put in 20% and they lend you 80% and they take control of everything because they lend money for a return. 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. The less debt you have the more you invest… and it goes on when you become unconsciously competent. If you have any personal debt this is the debt that you are going to target first. but because they are exposed to more risk. they sell money. they will cross-securitize the two loans and it becomes your risk.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.knowledgesource. If a bank does not allow you to separate the loans. 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. use it to pay down your personal 102 . The less tax you pay the more you will drive your debt down.25% off the interest rate and offer you more money. walk away and do not do business with that bank. The $100. The less debt you have the more you invest. So if you have any investment shares or property that has dividends or income.

knowledgesource. save $200. you now have the income of the first property and the second Virtually Zero to $3.5 Million in My First 18 Month in Real Estate off. If you can save $200 a 103 . with which to buy number three. you are a building a chain reaction. www. However big or small. no matter what your age is. What you are doing driving capital. if you can only save $20 a week. 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. it will build a chain reaction. Drive capital. Make a decision. save $20 a week.

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

But that is the stuff that all comes down to a mathematical 105 .knowledgesource.From Virtually Zero to $3. It all comes down to your ability to be able to work out your circumstances. It is not that hard.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. you are actually going to still be in a mutual position or a positive position in whether your current serviceability can actually withstand that. what is right. Whether by drawing the equity out. www.

2 years for that property to double in value. then at that ratio it will be a positive cash flow property. the thing you remember is 10%. you can work out if it may be in the future. what do you think the rent would be on that kind of ratio? Probably about $600 a week. so if that property doubled in value and you were getting $600 a week and you bought it today for $250.6789%.000 and you know that the current rent on this property is $300 a week.000. Not only is this really useful to work out how much your properties are expected to grow over varying periods of time. if that property doubled in value. This is really handy. as to how long it is going take before that property would start to become positively cash flowed www.. If you divide that number by 72 then it will give you the number of years it will take to double in value. If you are looking at a property and you have got this real estate agent jabbering in your ear. Because if you are out in the field and you are looking at a particular property and at the you are just going to sit on it. It is a really handy tool to use while out in the field. blah. or by 14% or by 22. 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.2 years. with those kind of 106 . For instance.5 Million in My First 18 Month in Real Estate The Rule of 72 There is a rule called the Rule of 72. telling you that the property is in such a good area and that it has increased by 10% and blah.knowledgesource. it is worth $250.2 years What you do is you take 10 and divide it into 72 and you get 7. while it is not positively cash flowed now. If you get a 10% growth on this property.2 years. it is really useful to work out. It gives you an indication. 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..From Virtually Zero to $3. 10% ÷ 72 = 7. if it is going to increase by 8%. how long is it going to take for this property to double in value? 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. It does not matter what figure you pick. it will take 7. 107 .From Virtually Zero to $ 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.

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.


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

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


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

do something to the property to manufacture growth, force the value of your property and that could be done in a myriad of ways.


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. For some reason. let us look at transition zones. This is not hard to do. views. Have a look for that strategy. Transport. it happens everywhere. Have a look for that when that happens and look for areas where that is in existence. 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. There were these two suburbs what were going berserk. What do you think is going to happen over time? Possibly. next to another. Let us have a look at areas that are going to give you potentially a better than the average return on your investment. a suburb starts to go up in value. Employment. the suburb beside it does not. You have got a lag effect. sometimes. It happens in Sydney and it happens in Melbourne. Population. rapidly increasing in Let us look at properties in lag growth areas. this is really apparent when you look at one suburb.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. Infrastructure. www. But for whatever reason. Have a look at the dynamics of what is going on side by side. in Perth and Brisbane. one could come down slightly and generally what happens is the other comes up to meet it or at least get a lot closer.knowledgesource. it is for no apparent reason that this suburb is lower than that suburb in median 111 .From Virtually Zero to $3.

