This action might not be possible to undo. Are you sure you want to continue?
5 Million in My First 18 Month in Real Estate
From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate
From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate
Introduction ........................................................................ 4 Asset Protection & Tax ...................................................... 13
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
So congratulations for making the effort to be interested to learn a little bit more. but when I found myself going through a divorce. For some people. that trigger comes slowly while for other people it may be a major catastrophe such as an illness. pick up a few tips that you might be able to implement.From Virtually Zero to $3. It was the easiest thing for me to fall back on. It was not that long ago that I was in a situation that was very. I had worked in the banking industry. I was really stuck in my job.com. and I wasted a lot of money on my first husband. After 10 years of earning really good money. www. because for me survival mode was accounting. I moved there in the midst of a very messy divorce. I had run a very large mining company from a financial standpoint. I only ended up with $40. It puts you in the minority. very different from the situation that I am in now.000 out of the property settlement from my divorce.au/dymphna 4 . I found myself in a situation where I had $40. It puts you in the percentile that actually gets out there and does something to actually succeed. That was what I knew. I was still working 40-60 hours a week.knowledgesource.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. All things aside. So that means you can learn from it to move forward. 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. The fact was. I had been a financial controller. At that point I went into survival mode. I had created my own practice. or an event like a divorce or similar. you are a product of your past. I spent a lot of money. I was pregnant and had a small baby as well. I had been a financial adviser. For me.5 Million in My First 18 Month in Real Estate Introduction Congratulations for beginning. reality set in and at some point everyone will have a trigger. Even though I owned my own accountancy practice. In my earlier career. At that time. I have done a lot of different things.
Even though I was an accountant and an economist and had worked in the finance industry for a long. I realized that that is exactly what I was still doing even though I was doing all the right things. looking after two kids and doing it all on my own and what this actually meant. where after my speech I listened to the next speaker and he said something about trading time for money. When I decided that things would have to change I looked at my home and then my business.com. all of that stuff.knowledgesource. It took a lot of trust in my own intuition and all of those sorts of things. Everybody I had spoken to at select points in time. these 20. and had the office which from which I ran the accountancy practice. an economist. 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. So I had to redefine the boundaries to those ‘boxes’ and for me that took a lot of effort. This reality was single parenting. Being an accountant. was actually a disadvantage to being wealthy. We did not have a place to live. we did not eat. I had this plan.5 Million in My First 18 Month in Real Estate For me the divorce was not actually my trigger. My trigger came very slowly. 30. an entrepreneur. There was a defining moment when giving a talk on asset protection and taxes as I do. The reason I had to unlearn it was because I expected everybody to ‘fit’ into this ‘box’.From Virtually Zero to $3. 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. as most people do. Even though I had savings. It is as simple as that. because that is what the books says you are able to do. It came very slowly as my reality started to set in. I thought that because I was in business I could www. rather than my kids. long time and I understood things from a technical perspective easily. I realized that even though I was in my own business. But I didn’t want to fit things into these ‘boxes’. That is how it says that reality works. I expected to ‘fit’ into this ‘box’ because that is how things were. I had to unlearn so much stuff. I was still trading time for money and thought there was something that had to give here. and it was those little things were what niggled at me. If I did not work.au/dymphna 5 . it was actually a disadvantage to me. or 40-year timeframe ‘boxes’ where I would end up spending time with my grandkids. I remember my little kids would say “Mommy.
knowledgesource. I had made my $40. I really started to research and study. but more quickly. all not my thing. Multiple negative flowing properties will just worsen the situation. As time progressed. then at least I would be heading in the right direction. I looked at shares and options.From Virtually Zero to $3. 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.5 Million in My First 18 Month in Real Estate leverage myself out of that business and work on it rather than in it.au/dymphna 6 . I needed something a little bit more secure that would as a conservative accountant suit me. I looked at other models that worked but they were all not my thing. I did do that but it did not happen quickly enough for me at that point in time. I did not have a lot of money at this point. I managed to buy some properties in the early stages without it costing me any money to get into www. 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. well through the internet and thought that this could be my thing. 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. learning and absorbing as much as I possibly could and it took me six months until I put a plan in place that I thought would work for me. I looked at my clients: I had some clients that were doing really. where it brings in more money than it costs. but I needed a lot more money to be able to do what I want to do and replace my income. I looked for what else that I could do to change my position. When I started to look at the characteristics of what I now call a cash cow. 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. So that is what I looked for. 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.com. It continues to keep you in the rat race that you are trying to get out of. they had certain characteristics. All of these things just did not suite me.000 property settlement stretch a fair way.
Compare that to America and all of the litigations that goes on over there. We have a market that is dynamic and changing and in economic terms what we call an imperfect market place.knowledgesource. are actually protected. It does not matter what the market is going to do. You have the perfect opportunity right now to make your own little money machine in the property market. you have got opportunities to make profit. New South Wales is the third most litigated State in the world. I had to do some growth strategies as well and that was the key. You can put yourself in a position where you are tax efficient.com. but New South Wales as www. I love the real estate marketers as it is at the moment.5 Million in My First 18 Month in Real Estate the deal and that gave me a bit of a leg up. 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. where you are not paying too much tax and that your assets. I know it is bit heavy to begin with but it is one of those things that you just have to do. as you accumulate them. 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. Whenever you have an imperfect market place with imperfect knowledge and imperfect scenario. We live in a very litigated society. It was not about one or the other. In fact.From Virtually Zero to $3.au/dymphna 7 . To do business in this society. Fundamental economics and an imperfect market place = Opportunity to make profit. It was about balance and balancing your portfolio and knowing what you need next. The market today is different but in many ways is very much the same. But when I just focused on cash cows I eventually ran out of equity so I could not keep using this strategy. it is not surprising that the first and the second place go to California and Texas. 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.
Queensland and Victoria rank in the top ten.From Virtually Zero to $3. because in this game. One property is not going to cut it. One of the things that you have to be to be successful is a decision maker. If you are serious about changing your paradigm and serious about changing where your life is right now.6% of property investors only buy one property. a reality as we see it right now.au/dymphna 8 .5 Million in My First 18 Month in Real Estate third is ridiculous. So it is a fact. 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. So. 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. 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. Because the very worst thing you can do is not make a decision. If you make a bad decision then at least you got the opportunity to learn from that. and you have to be determined and you have to participate. You will know what should have happened and what www. you have to be focused. to be successful in absolutely anything that you can possibly think about. You have to put yourself in positions where you make decisions. Another statistic: Approximately 13% of investors only own between two and four properties. Let us start with some statistics: 82. You actually have to take action. you will be sitting on the sidelines. number one. That is really sad. you should be deciding if you are committed to this process or not? If you are. in any game. If you do not participate and sit on the sidelines then that is exactly what you will be doing the day you die. you have to be committed.com.knowledgesource. you get the opportunity to look at what you did and analyze the circumstances. one property is not going to be enough.
Everyday millions of innocent people are forced from their homes by a disaster called ‘work’. it is the thing that is solid behind you. when there were 18 taxpayers for every pensioner now means that in the 1990’s. By 2020. they expect there will be only one taxpayer for every pensioner. You have your basic needs covered but you are choosing build an additional base. www. you have always got a buffer and you have always got a Plan B. but at the same time. you cannot do what you love doing in your work.com.knowledgesource. fantastic! Use it. as it stands now. Not every decision that I ever made has been fantastic. Real estate is your Plan B every single time because it is the thing that grows your wealth. That is $269 a week! The baby boom explosion that we had post war. and it is the thing that is going to always be there. Real estate and investing is your vehicle to change this situation. which means. you have got something to fall back on. If it has not been lost it means that I learned from it. if you love your work. build yourself portfolio. 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.au/dymphna 9 . there was six taxpayers for every pensioner. No matter how you feel about what you do now. that I am highly unlikely to ever make that same mistake again.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.From Virtually Zero to $3. in the 1950’s and 60’s. When you look out sound economic models. you still have to do it. but it has never been lost. keep doing what you are doing. I have made some mistakes. Eight out of 10 Australians will retire with less than $14.000 a year. It is going to be hard. This way if for any reason at any point in time. 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. a wealth asset on the side. but it is not impossible and the climate we have in the market right now is so opportune to do exactly that.
you do not know it until you are street smart. whether it is properties or a business. I am not going to try and teach you all of it. I call it being street smart. 2. There are lots of ways of doing things.com. 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. 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. Dealing with people whether they are professionals or not. There are a number of things that you can do to help change this situation. this is something that you have to know because you are the one that has to stand up and take responsibility. 1. As an astute successful investor. This is what you have got to do. Be Tax smart and Tax efficient in your investing You have got to be tax smart and tax efficient in investing. 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. Protect what assets you do have and those you may accumulate in the future You have got to protect your assets.au/dymphna 10 . I do not even know all of it myself but I do know the stuff that I deal in. This means the assets that you already have as well as those that you are going to accumulate in the future.From Virtually Zero to $3.knowledgesource. it could be anything. www. They are not necessarily achieving it but they are trying and this is why. Acting in ignorance will not help you or the problems that we have in society.5 Million in My First 18 Month in Real Estate If you are the taxpayer do you feel like supporting somebody else totally? The reality of this has hit our government. The tax act would probably stand about two meters high if you piled it on top of each other. You can read books but the reality is you do know it until you have experienced it.
4. Everyone has areas of specialty. but where you are going to go in the future. 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.knowledgesource.Growth Properties .Cash flow Properties (Cash Cows) . Market ready means getting your financial position in order and tidying up your loans and reorganizing your finances. Always be market ready The next thing is that you have to be market ready. 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 just GST.com. When you are always market ready. you are able to do a deal so when the right deal comes along.au/dymphna 11 . Some specialize in criminal laws and some specialize in property law.Property Money Machine (Chunk Deals) . you can actually act. some specialize in personal income tax deductions for plumbers. This is where you need to be www. Professionals are very. Focus on sound investment strategies . It means having your structures ready to go into the market and buy.From Virtually Zero to $3. Without all of this you are not in a financially strong position to be able to act. 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 corporate mergers. you can only act if you are market ready so you always want to be market ready. very important but they specialize in all different things. 3.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. This is where you need to step up to the mark and take responsibility for not only where you are at right now.
From Virtually Zero to $3.com. www.knowledgesource. if you are heavily into negatively geared investment properties. a deal that makes you a chunk of money. The lower the level of debt. so debt can be a factor with that. Or you could also be looking for a chunk deal that you can turn over relatively quickly. the size of your portfolio and what the mix of your portfolio is. your personality. 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.5 Million in My First 18 Month in Real Estate looking at your situation and saying. then you might be looking for a cash cow to help fund or support that activity. the higher the level of income from that property. For instance. 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. it means you have got debt if it is rent or not.au/dymphna 12 . that I need? Where is the balance? This is a factor of you. If you are negative gearing.
with our law being passed down through prime ministers over the generations. The first example was on a baby stroller: Warning: Remove child before folding. Public toilets: Warning: Recycled water. Yes. Which one you think they are going to sue first? The person with everything under their own name .From Virtually Zero to $3. they have more of a chance at winning a lawsuit with the person who everything under their own name. 2.every single time.knowledgesource.5 Million in My First 18 Month in Real Estate Asset Protection & Tax What is Asset Protection? 1. 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. but our influence today is not England. unsafe for drinking. Firstly. 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. Minimising the risk of being sued. We are definitely one of the most litigated countries in the world. We really do follow in the footsteps of America in so many ways and our legal system is no different. our legal system has come from predominantly England. 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. Put yourself in a situation where you are protecting your assets by putting legal walls around your assets and to alienate your liabilities by putting legal walls around those liabilities. www. Protecting assets if successfully sued.au/dymphna 13 . prevention is better than cure. It tells of lawsuits that have happened that now result in certain products needing to have a warning sticker put on them so you can imagine what some of the legal lawsuits were.com. You should be looking to put walls around you and your assets.
From Virtually Zero to $3.au/dymphna 14 . Mark is sitting his the office on a Thursday afternoon.5 Million in My First 18 Month in Real Estate An electric router: Warning: Not intended as a dental drill. In 1994. He went on to invite him to take part in a charity golf game on Magnetic Island to which Mark agreed. a digital thermometer.knowledgesource. A laser ink cartridge: Warning: Toner not intended to be consumed.com. should not be used orally’. Sleeping pills: Warning: May cause drowsiness. he has come to a number of my seminars and I consulted for him to see what we could do for him. imagine this. So he turned up for the charity game and teed off as the third player in his group. 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. You think with a wheelbarrow. He lives in Townsville. it wasn’t until after the www. 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. So you can get lawsuits from anything! I would like to tell you about Mark Shanahan. read ‘Warning: Once used rectally. I was in Auckland and I was flipping through the newspaper and it had a very similar article about products and how these warning stickers have now have to be placed on them and one that really stuck with me was one was for a multiple pronged fishing lure! You can imagine the fishing lure – ‘harmful if swallowed’ was the warning on the lure and another. duh… An electric iron: Warning: Never iron clothes while being worn. He gets a phone call from his bank manager asking what he was doing on the following Saturday.
So 10 years plus 12 years equals 22 years of your life where you are unable to accumulate wealth.6 million in debt. Now. 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. when he still wasn’t feeling that well. It was too late for Mark. 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. because somebody told him it was a good idea. it would go away. unable to know where your life is going or anything else.From Virtually Zero to $3. had a couple of kids.com. owning real estate. he had become totally penniless and the high court awarded against him to the sum of $2. Many weeks after the incident back in 1994. www.000. he is now on hold again for a further 12 years because they have 12 years to recruit the $2. Mark went to his local insurance broker and got his insurances reviewed.6 million which he did not have. Ten years of his life had been put on hold.knowledgesource. He was not sure what to do and sought legal advice where he was told not to worry. owned a business. Now at the time he went off to go and play golf with his bank manager he was happily married. Mark of course was really sorry about what had happened because he sincerely did not see him down the other end of the green. 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. But for 10 years it continued to drag and he had built up a legal bill in excess of $500. on top of the legal bill and the $2.5 Million in My First 18 Month in Real Estate game. and personal actions involving motor vehicles. He lost everything he had for playing a game of golf.6 million. he was not negligent. unable to do anything yet. he had lost his company and all of his assets.au/dymphna 15 . that he went to the hospital and discovered that he has a fractured skull and was really hurt. In Australia the three main areas of litigation come from owning civil business. It is a very sad story but a true story.
From Virtually Zero to $3. Unfortunately this was not the end of the story. 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.000 so according to the assessor they were definitely underinsured. So you take out public insurance and you do your best to cover everything. Then there is property ownership. He was insured for $300. They decided that they could fix that themselves but it never ended up getting done.000 and he put a claim for $80. they just bought under their own name. for your business.000. but an assessor came out to look at the damage his assessment implied that he was underinsured. I had a case on the Sunshine Coast where there was a fire in a warehouse. There was also some damage to the property that he was renting so his landlord was wanting reimbursement for the two-fifths which the insurance company did not www. They got the building inspection report which said that the back step was an illegal item that had to be fixed. a young couple invested in a property. They went in a little bit negative because it was a good idea for tax and rather than pay to set up a structure. they can then go after your assets as the individuals of the partnership or the individual. It was considered criminal negligence and therefore not covered under their insurance policy.000 not $300. The insurance company believed that he should have been insured for $500. They now lost their house. if it is upheld. They got sued because of the illegal step and they lost because they knew about the problem and they did not fix it. That is how insurance companies work.au/dymphna 16 . because they had it all in their own name all to save a little bit of tax. This is the type of thing that can happen. their investment house and their own house. it was informed knowledge.000 claim. Because of this the insurance company was required to only going pay out three fifths of his $80.knowledgesource. A few years ago in Bridgeton.com. You would think this would be fine. The inevitable happened someone slipped on the back step. Another similar case was with a balcony down in Victoria a couple of years ago. but if something should happen whether it is bad credit or a legal issue. they can access not only the assets of the business but any assets that you own in that same name. So if you have your business under your own name or if you are sole proprietor or in a partnership.
A foundation on the coast had really looked after his wife during her treatment so he was very committed to the foundation.com. Number one priority. 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.knowledgesource.au/dymphna 17 . Fortunately he had a good business and he was able pay this and to move on. If that fire had burnt down a house in the street. www. 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. He was told to give her anything that she wanted to make it go away. He was quite wealthy and had a nice home. the next door neighbor’s landlord wanted reimbursing for the twofifths that the insurance company did not pay. he would have gone bankrupt. Another case on the Sunshine Coast is a gentleman I know. health care and legal bills. All in all it up ended up costing him an additional $120. His wife had recently died from cancer. a couple of canal properties and businesses and he wanted to give something back to those who had helped his wife. 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. There was also damage to the next door neighbor’s property. He went to every barrister in Queensland and they all told him the same thing.From Virtually Zero to $3. So yes.000.5 Million in My First 18 Month in Real Estate pay. we are following in the footsteps of America when it comes to litigation. It is a very sad case on both sides where the only person who really wins is the lawyer. have a look at your insurance policy reconfirm what you are covered for and make sure that you are not actually underinsured. So again. He decided he would build this very unusual house on his land behind the Sunshine Coast and he would give it back to the Sunshine Coast as a rehabilitation retreat for people while they were healing. One of the young builders that was working on the job was so excited about the work he took his girlfriend and her three year old to look at the house while it was still being built. settle out of court because if you go to court you will lose everything.
Insurance is simply peace of mind. A friendly debt is a debt that you have with yourself or one of your other structures. Debt There are two types of debt: friendly debt and non-friendly debt. Have a look at your home and contents insurance and your lifestyle . My definition for asset protection purposes is that an unfriendly debt is a debt that you have with the third party. as in the story of the three year old girl.au/dymphna 18 . you may lose your house. • • • 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 usually piece of mind. It is non tax-deductible.5 Million in My First 18 Month in Real Estate Types of Asset Protection. That is not necessarily my definition. www. The trouble with insurance is that you can never buy it when you need it.knowledgesource. 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’. Nonfriendly debt is debt incurred through credit cards or a store card or the debt on your own home. Please look at your insurance policies and these types of clauses and exactly what it covers. the interest is a tax deduction. Some of you will be covered but if there are ‘uninvited guests’ and something happens.From Virtually Zero to $3.things like the golf club would it be covered in that kind of circumstance. So you have to anticipate what you need and buy it hoping you’ll never need it.com. 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.