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

From Virtually Zero to $3. you have got the $1. but the $300. Prices start to increase and start to go out from the center. admittedly. The canal front property moved to $800. It may have nothing to do with real estate. it is not on a golf course. What happens is you get a ripple effect. without these features you have only a $300. Prices then start to increase around the surrounding CBD and www. You have got to recognize that opportunity as a lag. it does not matter where it is.000 and across the road. the house across the road moved up and came up to $500.000 property. It changes. you could buy a canal front property for $650. The house across the road then moves up to about $650/ $850/ $950.5 Million in My First 18 Month in Real Estate Do a home study course. Jump on top of the pebble in the pond effect. just try putting the CDs on in your car and listening to them instead of the crap on the 113 . It does not have a view. but watch how you start react to people.$900. 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.000 property is in a very good area.000.000 . while directly opposite. you change.5 million property. Ask yourself how much television you watch. If there is a golf course. You become more of a receptor.knowledgesource. Brisbane. a view it may be a million dollar property. normally prime kind of properties vary dramatically to what is on the other side of the street.000. The house across the road started to move as well but you could still buy one for $350. look at your motivations and listen to what you are thinking. a canal.000 but the house across the road was still $350. Just watch the change in your attitude and your performance even in your daily work. Melbourne. When they first started to move. still too much of a lag. Eventually. Lag effects Lag effects can happen in a street. it does not even have to be a suburb. one side of the street.000 and the canal front property went up to $ I have seen properties. 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. downtown Sydney. Desperate Housewives is not going to further your financial stability.000.5 million. There is money to be made in that.

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

when you look at the lessons behind it. schools and hospitals.knowledgesource. Start to recognize that something similar happened last year in such and such place and when that happened. 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. you cannot be anything but excited about it because there is a huge opportunity there. they spend more and the people they spend more with are richer accordingly. When you start opening your eyes and actually watching it and seeing it happen around you. having money come in. By recognizing the similarity it allows you to potentially duplicate what happened somewhere else. is 115 . You need to be recognizing in the early stages that this is taking place and jump on the bandwagon. He would stand on street corners and hand these papers out to everybody in the hope that he could start changing the economic conditions of the everyday people in his time. He wrote about them in a biblical kind of way so people would read them and he published them paying for them himself. that one dollar building an incredible amount of wealth. rental. people coming in with demand for infrastructure and demand for That is the core of economics. I think he died about 1958. when he was doing this. You have got a model to create money because it is quite likely that what happened in the other instance may happen again. That book. How when you can make one person richer by a dollar. 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. You need to be taking part of that. When you have something like that. you have an activity. That is what he did for a living but his passion was writing about fundamental economic issues. They can trade with other economies and that brings an influx of funds back into that community and more money starts circulating. He lived in the early 1900’s.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate America. Somebody eventually collected all of these papers together and compiled them into a book called the Richest Man of Babylon and printed it. housing. One of the lessons talks about the effect of a dollar and the circulation of a dollar. these were the conditions and these were the types of businesses that went in. the types of houses that went in. www. you have an event that is an explosion.

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

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

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

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

it is going to be at least neutrally geared if not positively geared by the end of that five year period. You are just riding the wave with them. You cannot go 120 .000. 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.From Virtually Zero to $3. 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. But it has not cost you a lot to do that.knowledgesource. you start to have a look at.000 and after seven years it goes to $500. Such areas. If you bought something at $250. When you are in that situation. www. 10% is what you predict a particular area to do and you are putting in your 20% or your 10%. 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.000 Mortgage $256.5 Million in My First 18 Month in Real Estate that has got big pockets with big bucks to spend on advertising and marketing. If you look for areas that have got a 10% growth These are the kind of circumstances where sometimes negative gearing is the right thing to do. Case Study: Suzanne Position pre Dymphna two day conference June 2004 PPR value $320.000 and would you be pretty happy with yourself. you have got to work it into your overall strategy. 2 children aged 3 & 6 yrs Employed as a disabilities carer Husband employed as a postman. They will make that market increase because of their advertising and effort in the marketing of the whole process. However. what you are doing is riding on the back of their bucks or their dollar because they will force the market.000 Married. If you are putting in a 20% deposit and claiming depreciation along the way. you would have made $250.