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 up. www. For instance.com.000 but you may also have a $300.5 Million in My First 18 Month in Real Estate A friendly debt could be all sorts of things but it would still be a legally binding debt.au/dymphna 19 .knowledgesource. If somebody tried to sue your company they would get nothing.From Virtually Zero to $3.000 and it has a debt of $200.000 registered mortgage with one of your other companies.
000. You can have partnerships of trust which come under a different category. they have a limited liability. Discretionary Superannuation Funds Sole Trader If you sole trade. you are doing business in your own name and own assets in your own name.com.knowledgesource. Derrick pinches everybody’s money and runs off to the Bahamas. I would be equally liable for that debt. Company Now. I will be equally liable for the actions of Derrick even though I may not have known about it. So if you have gone and bought $10. The shareholders are limited. Companies are a separate legal entity. all you can do is lose your $10. you can lose the whole lot. Because we are in partnership together. Partnership Derrick and I go into business together. had nothing to do with it.5 Million in My First 18 Month in Real Estate Structures • • • • • Sole Trader Partnership Company Trusts – Unit. Any credit that BHP has. 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.From Virtually Zero to $3. it means that you trade in your own name.000 worth of shares in BHP and BHP goes down. You will not lose any more than that. A company is a structure that has directors and it has shareholders. Hybrid. So partnership. belongs to them. but you can have partnership with companies where this is not the case. the previous example is that of the partnership of individuals. and did not benefit from all the money he took off to the Bahamas. They come under the same category as if you did it directly in that structure. they cannot come after you as a shareholder and ask that you pay their debt.au/dymphna 20 . That part comes from a limited liability. If anything goes wrong. www.
Primarily the major rule is whether or not the directors were trading insolvently or illegally in any way.From Virtually Zero to $3.knowledgesource.5 Million in My First 18 Month in Real Estate There are some rules governing the directors. what you might want to do is not actually have the company directly doing the trading but a trust underneath it www. So. meaning that they continued to trade when they knew the company could not pay its bills.au/dymphna 21 . that is where most of them come unstuck.com. when you are trading in a business. Now if they were trading insolvently.
you have a trustee.knowledgesource. we have got a trustee but instead of having unit holders. 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. In a unit trust. I am the trustee and I have a number of beneficiaries of the trust. we can have a trust where for instance an item is the asset of the trust and because I am a control freak. Again. 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. the unit holders. A trust is basically is just a book of rules. we have actually got beneficiaries. Discretionary Trust So let us have a look at a discretionary trust. as in the case earlier. you basically do not have any asset protection because should you get sued and you lose. the trustee is the one that controls the trust. Now. As an example for a unit trust. If you have units in your own name. even if you have unit trust but you own units in your own name. A trustee in bankruptcy would be appointed on his side. 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. it would not affect my half of the business per se. if you are in a trust on its own. those units can be taken away from you just as easily as market shares will be taken away from you. I do not want to give him any of the income from that item and because I am the trustee and I have www.com.au/dymphna 22 . Now. There are others that are better. The trustee is given the job to manage that book of rules.From Virtually Zero to $3. it is a book of rules that says things have to be dealt with this way. Derrick and I. because Derrick did the dirty on me. it is an outdated vehicle.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. but not mine. maybe he embezzled money or was a major bankrupt. 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. So.
Now. the grandkids etc. One important thing that you do need to understand is that of the role of an settlor. so it is problem. ever.com. and they can specifically exclude people too. the spouse and three generations all around. Either way. the individual and their spouse and three generations all around them. or when you go to get a loan. Once the trustee does not own the assets of the trust. Never. like a exhusbands. www. The settlor needs to be somebody totally independent that could never. the sister. 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.From Virtually Zero to $3. the kids are already included. ever. for a number of reasons. now or at any time in the future. There is a better structure for ownership of business but for the ownership of property. Now.knowledgesource. I will be the one making the decision to distribute any of the income or capital or the assets of the trust. 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. I can do that. You might have more kids later on. the beneficiary group in most family trusts will be. the primary beneficiary has to sign the loan documents. I can share the return of that item amongst anybody I chose except Derrick. it is the ultimate discretion of the trustee. ever. it controls them. it will be the individual. ever. They can’t anyway. This is the best structure that we have from an asset protection perspective in Australia particularly for ownership of property. it says who does what.au/dymphna 23 . So the trustee at any point could distribute any income to anybody in that family group. The individual and the spouse would be named as the primary beneficiaries. this is probably the best structure. so are the parents. 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.5 Million in My First 18 Month in Real Estate total discretion. Your children will be automatically included anyway because in a family trust. now or in the future be a potential beneficiary of the trust. ever put the kids in there. you do not want a five-yearold signing a loan document. because at that point in time. ever. if you so wish. it is up to me whether he gets any of that trust or not.
Recently I spoke to a friend who is an accountant. The two brothers bought the property years ago.au/dymphna 24 . The trust was void. A settlement fee cannot be charged. She married this gentleman who is a grazier.5 million were now up for grabs. it was a $1000.5 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. As soon as they are in a relationship that trust is now invalid. who owns a property in New South Wales with his family (two brothers. There was a case in the 1970’s where they subpoenaed the records to prove that the accountant who set up the trust charged the $20 settlement fee. It is the position which is the one that gets to appoint or sack the trustee. So the settlor is normally somebody in the accountancy office. your grandmother’s mate or someone or other that settles the trust.com. This proved that a settlement fee was charged which meant that 15 years later. They both lived on the farm but there www. assets that had built up in that trust to the value of $1. her husband’s father and his uncle) that is worth some $20 million. It is an old. The appointer is sometimes also called the guardian or protector or sometimes the guarantor. One brother (my friend’s husband’s uncle) owned a third and her husband’s father owned two thirds. As the uncle got older. somebody in the legal firm. That is what it was originally setup for although they have changed their uses at they came down the generations. It loses all of its asset protection quality and is useless having it. 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.From Virtually Zero to $3. This the position of real control.knowledgesource. These things may seem insignificant but are important so make sure that the settler does not charge a settlement fee and they are totally removed from any part of the beneficiary group and do not benefit from the trust. The settlor of the trust was the boyfriend soon to be husband of the primary beneficiary. The important position is that of the appointer. The invoice for that year showed $1020 whereas every other year. 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.
au/dymphna 25 . Now. The other thing you must do is make sure that you take care of it in your will. When my friend’s husband bought out his uncle.knowledgesource. appoint himself the trustee of bankruptcy and distribute all income and assets to the bankrupt estate and distribute it amongst the creditors. who was the appointer of trust. all of this transpired some 10 years later and what has happened is that his father.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. very sad case. as you do when you are a younger entrepreneur.com. A very. and forced the sale of the property. which was the right thing to do. it is probably better to have a couple of people as appointers so that you can resign your job as an appointer if need be. you have got to understand it and get that right. sacked my friend’s husband’s company as trustee and appointed his own company as trustee.From Virtually Zero to $3. That is the importance of the appointership. Now. let us say we have got a million dollars worth of assets in this trust and it builds up over a number www. he went to the solicitors. 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. they wanted their share now rather than when the parents died. 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. 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. Trustees The appointer could be mum and dad and they could be the beneficiaries. 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. Mum and dad were also the trustees. to pass that job down to the next generation. He got the solicitors that his father used and set up the trust. They sisters wanted the property sold and they convinced their parents that it was a good idea. But for safe guarding that. They are now in court.
So again. Again you have got trustees. But.From Virtually Zero to $3.com. It does not do anything. it does not have any assets and cannot trade insolvently because it does not trade. so they sue the trust directly. individual or corporate. but the best strategy is to not be there as an individual at all and appoint a company as trustee. The company is a $2 shop company that does not trade. let us say they win the lawsuit and they are awarded $1.5 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. If lawsuits took place and they sued the owner of the property and the owner of the property is now the trust.000? They can’t go to the beneficiaries so they go up the line and if the trustee is an individual. I am recommending corporate all the time and this is ideal as a hybrid trust for a business. This is because now the lawsuit would be suing the trust not the beneficiaries. you then only expose yourself to losing one property. They can sell their half independently from my half because I only own half the company. they won’t get any of that million dollars. I am not in business with Derrick anymore. We own this business 50/50. their spouse can step in and it goes to their estate. They cannot go to the directors because they are not doing anything wrong. So that is the end of the line. It gets taken into my will and all the rest of it.knowledgesource. because you have fixed entitlement to ownership. Hybrid Trusts A hybrid trust is a combination of a discretionary trust and a unit trust. They should own their shares in a personal family www. 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. To illustrate this. I am not going to go into business with someone else unless they protect their side. It will protect their principal place of residence or anything else that they may have in any other structures. As soon as anything happens to this person.au/dymphna 26 . not the rest of your empire. I am now in business with someone else. guess what? All the personal assets of the trustee are now up for grabs.5 million. this structure is useless unless you use specific wording in your trust to guard against that. so it is clear ownership of this business. So. What are they going to do about the outstanding $500.
So for tax purposes and income purposes. we have also got beneficiaries. one in Dubbo and one on the Gold Coast. That means that you can put money into any of your company’s trusts or anywhere else you see fit.5 Million in My First 18 Month in Real Estate discretionary trust as would I. Superannuation is basically a form of a trust. because of the beneficiary group and the discretionary side of things. For business purposes. so it does nothing at the moment. 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 can put it into superannuation or into one of those companies and your trustee should have the ability to distribute to any associated entity. It will cost us $30. www.com. The one in Sydney is negatively geared.From Virtually Zero to $3. it would affect the other properties. we can put money anywhere we want which is fantastic for reducing tax.au/dymphna 27 . We are going to buy one in Sydney. it is net zero for tax purposes. the only thing that is exposed is whatever you own in that particular trust. The one on the Gold Coast is mutually geared. Example: We have got a company and directors of the company and we are going to buy three properties.000 a year to keep.knowledgesource.000 positive cash flow so is a positively geared investment property. my own. The one in Dubbo gives us $10. but as well as the units. It does not affect your principle place of residence or anything else that you own elsewhere. We have protected the properties by putting them in different structures so if anything happens on any one of the properties.
knowledgesource. www.From Virtually Zero to $3. having only one trustee company that you cannot determine at any point in time which trust the company is actually operating for or making decisions for so it could compromise the integrity of that structure although this has not been tested in court up to this point.au/dymphna 28 . But to get around this. you would put a company on top of each one because your company is your separate legal entity.5 Million in My First 18 Month in Real Estate There is a school of thought that says in this structure. therefore it is clearly divided from the others and there is no overlapping.com.
It is a registration thing. I would not go that way.knowledgesource. Let us have a look at a typical business and investment structure: www.com.au/dymphna 29 . but that is overkill and unless there were three separate businesses.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.From Virtually Zero to $3. They could also be set up as hybrid trusts.
The income is passed through these vehicles. If there is a business. For tax purposes. It is the ultimate. shares in other companies. through it you can own shares. It is the ultimate owner.com.000 and Gold Coast 0) now we have directors that through a trustee company goes out and buys the three properties.From Virtually Zero to $3. they pass the income through to the beneficiaries. gold. a coin collection. This trust would be the one that owns the shares in the trustee company. It does not interact with the public. 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.au/dymphna 30 . Then we could also have a piggy bank trust that would be the ultimate owner of everything. units in other businesses. www. has no employees. does not own a car.000. but rather than pay tax in their own right. etc. It is protected. 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. we know what income each of those trusts have.knowledgesource. does not do business. Dubbo + $10.5 Million in My First 18 Month in Real Estate Going back to those three properties that were purchased (Sydney $30. the business would not be under the same structure as our investments.
000 but we would still have to pay tax on it before we do.000 so that trust also becomes zero. 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. First of all we write the -$30. It cannot be given to the piggy bank trust because the piggy bank trust is purely a pass through vehicle. as they have already been paid salaries and don’t need any more. 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.knowledgesource. let us say that in this business that we have. we have got that plus we still have the properties (.000 off against one of the others so we distribute the $10.000 out of one trust and into the other so we now have two trusts with zero and the trust with -$30. so that leaves $56. At this point we have done everything that we can possibly do to minimize our tax payable in the business.000 and distribute the $20. we are going to be in the top tax bracket.000 from our $100. We could invest or buy property with the $80. $772 because that will be tax free.000 www. Then we take $20. which is going well.000.5 Million in My First 18 Month in Real Estate To add to the example.000 to do something with.$30.000 becomes $20. Let us have a look at the flow if this income for tax purposes. + $10. We give our children that are under the age of 18.000 and 0). we pay ourselves a maximum salary.From Virtually Zero to $3. Tax would be about $24. with no earned income. So now.000.com.au/dymphna 31 . The company is the corporate trustee.000.000 business trust which now becomes $80.30 to the dollar and the piggy bank trust becomes the ultimate owner of the shares in the bucket company Once we have got the bucket company we give it the $80.000 to the $-20.000 and it pays the tax on it. The three property trusts now all have a zero tax implication but we have still another $80. We put the maximum amount we can into superannuation which can also be a tax deduction and we pay the kids. We still make $100. So we have maxed ourselves out. so that if we take any more income.000.
for tax purposes.com. transferring the Rolls Royce. tighten out further registered mortgages for asset protection purposes. 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. Mercedes and the $7 million family home into the wife’s name. Its sole purpose is to pay tax and lend money in the structure.From Virtually Zero to $3. The rest of the money would be lent from a bank or a financial institute. through a company and trust’s name. It also talks about Rodney Adler and Ray Williams.000 would be enough for a deposit on another property. In a newspaper article a few years back. and do not do anything else in that company because it compromises this integrity.au/dymphna 32 . etc. The company’s sole job is to pay tax. To purchase this new property we would form another trust and use our $56. lend money in the structure. but like the piggy bank trust do not ever. it talks about some high-profile business crashes.000 as a deposit in that trust to buy that property. Because your debt is going up as your property goes up your protection is going up also. The $56.Tel who transferred the $6 million family mansion solely into his wife’s name.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. ever let anything hold you in there. Let us say. former directors of HIH Insurance.knowledgesource. and take out mortgages for protection. ever. Do not buy a car. They would have had full recognition and knowledge of pending litigation. which means that in light of the four year callback period that applies to bankruptcy those transfers could have been called back because they had knowledge of pending litigation. do not have employee. do not interact with the public. it has friendly debt. It tells of one of the founding directors of One. www. so you lend the money to yourself to build a big extension on your PPR and take out a registered mortgage for the loaning of that second loan of money. It is the perfect vehicle. do not buy any asset directly. you did not really want another property this point in time but you wanted an extension on your PPR (Principal Place of Residence).
Another important thing that is usually taken care of when you do your will is an Enduring Power of Attorney. well before any bankruptcy proceedings. because they were in his name. An Enduring Power of Attorney is basically a single page document. the bank accounts were frozen because she had no authorization. This is why it is so important to do it early not when it is nearly too late. somebody else can act on your behalf.knowledgesource. if you haven’t reviewed your Will for a number of years. who divested $60 million into trust at the height of his power. it needs to be reviewed.From Virtually Zero to $3. He was pretty old school. At the time of his stroke. where the man in the family controls all of the finances and he owned all of the assets. but not dead.000 worth of interest and www. this is really close to my heart. Get it right from the beginning and grow your tax efficiency accordingly. Now. He could not speak or communicate in any way. 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. that if you are incapacitated. Allan Bond. so I did not know much about his financial situation) who in his early 80’s. had a stroke and became incapacitated. The car registration was in his name.5 Million in My First 18 Month in Real Estate The article also goes on to talk about other failed entrepreneurs in Australia. These assets probably still exist and are protected today even though he went through the Bankruptcy and Criminal Law Court.au/dymphna 33 . Dad was in the middle of selling one property and buying another so the family incurred $25. One in particular was Mr. the bank accounts. 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.com. because my father (he was 51 when I was born. that in most cases says. pretty much everything and my mother was very reluctant to take over that role.
knowledgesource. The other thing is that it not might be you that creates the area of concern. Now here are some statistics for you: 48% of all marriages are likely to end in divorce:9% within the first five years.au/dymphna 34 . as in direct descendants or a www.com. Succession planning and the ownership of an asset is very. so a Prenuptial Agreement can be very important. I can’t stress enough the importance of having an Enduring Power of Attorney in place. but they do now— straight out of the American courts. very important as is how you structure entering into a new relationship where you retain the integrity of any assets that you had built up previously. You need to be aware of how these things play out so that you can protect yourself at all levels. You can safeguard against this by establishing a ‘Bloodline™ trust’ where the beneficiaries are required to remain within the bloodline.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. We talked about Australia following the footsteps of America. 22% within 20 years and 39% within 30 years. 19% within 10 years. That whole experience cost my family an exorbitant amount of money simply because that was the way things were always done. who hooks up with some guy that you may not approve of and they strip the assets from the trust and move on. rather than you or how much interaction the new spouse might have. Prenuptial Agreements never previously held up in Australia.From Virtually Zero to $3. Imagine passing your assets down to your child who is relatively young. There are a lot of second marriages where kids from previous relationships as well as a range of other things need to be taken into consideration. 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. Asset protection is effective for our current society with all litigation and legal issues.
” Extract from Rich Dad’s Guide to Investing by Robert Kiyosaki It is a beautiful statement and never a truer one. You do not want to do business or own anything as a private citizen…. the trustees formed and from there a Bloodline™ trust created.From Virtually Zero to $3. The poor and the middle class. so you actually have control. it is worth thinking about. A C-Corporation has the ability to be a clone of you. the assets that are put into a testamentary state. While you are alive you could be the discretionary trustee or a director of corporate trust. You can also have a testamentary Bloodline™ trust. so that upon your death. you want a clone of you actually doing the business. you would still have your home in your name. If you are serious about doing business. want to own everything in their name. Now. If you want to be a rich private citizen. you need be as poor and penniless as possible on paper….5 Million in My First 18 Month in Real Estate blood connection depending on what you specify of the primary beneficiary. That is too risky.com.au/dymphna 35 . So substitute the word company in the following extract. I call anything with your name on it ‘a target for predators and lawyers’.knowledgesource. Although it is not really relevant while you are alive. but if you want to have a little bit of say as to what is going on after you have gone. ‘Pride of ownership.. “A C-Corporation is another you. Primarily. When you do business. on the other hand. The family asset that you have at that point in time can then only be passed within the bloodline. They have SCorporations and C-Corporations in America whereas we only have companies. then you do not want to do business as a private citizen. 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. It is not just an extension of you. especially in this day and age of lawsuits.’ they call it. we do not have C-Corporations in Australia.