she bought for $270. She worked as a disabled carer and her husband was a postman.000 $190. 2 bathroom per house Purchase $ and it had a mortgage of $256.000 $645. Came with plans and permits to build 2 more units on the block.000 in eight months which was how long it took her to do that.000 for both Rental income $400 per week total Positive Cash flow $140 per week www. It was three units in Ballarat and she basically renovated and strata titled them.000 8 months Chunk deal process: Block of 3 units in Ballarat. 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 121 . The cost of the project was $185.000 and the end value when she finished doing things to it was $645. This is what Suzanne did in 18 months. Deal 1: Price Cost of project End value Profit Time $270. That is a pretty modest start. which gave her a profit of $190.000.000 $185. She started with her principal place of residence of $320. Victoria.000. She was married with two children.5 Million in My First 18 Month in Real Estate Suzanne is from Melbourne. Deal 2: Laverton Joint venture deal Two house – 4 bed.000.knowledgesource. three and six.From Virtually Zero to $3.

two bathrooms per the purchase price of $170.5 Million in My First 18 Month in Real Estate This property in Laverton was a joint venture deal. www. The rental was $400 a week and the positive cash flow in this one just as it sat. just for buying it. It was two 122 . both with four bedrooms.knowledgesource.000.From Virtually Zero to $3. was $140 a week because of the way she structured the loan.

000. Plan: Renovate each house and subdivide so that each house is on a separate title. Rental on the property was $1. The cost of the project was $70. This property is now worth over $1 million. subdivided them and then put them under separate titles.100 per week. It was four dwellings on half an acre in Victoria.000.000 $ 1.000. Victoria. The end value was $435.625 p/week $ 1.000 End Value $435. Cost of project $ 70.From Virtually Zero to $3.00 profit.149 p/week + $ 50 p/week This deal was in Kalgoorlie.000.000. Deal 4: Kalgoorlie 23 units complex Purchase price Current value Rental per week Positive cash flow Est.625 per week.000 after just six months time which resulted in a $120.000 Four dwellings on ½ an acre in 123 .5 Million in My First 18 Month in Real Estate Deal 3: Price $245. I spoke to recently and she said the rental on that now is $2.000 Time 6 months Profit $120. The current She renovated each house. washing machine income $295.000 $335. Deal 5: www.000 The next deal cost $245.150 a week plus she had a little extra income through installing coin operated washing machines from which she gets an extra $50 a week. it was a 23 unit complex purchased for $295. at the end of the 18 months was $335. Additionally she had passive income at the end of the 18 months that was $1.

000.From Virtually Zero to $3. 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. The current value at the end of the 18 months was $ 124 .000.000 a year! Will that make a difference in your life? Particularly. Deal 6: Purchase price Current Value Rental Positive Cash Flow $27.000 with the market value at the end of the 18 months at $310. The purchase price of this property was $210.knowledgesource.000 $310.000 $ 510 p/week $ 210 p/week The next deal was also in WA. The rental was $510 a week which resulted in a positive cash flow $210 per week which is $10.000 it was sold for $70.5 Million in My First 18 Month in Real Estate Blackwater. in a very small town in Western Australia but in a town that had good strong rental. remembering that Suzanne lives in Victoria. It was purchased for $27. www. when you add up the income on these this deals. Qld Residential block of land Purchase price Sold Time Profit $42.000 The Suzanne did a little land deal out in Blackwater.000. she is investing all over Australia.000 profit.000 in five months resulting in a $28. Purchased for $42.000 $55.000 $70.000 5 months $28.000 $ 90 p/week $ 23 p/week This next deal was in Western Australia. Deal 7: Purchase price Current Value Rental Positive cash flow $210.