So for example the title on the deed will say ABC Pty Ltd for instance. ABC Pty Ltd entered into a contract on behalf of the Wombat Trust to buy XYZ Property. Once you have decided that the investment decision is right. Do not do it the other way around. and insurance and potentially through structures but only as last resort. in New South Wales. just make sure that one way or another you identify the trustees that are buying www. on that present day. your company at that point of signing the contract and entering into that agreement and settling on the property. not just because you want to save $2000 or $3000 tax.5 Million in My First 18 Month in Real Estate you sell it. you will have to pay stamp duty to do this but may be a worthwhile option. you will need to do a company unit that essentially says. Think about why you are doing something first. What is your primary motivation here? Is it to change your life? Is it to get a serious of wealth portfolio? Is it to create a passive income? Make decisions because it is a right investment decision.From Virtually Zero to $3. Do it because it is the right thing to do from an investment perspective first. you can actually put ABC Proprietor Pty Ltd as Trustee for the Wombat Trust on the contract. What name do I put on the title? The name that you should put on the contract can vary from state to state. external debt. If you are putting something in to a company with a trust underneath it for instance. then decide how you are going to structure it for asset protection and make it the most tax efficient. What we then need to do is to determine that in New South Wales. New South Wales and Victoria are a little bit different to some of the other states. 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. and it clearly identifies the trust from which you are acting. In other states. it will not say ABC Pty Ltd as Trustee for the Wombat Trust. Look to have your property protected through internal debt. If it is acting on behalf of the Wombat Trust.au/dymphna 36 .com. the titles office only accepts the legal entity. With assets that you already have sometimes it is worth while transferring them into another structure.knowledgesource.
but also legal entities that are appropriate in the other countries such as America. 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. all of your properties from your businesses and all of your endeavors from each other to reduce their exposure to risk. is something you also might want to keep separate. It was owned by a separate company and trust. Having plant and equipment.com. So. The company had contractors and employees and in the process of the excavation. the ownership of which is an asset. 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. It is the trust that lodges the tax return. 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.knowledgesource. One of the most important things in property investing is being market ready. There was a construction case in Sydney a number of years ago where this construction company was digging on some land. What if I find a great deal and I do not have to structure yet? Well.5 Million in My First 18 Month in Real Estate the property. but it is the company that is the legal entity. The company that was actually doing the construction did not own anything nor did they employ anybody. LLC’s predominantly. 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.au/dymphna 37 . What you are primarily doing is separating all of your properties from each other. you should have.From Virtually Zero to $3. it depends on what you want to do. 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. Being market ready is so much more www.
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. structuring.knowledgesource. desks. the computer. Tax There are a number of tax laws that you should know if you are going to be a property investor or in business. First of all. 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. 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. the filing cabinets. even the brief case that is use to carry all of those kid’s papers to and from school. you will be able to claim some depreciation as a tax deduction regardless of whether you have spent any money or not. the professional library. It is finances. 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. So if your building that you bought as an investment property was built after that date. Although depreciation is fantastic you do need to be aware that when you sell the property. 1985.com. When the law was first introduced. Home Offices Another tax deduction is if you are running a home office. depreciation is a tax deduction for not spending any money. for the depreciating value of the building or fixtures and fittings that might be inside that particular building. If you had a property that has had a major renovation since July 1985. saving and lots of other things. On July 18. If you are renting your www. getting your tax returns up to date. for instance if you are a teacher and you mark papers or prepare classes at home.5% and that is where it has remained ever since. so much more than just being ready to invest. but in July of 1987. they reduced it to 2.From Virtually Zero to $3.au/dymphna 38 . the rate you could claim was 4%. It is the tax deduction on your properties. 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.
if you own the property. A place of business is different in that it means that you can claim all the same things as a home office.From Virtually Zero to $3. breakfast. if you own your property. it includes set amounts for accommodation. the amount will go on your employment summary (or group certificate) and you can claim www. However.com. But again. So you have one structure that is subdividing. one-tenth of the gain that you make on your own home. which would normally have been exempt. but additionally. will be subject to capital gains tax on the same percentage as what was claimed. whatever. if you were an employee of that entity that owned this development and as an employee. all of your travel would be tax deductible.knowledgesource.au/dymphna 39 . it becomes your place of business rather than a home office even if it is the same one-tenth office size. went to check on this site. However. when you sell that property. 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. then regardless of how much money you actually pay for your accommodation. if you are an IT consultant and you actually work or conduct your business from home. you can also claim one-tenth of the interest that you pay on your mortgage and rates and everything else associated with the ownership of that property.5 Million in My First 18 Month in Real Estate home you could claim one-tenth of your rent but. the tax deductions for that entity are suddenly now much broader. lunch and dinner and an additional amount for incidentals (the tables can be downloaded from the Australian Tax Office website). your business now is property. or building units. Travel Expenses Firstly. If the travel allowance is paid in accordance with what the tax officer has set down to be a reasonable rate for rural Queensland. Travel Allowances If your employer agrees to pay you an allowance. you cannot claim one-tenth of your interest bill. if you visit the construction site to things. Let us say you are a property investor or you take it a step further and are a developer. These are the sorts of things that you can claim for a home office.
It becomes part of the sale price which affects your profit. These are the types of things that you start to bring in to your reality. Therefore. 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. it is now a new property and there is a GST charge on new property. 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. What if you bought a house and land package.From Virtually Zero to $3. when you sell it. so you claim it as a fully expanded amount in your tax return.5 Million in My First 18 Month in Real Estate that entire amount on your taxable income without requiring any substantiation. 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. you would not have had to pay any capital gains tax at all.knowledgesource. However.au/dymphna 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. because it is paying within the accorded limits. It also applies to international travel and the rates are all set down depending on what country you are in etc. Alternatively if www. 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. or directly after its completion? You have now. you are in effect selling a new property. You need to be doing this stuff automatically. That can be thousands of dollars unnecessarily. GST If you do a major renovation on a property and you substantially change the nature of your property. You received it as a travel allowance for doing that amount of work. had you sold it two days earlier inside that two-year timeframe. You can do that for up to 21 days away. 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. you contracted the builder to build house and then you decide to sell it after either living in it or renting it.com.
Other deductions How can you claim a tax deduction for dog food? It is a funny question but it is a valid one. if you needed security for instance and you had a business where you might need a guard dog to guard your property. If you bought the property as house and land package from the builder complete.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. Many years ago in my early years in my accountancy practice. So for an opal miner. anything associated with that security would then be a tax deduction including dog food. but black snakes. Looking at this. and this is not going to be a Chihuahua. www. He is the one that has to pay GST on it.knowledgesource. but it is not the first sale.com.From Virtually Zero to $3. A security measure needed for an opal miner to protect their opals is to protect from what they call ‘ratters’. you do not have to pay GST on the property because the builder was the first sale to you.au/dymphna 41 . You have to pay more in stamp duty because of the higher value when you bought it. So one of the security measures that miners employ are not dogs. 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. I had a lot of clients at Lightning Ridge. vet bills etc. 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. 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.
That $100 a week from that second property was $100 a week that I did not have to work for. I call them chunk deals. Cash cows give you lifestyle. Now it might be as simple as shuffling paper. In my initial 18 months of property investing.au/dymphna 42 . Cash cows are there to produce an income stream for you. It came in regardless of anything else that I did. The first property that put $2. When I am talking about chunk deals. doing something. cash cows were the things that made the difference in my portfolio. Predominantly. what I am talking about is having a property that you do something to. creating something. You are doing something to a piece of real estate to make it worth more. Cash Cows A cash cow is what I am going to cover now and why you would want a cash cow as part of your portfolio. there are only two kinds of property. getting out there and doing as much as I possibly could to learn. that is your purpose for doing it. This is called a chunk deal because what you do is you create a chunk of money. You buy them to create income. learning.From Virtually Zero to $3. There are ‘income properties’ or what I call ‘cash cows’ or there are ‘growth properties’.000 a year positive cash flow in my pocket made an enormous difference to me. Changing something. gaining experience. 6 months was of training. That meant that following 12 months I then starting investing and in that 12 months that was the time www. income properties or what I call cash cows. You create that chunk of money in any economic climate. Then next one that put $5.knowledgesource.com.000 a year in my pocket made an enormous difference. When I was going through my early years. The other type of course is growth properties. it might be doing some hard yards on it or it might be building something. as much as possibly could to try and cement in my head the strategy that was right for me. did not have to get out of bed for. Cash cows are a property that produces more income than they cost you. whatever.5 Million in My First 18 Month in Real Estate Income Properties What I would like to cover now is income.
what I am saying is it is hard work. 6 months worth of thinking and learning. I am not saying it is impossible. Because when you can do that. Put the $100 a week that you have created in your pocket or www. I needed income coming to me regardless of what else I did. Then you have got choices. 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. They began with negative but have done exceptionally well. it will make a huge difference on your lifestyle.From Virtually Zero to $3.com. Put your peg in the sand and say ‘this is my level of income that I am shooting for first’. and say okay. How many people can honestly tell me that they are in that position. that started with nothing. Some of them started with less than nothing if you can have less than nothing. an extra $100 a week. I just figured that if I could just get out there and accumulate enough of them then I would have my income replaced. very similar to myself. I have had lots of students that have gone through with me. This is your first point that you can aim for. 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. When you create that income. When you get enough of those that you have got your basic needs covered. You need to know this because that is your first peg in the sand. 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. The income that I was working 40 to 60 hours a week for. 12 months worth of investing. So that those little properties put $20 a week extra in my pocket or $100 extra in my pocket. Absolutely nothing.au/dymphna 43 . then you have got lifestyle. Then you can choose what you want to do. that they know how much income they need to cover their basic living expenses? Not many.5 Million in My First 18 Month in Real Estate that it took to totally replace my accounting income. What I quickly realized was that what I wanted was income.knowledgesource. let us say.