Her husband is doing his bit as well. every time you do 125 . if you just focus on income. In fact. working as a postman. 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. it can be done and look.000. no. She is working part time as disabled carer and she is trying to fit this in around everything else that she does. Because. do you think her journey was hard? Probably.000+ a year! This amounts to such an enormous difference to your lifestyle. Suzanne’s portfolio so far: Total income Total gross income Total net income $ 2.885+ p/week $180. your paradigm. do you think she will ever have to do that again.000+ p/year $150.knowledgesource. This is the difference that you can make and you only have to do it once. This is what you can do in such a short period of time. you will eventually run out of equity. www.5 Million in My First 18 Month in Real Estate collectively including growth Suzanne has created a net income of $150.000+ p/year Now this was the tally. She was earning a total passive income of $2885 a week which had a growth income of about $190. 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. Because she paid a PA to look manage things and everything else it amounts to a net figure of about $150. Renovations and rehabilitations The renovation industry is $3. It gets easier and easier and easier.From Virtually Zero to $3.000 a year Now. How much Desperate Housewives do you think she watches? None .and that is what it takes. she has got two small kids. Yes. This is the life.6 billion a year industry. your everything. but it can be done. 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. now that she is in that position.

000 for nearly $100. It was looking after itself so I did not really need to do 126 .000 $ 1.From Virtually Zero to $3.000 13 days $82.000. I needed the equity. If I needed the money.500 $51. who is still one of my good friends. but that time. I did not need to sell it and pay tax on it to get it.000. on my credit card and that was my deposit to buy this property.000 $ 45.000 renovating it and sold it a year later for $290.. It was totally dilapidated so I spent $45. Now.000 profit. it would have been the right decision. talked me into it. So believe it or not I put $3.000 To create equity I bought a property for $135. I can borrow equity and use it. www.5 Million in My First 18 Month in Real Estate Renovation 1 Purchased Renovations Sold $135. My darling real estate agent. 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. The renovation costs $ I actually did not need the money. but I bought it for $30.000.knowledgesource..000 3 months I bought another property.000 and that also went on my credit card. Renovation 2 Purchase price Purchase Costs Renovation Renovation time Sold Profit Time frame $ 30.500 $ 6.000 had I kept it? I was too shy.000 $280. It was totally run down. I got misled. 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.

the average person could not have done that in 13 days and it was not me either.000 Rented $ 145 p/week Revalued $105. After three months it was sold for $51.000 in equity – tax free because it wasn’t sold.” Roger Staubauch www.000 Cash back in pocket for next deal $ 34.000 profit at $82. learning this time and not selling it but through revaluation allowing access $34.000 renovation and I rented it out for $445 per week. 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. The renovation cost $10. Again.5 Million in My First 18 Month in Real Estate The renovation time took 13 127 . “Opportunities just usually disguised hard work so most people do not recognize them.000 (after $ 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.knowledgesource. my darling husband and my brother went off and did this. Now.000 The next renovation was a property purchased for $59. understandably. I made the mistake of selling! Renovation 3 Purchase price $ 59.500.000 rebate for repairs) Renovation Costs $ 10.From Virtually Zero to $3.

She wanted to pay down as much debt as she could on co-properties before she was 55 which is when she wanted to 128 . www.From Virtually Zero to $ She did not want a lot of debts. manufacturing growth and making a chunk of money like the one I am about to explain. Risk was very important to her. 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. 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. Since then she has put a new peg in the sand.knowledgesource. 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. 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. She was 53 when she started with me and she had a very distinct plan. give you accelerated growth. After two years she has $5 million worth of property with $3 million worth of pure equity. Now. we stuck to that philosophy.