Neither can happen in isolation. growth properties do not cash flow.com. The Rule of Two www. I do not care how big your pocket is right now. you could stop working and still live the lifestyle that you live.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. Or you might love doing what you are doing. This gives you lifestyle. you could go in and work in a foreign mission. Mostly. That is what gives you wealth. You are going to run out of the ability to continue to exist because if you only focus on growth deals. It does not give you wealth. When you get to that point where you have got your basic needs covered. what you are doing is you are tying yourself to an alternate income stream to support it. a friend gets an illness. the job does not exist anymore. This should be your starting point. growth properties that continue to grow and expand and build into much bigger. creating equity.au/dymphna 44 . this gives you choices. you are going to run out of cash flow. What gives you wealth are growth properties. If you hate doing what you are doing. whatever. Creating that benchmark on the side means that if anything should ever happen. you are going to run out of equity or the ability to continue to invest. This gives you your freedom. You have got your basic needs covered. That can be a secondary issue. 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. your shooting point that you are going to go for. If you only focus on growth deals. What you need to maintain your lifestyle as it is right now is passive income. effectively. You could go and work part time. not in the short term so it is that balancing act that you have to put into place.From Virtually Zero to $3. greater portfolios the longer you have them. if you only focus on cash cows.knowledgesource. getting out there and manufacturing and making it happen. the company goes broke. You could choose to go and do anything you want. Anything that you do on the side is a bonus. You need a combination of the two. then life becomes a choice. Creating chunk deals. something happens. you get an illness. you are still in a position of security because it does not affect your lifestyle. You could work full time on your real estate.
From Virtually Zero to $3. It will come in as a rule of about 1. There are a few things you can do to assist in working out this process. for not spending any money and being able to get a tax credit back on that.000 x 2 1. Eg. if you have the purchase price and you divide it by 1. But this is how it works.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. it does not matter because I made it up.000 (for those of you who are mathematically challenged.You need to be getting $400 a week or more from that property to make it positively cash flowed.knowledgesource.au/dymphna 45 .7 because it takes into account the depreciation of the tax deduction. 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.com. The Rule of Two says this. $200.000 property.000 divided by 1.000 x 2 = Weekly Rent So if you buy at $200. 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. Then you multiply this figure by two. I have a rule called the ‘Rule of Two’ and if you have not heard of it. Eg. you have got $200. 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.5 Million in My First 18 Month in Real Estate Let us have a look at some income deals. you have got yourself a cash cow. www. 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 is $200 multiplied by two is $400. you take off three zeros and you are done). Purchase Price 1. 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. This is just the rule of thumb.6 to 1.
Either way. Too slow. which one of you bought it? All the hands went down. you have paid off your house. Urgent sale . My philosophy is that unless you have got $40.5 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. A www. 10 out of the 75% that saw the ad.000 of that will be secured on the property that you are buying and $40. 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. you will be borrowing $200. I was speaking to an audience of 175 people on a Monday night.$135.com. This is a rule of thumb only. the $40. I have got a cash cow in my hands.000. I acknowledged the ones that rang up and were too slow. On the Monday night.400 Does this make the rule of two? Yes. This is an ad that was in a newspaper a number of years ago when I was speaking up in central Queensland. you have no debts and you have got $40.From Virtually Zero to $3.000 (in this case 20% of the property) sitting around in cash.000 in savings. I was one of them. it does. you are still paying interest on 100%. Immediately you have now got a reference point to say I am in the money. I said what happened to the rest of you why did you not ring up about it? It sounded too good to be true.knowledgesource. Fantastic. If you are taking your $200. we are talking about paying interest on $200.000. 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.000. 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. $160.000 will be secured on your other property.000. I said who actually rang up about it? 10 people put up their hands. I did ring up about it but that was after lunch on a Saturday and they had already gone. All returning $100 per week. But those that did not even try were giving up a pension.000 out of equity out of another property to go and buy this particular property.000 Cash Positive $11.au/dymphna 46 . it is still 100% borrowing.
To buy an $11. They are going to be muddled in amongst everything else and maybe it is your own ignorance that stops you from identifying the opportunity. it would just be shuffling paper. Why wouldn’t you be excited about an $11. An index pension because it will continue to increase in value because the rents will ultimately go up from $11. Characteristics of direct cash cows • • • • • • • • Regional Areas Dual / Multiple Occupancy Multiple Streams of Income High Rental Demand Commercial Under market rental Lease/Sub-Leases Rent to Buy / Lease Options There are certain characteristics to look for if you are looking for a direct cash cow but there are also indirect cash cows.400. From the day you buy it.400 index pension not only for life but for generations ahead would cost you in excess of half a million dollars. So those people who did not even try were giving up a lump sum benefit of half a million dollars. When I say a direct cash cow. Quite likely that will be the case.5 Million in My First 18 Month in Real Estate pension for life for as long as they wanted to own that property. For some of them.everybody. Properties that they have driven past everyday for the www. There is the ‘direct cash cow’ and there is the ‘indirect cash cow’. They do not fit the Rule of Two. nothing more. These are the ones that are harder to see. 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 .au/dymphna 47 . That is what a direct cash cow is. it is like the one I just explained.From Virtually Zero to $3.knowledgesource. I have seen literally hundreds of these deals go by under people’s noses. it puts money in your pocket.com. There are two types of cash cows.400 pension.
he knew it was a piece of rubbish. Some idiot did. last one available and finally all sold.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 on a busy road and one day when he was driving past he saw a sign on it.From Virtually Zero to $3. www. you could not really call it a factory. A week or so went past and he saw a sold sign. What he drove past everyday was an opportunity at a number of levels. he noticed that there was a sign on it again. it was a very old.au/dymphna 48 . The sign was up there and it said nine for sale and then eight remaining. Never identified that it was a potential indirect cash cow. increased the value of the property immediately. He had an opportunity to get in there and buy it initially and get what we call a DA on the property. It was sold again a week later. that picture had now become a completed building with a for sale sign up again. When he first started to drive past that property.com. Let me describe this deal to you. He thought it was interesting that anybody would want to buy what he thought was a piece of rubbish. there were now beautiful new commercial buildings. Then about nine months later. But this time it had an architectural designed picture on the sign and what it might look like if you built something there. So that was a chunk deal. but this is zoning to build a certain style. five remaining. after continuing to drive past this same building every day.knowledgesource. they are selling it again. he thought. really ugly factory. Getting that through the council to say that you can build that particular building there. It was more of an old shed. Then some three months later. The opportunity to buy it was there at any point in time but he never recognized this property as an indirect cash cow. 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. 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 thought.
The next person who came in had the opportunity to manufacture a cash cow. but first there are characteristics that you are going to have to start to look for. First of all.com.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. 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. take the money that they made and pay down the debt that remained on the remaining premises that they decided to keep. If they did that. They 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. In this particular case. By doing this they could take their profit from those properties. Some of you may not be comfortable with that. I get a lot of that particularly from people who live in the city. in the indirect cash cow market. www. These are the hidden ones that you would not necessarily pick up on unless you tune yourself into them. that person that sold all nine of premises but that person did have the opportunity to sell only seven or six and keep the remainder. Let us have a look at some of these characteristics. 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. I grew up in a bush so I have no bias but I have some mates who have grown up in the city and live in the city and their attitude towards buying something not in their own suburb is very strong. This is a complicated structure and it is a little bit more advanced but this kind of deal could have been a little house. This is where I want you to start tuning yourself. a direct cash cow could be in a regional area. But they would also have created a passive income stream because the debt on that property would now be so low because they used the profit from the others to pay down the debt on the remaining premises. This could be anything and this is where the opportunity to make a cash cow is now. not only have you increased the value of the property but you have increased the rent and now it might be a cash cow.knowledgesource. in some cases.From Virtually Zero to $3. He went in and he produced nine commercial premises.au/dymphna 49 . This kind of deal could be a subdivision.