This was her safety net. Then she went shopping to try and find an office that she could marry up with it. This next deal that was sent to me by one of my buyer’s agents in New Zealand. Within three months. I was too slow of getting back to him.000.62 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 that she now had in her hand to pay down debt on one of her co-properties.000. She recognized where the area was that she liked to invest in and would not go outside of this area.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. she sold the medical suite and the car park together as a unit for $ 129 . for the rest of her life and with no debt. This is just one of the possibilities.000. That is the strategy that she did creating a chunk of money. A car park came available on its own for $20. This particular buyer focused on a certain type of property which I 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. because I was not available.knowledgesource.From Virtually Zero to $3. But this was the deal: Deal: Waikato University’s doorstep! Purchase price $1. She found a medical suite not far away from the car park and she bought for $150.000 Time Span 3 months www. her superannuation that she planned live on when she retired and she was paying down the debt on these properties very quickly. So guess what? He picked up the phone to ring somebody else. the properties that she wanted to keep in the long term. She worked full time over two years where she did most of this at night. paying it down on debt on the coproperties.000 each Profit $430. You cannot normally borrow on a car park so she bought it and paid cash. yes put a contract on it. so I was not the one saying. giving her $130.

62 million was the purchase price of 10 units. but that were already Strata titled so they were already broken down onto individual titles.000 for the stock and typically would then sell it in three to six months. They should have been rented the $300 a week. sometimes 12 months for anywhere from $150.knowledgesource. were currently rented at $250 a week. He would buy a business for like $20. 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. Buying growth While in the US. That is good money.5 Million in My First 18 Month in Real Estate $1. all that kind of stuff and he hired young butchers that were very good at cutting meat and were good at 130 . As a butcher he would go in and buy a butcher business that was losing money. He sold all of them on simultaneous settlements within the three months and put into his pocket $430. What the buyer did was negotiate a long contract. big signs. They were all three bedroom units but they were at random market rental. Number one. His business boomed. He is a butcher but what he does can be applied to a whole realm of businesses.000 Virtually Zero to $3.000. He had a particular philosophy as to how a butchery business should run. The buyer that bought this negotiated a three month contract on it and then went about selling off those properties. Then he cleaned it up. Karen had a particular interest in Florida and these are some of the properties that she had picked. he would normally get rid of all the old stuff. Growth Pick: www.000 without taking any money out of his own pocket. That is not bad work for three months and he did it part time on the side while doing whatever else he did. He had a particular way of presenting his meats. 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. You can apply the same to a business.000 to $300. no renovation nor anything individually for $205. nice bright colors.

5 Million in My First 18 Month in Real Estate Price Rental ROI $265.4% The purchase price on this one was $265. Why do you think she would be interested in this property? Because across the road was a beautiful house that was worth $950.000 and her calculated estimated growth was 20-30% based on the fact that this property was across the road.From Virtually Zero to $3. So when she entered the property 131 .400 / year 5.000.000 $ we had to define some deals so that she did not have to actually do anything or break one single nail with. The rental on the property was $14. She would do anything not to break her fingernail.knowledgesource. www.400 a year which has a return investment of 5. Case study: Kemorine Kemorine is a model.

000 $ 750 p/week $ 10.000 Kemorine bought a property which was $275. So just by shuffling paper and signing of few documents she made a profit of $95.000. The block of units was already renovated beautifully and they were rented out for $600 a week.5 Million in My First 18 Month in Real Estate Deal 1: Purchase price $275.From Virtually Zero to $3.000 by merely only signing her name. The two deals took a total of three months and she had a positive cash flow on the property at the end. She paid the consultant $10. Each property went up. A couple of years ago I led a few groups in Victoria. Advertisement: Myrtleford House $10. 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. Deal 2: 5x2 bedroom units Purchase price Rental Income Strata cost Value post strata titling Profit $340.000 She bought another one very similar which was a block of five units at same deal and $110. without too much challenges.000 Current rental $ 600 p/week Current value of 2 bedroom units in this condition Strata Titling Profit $ 132 . she made over $200.000 $110.000.000 to do the strata title.000 $460.000 Strata titling costs $ 10.000 FOR SALE AND REMOVAL www. She paid a consultant to strata title the units so she did not have to do anything herself.knowledgesource. So I started to have a look and found a house in Myrtleford.

floor boards throughout.From Virtually Zero to $3. 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. Case study: Julie. Look for the opportunity all the time. two bedroom house. First of all I have to find out how to go about it. So I am now up to $85. 1 bathroom and a laundry. a low maintenance. 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. but a good job. It was a two bedroom house that was quite pretty with timber aluminum clad. no debts.000.knowledgesource. It would be another $10.00 reduced from $ 133 . it was not really flash but wasn’t too bad either.000. Deal 1: www. Look for these deals.000 to connect it to all of the facilities etc.000 it would cost up to about $65. Now I needed to find out what houses in Myrtleford were selling for. heating and I could make mine fairly similar.000 to move it onto the block.5 Million in My First 18 Month in Real Estate Easily transported.000. no property. Land in Myrtleford sold at the time for about $40.000 making it $75. that sounds fair.000.000 for mine. 39 divorced with 1 child Before starting with me Julie had no savings. At $10. I could still make $45. and then maybe another $10. nothing very much different from the other property. One I found that would have been similar at the time was $140. even if I could only get $120. Now. GREAT BARGAIN. Okay.000 for landscaping.000. no settlement. 1 large and 2 small bedrooms.000 so with land and removal costs which would be about $10.000 it was aluminum clad with two bedrooms.

Case study: Rob & Kylie Purchase Price $295. when I visited her and I walked around the property.000 Renovation $100. She renovated it doing most of the work herself so it only cost her $1200 so it looks good now. she had only painted the front of the house.000 Intention to subdivide and build a duplex on site.From Virtually Zero to $3. but was $230.000 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 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 spent on it to make really nice but it would then be valued at $950. It was pretty ugly and run down. she said nobody ever paints the back of the house in Port Hedland but.200 + hard work Across the road from the beach and Spoilt Bank Yacht Club Current estimated value $350. Manufactured Growth example: Purchase price $ Julie bought a property in the town where she lived which was in Western Australia in Port Hedland.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.000 and she did make some money on it.000 Partly finished renovations – currently unlivable Paid $320. It needed $100. she managed to increase the value of the property by $50.000 End value $950.5 Million in My First 18 Month in Real Estate Port Hedland $ 134 .000 www. But the thing is. Upon questioning her about this. It required major renovation.knowledgesource.000 Rented for $ 300 p/week Renovation costs $ 1.

It was one of those opportunities that you would have driven past everyday and missed.000. long 135 . and in the contract phase they built up the façade.From Virtually Zero to $ He also built a duplex out the back that cost $190. On completion the duplex and the house was rented and the whole block was revalued in excess of $750.000 Another example is an old Pizza Hut building.000. John bought a development block that had on it a little old house that needed renovating for $367.300.000 to build.000 back in their pocket in the way of equity after it was revalued at $390.000 $390. Just after settlement the building was revalued with the new tenant in place www.000. Tenant wants to stay. Example: Old Pizza Hut Building Sold $ 680. I drove past it. The Old Pizza Hut closed down and for about 6 months nothing happened to the building until somebody came along and could see a much bigger picture. renovation and new tenant Valuation $1.000 New façade.000 $ 75.5 Million in My First 18 Month in Real Estate Renovation costs Revaluation Profit Time $ 20. Case Study: John Ballina Development $367.000 6 weeks Kylie is in my Platinum Program and her and Rob did a renovation on a $295. It put $75.000 Current rental on existing house $ 220 p/week Medium density development block on Ballina Island.000 house which cost $20.000. They put it on an extended settlement. 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.knowledgesource.