You can get a rat bag tenant anywhere. Regional areas generally do have a high yield. that you are going to get a rat bag tenant.knowledgesource. what drives employment in the town. are we going to be in trouble? What drives the town.au/dymphna 50 . when you go out of your own suburb. The issue is not your tenant. Some more so than others. The reason I say that is because when I see people who manage their own properties. 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. just down the road. Typically. those properties are under market rental.From Virtually Zero to $3. I actually gave up a property. they are not managed as well as they could be.com. not your tenants. I will not manage any of my properties. You should be managing your management agency. It is not a product of where that property is this can happen anywhere. you are not managing your manager efficiently. 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. This is pre-resource boom.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. particularly if the owner is a little bit soft like I am. But they have this idea that just because you might buy in a rural area. If you have got a rat bag tenant. 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. a rural area or whatever. you have got to look at the fundamentals and this is where the economic model and the microeconomic model or a region really starts to become apparent. 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. whether it be a mining area. Typically. The issue is your management agency. in my opinion. that will be okay too. Rat bag tenants live in rural areas. but they live right around the corner from you no matter where you live. I let the tenant get away with blue murder. typically. I always manage my properties through a property manager and I manage my managers. It is also www.
Something that you could put another www. That was the potential of this particular property. I could not afford any lack of rent. that property had a positive cash flow of $38. You might be able to buy something that will you can turn into multiple income streams.000 and I could not afford if that property was not rented. the more likelihood that the property is going to be a positively cash flowed property.5 Million in My First 18 Month in Real Estate pre-me being very financially strong. Do you know how much difference that would have made to my life back then? Enormous. I refused to buy the property. is where you have two or three shops in a row so you have more income coming in from the one purchase. probably a whole lot more income comes in from it. I could not sign it quick enough now but back then it was too risky for me. a fourplex or then you go to a six pack. Multiple income stream properties could be blocks of units and things in the residential market but it could also be in the commercial market. Had that property come to me today. a triplex. not to reduce the rent so that you get a tenant. I am talking about a duplex. You should to. 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. something that you can turn into a duplex or triplex or a fourplex etc. Strips of shops. etc.From Virtually Zero to $3.knowledgesource. So that is where you have got to look to the fundamentals. I had known that town. That property was for sale for $320. strip of shops. to pay the repayment on that property and the property was supported by one small to medium industry.au/dymphna 51 . I could not withstand that and I said no. The reason I refused to buy the property is because in my financial state at that point.000 a year. I always look at risk profile when I am making a decision. It is a case of board up your windows and wait till the nickel price comes up and the mine reopens. The property is worth a whole lot more now. In previous years. 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. At the time. I could not sign the contract quick enough. Houses that you can turn into multiple flats. Upstairs / downstairs rented out separately.com. when the nickel price was not so high.
Most of you will be thinking in traditional mindsets.au/dymphna 52 . put in four washing machines. By renovating you will increase the value of a property. she cleared an extra $500 a week in coins! Do not think that you have to think inside the box. four dryers. The garage gets rented out for storage for $100 a month. then it could become a manufactured cash cow. Something that you could potentially strata title or subdivide or build some storage facilities or rent out the shed for parking.knowledgesource. In all she put in six slot machines. a splash of paint.From Virtually Zero to $3. 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. Always www. a pinball machine. hindered my success. a chocolate machine and one of those space invader machines. One on my properties in America gets rented out for storage. hindered my progress.5 Million in My First 18 Month in Real Estate residence on. Think of what else you can do to create income streams. She then put a bit of a carpet down. The students who predominantly rented these units invited all of their mates around. In the beginning my reality of how I thought things should be hindered my wealth. from those vending machines. While she increased the yield on the property for the traditional rental model that she had.com.000 and each of the units was rented out for $100 a week. It was a block of four for $230. They put in a lounge and a TV and this room became this little social Mecca where everyone used to hang out. It becomes a bit of a chunk deal on the side and then you may have something that is positively cash flowed. on average. It is not quite a cash cow but it is getting there. multiple income streams. So have a look at how you can maximize your income streams. But this student did a bit more than that. a coke machine. What else can you do to make this thing positively cash flowed? You have got to start thinking outside the box. One of my students bought a block of four units in a pretty sizeable regional town supported by number different industries. If my student shares the opportunity to renovate it and increase the rental on the property.
How secure is it. 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. If you are talking about commercial throw the Rule of Two out the window. Remember how we talked about the Rule of Two.From Virtually Zero to $3. it is lifestyle. what happens is the tenant normally pays for all of the outgoings. as the case may be. The lease has been set up and they pay for the maintenance and everything else on the property.com.au/dymphna 53 . I have got a new rule for you. Whilst most of you may be just thinking mining areas. In commercial. It is called the Percentage Point Split. where they do what I call ‘infill housing’. they sometimes pay for the insurance. It does not apply. they pay for the body corporate. is it transport. Commercial generally has a higher yield on it than residential so the Rule of Two does not apply to commercial. It affects your growth. Commercial Commercial is a little bit different. What makes people live in an area? Is it employment. So if you have a property that has got a 10% yield on it. They are allowing multiple income stream properties so that you get most people living around where the transport hub.5 Million in My First 18 Month in Real Estate look for areas where there is a higher rental demand. 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. and there is a high rental demand in mining areas at the moment. What you end up paying for as the owner of the property is the interest on the mortgage. So if you look at the Percentage Point Split between the yield that you are getting on the property and the interest rate that you are paying on the property that is your positive cash flow or negative. 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 is happening from fundamental perspective? That affects your yield.knowledgesource. you are returning 10% on the commercial property and you are paying 8% www. They pay for all that stuff.
poor Derrick. Primarily.knowledgesource. Under market rental Under market rental. you have got to think about your tenant. they are going to be properties that have been owned by the one owner for a long period of time. and he is got Derrick living in one of them and Derrick has hurt his arm.000. 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 can help their business and thereby. it is not their problem. Now.com. strengthen your ability and be able to keep the market rentals. He has been doing it for 20 years. So if the property was worth one million dollars. You can improve the well being of your tenant even if they do not seem to know what they are doing. He has hurt his arm. what is your Percentage Point Split? Two percent. typically. Mr. Because.5 Million in My First 18 Month in Real Estate interest. he has been a good tenant and he looks after things and he does this and does that and whatever else. So. But. He is got a number of properties. www. if Derrick went somewhere else. this is now. But. that is even worse. he would have to pay current market rentals. it is your problem because you would not have that tenant for very long. For example: You have little Mr. and have a more enduring positively cash flow property. They are going broke. what happens is. they are going to go out of business.au/dymphna 54 . Now. you have got a vacant piece of real estate. how much possible income have you got? $20. Smith would not want to increase his rent because. Smith. strengthen the position of your tenant. you have got to pay a lot of attention to the well being of your tenant. The other thing that affects our cash cows in the commercial market is the business environment. that is the rule that you should be thinking about when you are out in the field or on the internet. First let’s look at the residential market. If your tenant is losing money.From Virtually Zero to $3. He will keep his rental at a $100 a week which is what he has being paying for the last 10 years. he manages his property. literally heaps of properties around at the moment that are under market rental. or talking to somebody on the phone when you are talking about commercial. There are. particularly if they are managing the property themselves. Derrick is out of work.
Typically. the current market rental at that time was about $220 a week.knowledgesource. Dear old Mona. Mona had paid a $140 since she moved into the block some six or more odd years ago.au/dymphna 55 .From Virtually Zero to $3. No one in the agency was going to say ‘wait a minute. If you want to be charitable and you want to give money. In the commercial market it is more apparent because their leases may often be longer. Now. So bring things up to micro financial if the rents are lower than they should be.000 a year that I was not getting from Mona. if I am a charity. her name was Mona.com. Mona was paying a $140. that she would find somewhere else. Mona moaned. They may have a www. but a lot do not. $80 a week. I want the choice to be able to give. fantastic. but Mona had it all over this agent. You are not a charity in that regard. It was a block of five units on the Sunshine Coast. She started to pay the rental but would moan that she was going to leave.000 a year to who I consider to be the most needy and to me Mona was not that person. 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’. nearly $4. she would wince at everything. I absolutely support it.. It was managed by an agency. there are opportunities in the commercial market with under market rentals. but choose where you put that money. in this case. So. commercial tenants may have a three or a five year lease or even a 10 year lease or longer and the clauses in that lease can vary greatly. Some of the clauses may be increases to market rental or have a review periodically to make sure they come up to market rental. than Mona. Mona. not only to find a property that she could pay $140 a week for.5 Million in My First 18 Month in Real Estate I had a property that I bought with exactly this situation. Now. has to pay $220 for that unit somewhere else. I inherited one tenant. go and do it. if she goes somewhere else. But Mona found it very difficult. It was so appropriate. but she eventually moved on. 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. and that this was not fair at all etc.. In the same way as residential. and she carried on for so long. So why would I let that situation continue? There were other more needy causes that I could choose to give my $4. Hang on a minute! I do not care what ‘situation’ she is in. but a property of similar ilk that she could pay $220 a week for.
com.$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.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. 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. It is risky in that you are signing a contract where you will be liable for that lease and therefore responsible for it. Have a look for these opportunities.000 and it was being rented for $20. You just made $100.000. There may be an opportunity to buy in because in the commercial market.000. It is where you have an opportunity to take out a master lease and then sublease the same property out. The cap rate in that area is x percentage therefore the value of that property is x. very quickly. Leases and subleases Leases and subleases is where you have a great opportunity to look at the leases. Guess what the property is worth now? $300. But what happens if that property really should have been bringing in $30. 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. It is set on how much are you getting on the property.From Virtually Zero to $3. a factor of your rent. you renegotiate the lease up to $30. You compound that over a number of years and what you are doing is being a charity all over again.000 a year at a 10% return. Let us say you had the opportunity to buy a piece of commercial real estate for $200. when the lease comes.au/dymphna 56 . It is a factor of yield. There are opportunities like that everywhere so look out for that in the commercial market. Market rentals might have been going up at 6%.000 by doing nothing other than bring your rental up to market value and getting what the property is really worth. www. That is how the price is set. commercial prices are set by the yield. unlike in the residential market where it is set by comparable sales analysis and things like that.knowledgesource.000 . I will not go into this in a great detail because it is a little bit risky.