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. You will never know if a vendor is going to say ‘yes’. Think about that. 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. Do something with it. These guys have impacted an amazing amount of young people in their town by their success. Find other plan. Have a finance clause in there. Good negotiation skills will allow you to purchase property at much lower prices than you might otherwise. You cannot help somebody unless you are successful yourself. Doing this.From Virtually Zero to $3.000 you will be paying to be part of my program and work with me for a year. changes your life. Sharing Knowledge Sharon and Andrew started with me a number of years ago and they have done numerous courses with me. that ripple effect.knowledgesource.3 million. look for some opportunities. before the deal when it was Remember that flexibility is always on your side. That is what gives me the biggest thrill.5 Million in My First 18 Month in Real Estate for $1. passing it on to other people. opportunities are when you see the block with the for sale sign. 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. So if I can help you to get in that position of strength you can pass it on like pebble in the 136 . So please open your eyes to this kind of possibility as you drive past. you have already got a ‘no’. 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. it changes your circumstances making your life better. sharing the knowledge. a building inspection clause. www. Negotiation skills One of the things that my course can teach you are techniques of actually how to negotiate.

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

so deeply that she wanted to make a difference. because she did not go on the trails and the tourist tracks. This sort of thing is so rewarding. she was also smart enough to recognize that she could not do very much. That is how you continue to increase your wealth and have more success. But.From Virtually Zero to $3. and what their reality and paradigms were. I would love to have you part of the team. continually learning and growing and experiencing. It never stops. how people lived. and this affected her so profoundly. but it is always consistently going 138 . She also saw the results of a policy in China called ‘one baby policy’. many years to come. expanding. Many years ago.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. 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 saw first hand some of the tragedies that happened. Because. and she was of Chinese descent. and she was in the process of negotiating with Western Societies to be able to adopt some of these children into the Western Societies. little baby girls were not favored as much as little baby boys.knowledgesource. 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. She saw little baby girls being killed at birth. I would love to be able to make that difference in your life so that you can pass it on. so special. She just came back from China and she was very emotional about her trip to China. So I worked with her for about a year to give her a financially stable situation so that she could go to China and she could setup orphanages and that is exactly what she did. I would love to have you as part of that relationship for many. I had a lady come to me in my accountancy practice. she could make much of a difference unless she was financially secure herself. that is how you continue to get ahead. I feel satisfaction for all those www. She wanted to change the lives or the potential lives of those little baby girls. and so amazing for me to have been a little part of making it 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. 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.

no money. I had the privilege to be able to help that one lady in that one society. They realized that it did not have to be this way.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. I want you to think about what difference you are going to make. 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. I saw the difference 139 . I helped her initially and then her husband joined in as well. 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. that woman and her husband made. She taught her sister. That is amazingly special to me. The town had lost hope. She was a farmer’s wife. They now own a factory. 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. I am privileged to have been able to see the effects of my The whole town was dying. www. The town had lost hope. 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. not able to even send their kids to the off the land or to private schools or anything else. They set up this craft business with the wool industry and they exported to other countries and suddenly they have got this little industry. They employed the kids so they now have a future too.knowledgesource. communally. they started to change their financial position by creating passive income. That is so special. What are you going to do to pass it on? Somebody very. The difference that you are going to make when you are in a financial secured position. The farmers did not have the money to buy the bread so the grocers did not have the money to pay the supplies. She went on to teach the same skills to other people in her little country town.From Virtually Zero to $3.” I say the same thing to you here now. That town’s attitude changed. She taught the country women’s association. her aunt. it was crumbling under itself. Wherever you are at right now. They created businesses. 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. Together. the lady down the street. It changed to an attitude of hope. I hope I will see most of you come with me in that journey and make that difference to be part of the process. I cannot wait to see your journey and the outcomes of what happens.5 Million in My First 18 Month in Real Estate I hope I have been able to pass some of that on 140 . and to be part of that relationship for many.From Virtually Zero to $3. www. many years to come.

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