So the only way I will use this strategy is with somebody else.From Virtually Zero to $3. strong.000 a year into your pocket. Did that property ever go www. They come under the three different forms primarily and they each have right ways and wrong ways of doing them.000 Currently returning $57. The income on the property is $57. I have nothing against this strategy. Does it matter? Absolutely not. It has 0 vacancies. Example 1: Block of 6x2 Bedroom Units $430. whoop? Probably not. I am not tough enough to do it. I once bought a property and it probably looked worst than this. It was a block of five units but that property put $27.000. Are you are going to get much growth out of it? Probably not. so does it really matter if it is in whoop.500 a year into my pocket year after year after year.au/dymphna 57 .5 Million in My First 18 Month in Real Estate Lease options Rent demise and lease options are your typical wrap deals. The rents go up and you end up paying more than you would have if you just rented the property in the first place. If I am the owner then I am the keeper and this strategy requires a certain amount of personal interaction and my personality is such that I am too soft. solid little town.knowledgesource. My personal bias is that I want to own a property. it is just not for me. It has been supported predominantly by rural industry but they are always going to be rented. I do not want to be leasing it up to somebody else. Zero Vacancy A block of six units at $430. This property puts about $15. Is this cash cow? It is.000 to $20. They are ugly units but they are in an area that is a good. It was in a mining town and that it was the ugliest thing you could possibly imagine.com. The only way I will go into a wrap deal is with somebody else who wants to do the work.500 a year.500 per year. absolutely works. This is not really a strategy that I personally use.
000 for it.5 Million in My First 18 Month in Real Estate up in value? Not a lot. I paid $250. www.com.From Virtually Zero to $3.knowledgesource.au/dymphna 58 . It could have bought properties that would have quadrupled in value with the same money but did I care. I bought this property for cash flow.
representing an 18% gross return (gross not net). Games room. Its purchase price was $290. This is based on a $290.com. secure fencing and a car-park for car accommodation.000 Rent (p/wk): $110-$120 p/wk per unit. Laundry. The figures are based on a 25% vacancy rate and $180 a week.au/dymphna 59 .knowledgesource.000 so the yields would be even higher.From Virtually Zero to $3. 20 UNIT ACCOMMODATION VILLIAGE KAWANA Features: A/C.000. This investor’s reality returns $110-$120 p/wk per unit. This property returns $945 plus per week. To finance it you may need a little more equity because it is a more of a hotel style property but the type of property that it is does compromise its value or its potential value in the future. 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. Example 3: Price: $950. Over Christmas it has100% occupancy. 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. Entertainment room and spare land on this block. www. 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).5 Million in My First 18 Month in Real Estate Example 2: $945 plus per week represents 18.000 purchase price and there are some left from $265.00% gross returns.
a personal loan.000 $ 10. Credit cards • Bank of Qld Visa • Commonwealth Visa • ANZ Visa • Myer Card • AGC C/Card • American Express Personal Loan Home Loan $ 15. Her situation was that she and her husband had credit card debts. So they were in 0.000 $ 2. 20 units priced at $950.000 all rented between $110 and $120 a week.000. I will tell you some more stories because many buyers will say to me ‘but you are an accountant. All of those things made it harder for me because I had to desensitize myself to what was normal and acceptable.com. How much money would we need to buy this property? How much equity will we have to have? 30% at least.From Virtually Zero to $3.au/dymphna 60 .000 $ 5.000 that you would need to look at in equity from somewhere else to be able to buy this property. That is a lot of rubbish. you are different’. in total $186. Case Study: Linda & Nick before they met Dymphna I met a lady Linda through one of my coaching programs.000 www.knowledgesource. is in a university campus 20 unit accommodation village. you are an economist.000 $112.000 worth of debt.500 $ 30. a home loan. 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. That would be almost $300. 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. Is that a cash cow? Yes it is. Someone without the kind of programming that I had will find it a lot easier. they were minus $186. But this property puts in excess of $20.000 $ 7.000 a year in its owner’s pocket.000 $ 5. This is what they did. So sometimes you have to take the longer view.5 Million in My First 18 Month in Real Estate This one here.
From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate
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
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.
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
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.
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
From Virtually Zero to $3. it was $25. www. The purchase was a residential block for $2.000 to $30.knowledgesource.500.com. Their next purchase was a property in a little town in Queensland. There are a lot of strategies here that can be used to reduce these kinds of costs but all in all after an additional $10.000 profit.000 for removal and set up and $8.000 for hook up.500. Then they bought a removal house.000. It was rented for $180 a week and revalued on completion at $150. I believe that there was probably an additional $20.000 for the removal house and another $37. which in my opinion they paid too much for. So they made $67.5 Million in My First 18 Month in Real Estate off their old debts and getting rid of what they had previously accumulated.au/dymphna 64 .000 that they could have made if they had had a little more experience but it was still a great result.000 renovation the total cost of the house was $82.
1 ½ bath for $60 000 delivered and stumped Small Reno $ 10.000 for the renovations on this one.000 Renovated & turned into 5 brm boarding house. Reno costs $ 15. Deal 5: Price $155. It is much harder to get insurances and make sure you get all of the correct licensing in place.040 per www.000 Revalue $ 175.000 and had the house revalued $175. Revalue (post reno) for $250. So they did a similar deal in the same town.000 was renovated into a five bedroom boarding house.5 Million in My First 18 Month in Real Estate Deal 4: House block – Same small town Asking price $ 3.From Virtually Zero to $3.knowledgesource.000 with a rental return of $27.000 profit on that property. It is very important that these things are investigated thoroughly. They purchased some land for $3.com. They moved a three bedroom house for $60. They completed a small renovation for $10.000 Rent $520 / week. 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.au/dymphna 65 . Boarding houses can come with complications.000 A similar one for $155. thank you very much. You must be very aware of the fire ratings. So they spent $15.000 Profit $ 80. have fire alarms installed and all other fire requirements that are necessary.000 Profit $ 102.000.000 and that is $102.000 They bought it! Move a 3 bedroom. It was revalued post renovation for $250.000 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.
It now had an additional value of $80.au/dymphna 66 .000 as well as positive cash flow.com.knowledgesource. www.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate annum.
knowledgesource. total cost of $164. They agreed to buy a house under market value for $125. They made an immediate profit of $35.000. Lender Cancelled Settlement. www.000 Rent $200 /w Immediate Profit $35.000.000. they still could not do one on their own. Lots of hiccups with this house. a profit $56.000. Had unconditional approval from non conforming lender . Approached bank to finance within hours of settling. They put in a new kitchen for $7. They could not get the finance by the settlement date as the bank backed out and did not approve their loan.hours before an extremely delayed settlement.000. Between signing contract and bank valuation another house 4 doors down sold for $160.000 Another joint venture.au/dymphna 67 .000 $220.000 with the rent at $200 a week.com. They knew they could not ask the vendor for an extended settlement as by this time the vendor had realized that he was selling the property under market value.000 and revalued it immediately at $220. Begged & borrowed – settled with cash. Just in time a friend came to the rescue and they did settle and it was immediately revalued at $160.000 $ 56. 000 $ 7. Deal 7: Purchase Price New Kitchen Legals Total Cost Re Valuation Profit $ 15.000 Another joint venture.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. Purchase price was $155.500 a few extras.From Virtually Zero to $3. it was a great deal but they had a lot of hiccups.
Like them.au/dymphna 68 . but it is not going to be easy.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. It works for them because they could do the work.From Virtually Zero to $3. www. They did not have any money. They could do the work and make it happen.knowledgesource. you can make it happen and you can make it happen surprisingly quickly.com.
knowledgesource. They paid $65. It is not a lot but it means that there is a future. Deal 9: Bought a 1 bedroom house for Agent estimated real value at Tenant in place for Profit $63 000 $75 000 $125 / week. The agent estimated the real value to be about $75. Painted everything! Reno Cost approx: $ 22.000 JV 5 $ 80. New everything except bath tub & Toilet.au/dymphna 69 .000.000 Next they bought a three bedroom and one bathroom house on a large corner block.000.5 Million in My First 18 Month in Real Estate Deal 8: 3 Bedroom.000 JV 3 $ 67.000 Paid $ 65. 1 Bathroom House on large corner block Asking Price $ 67.000 Desperately needed renovating.com.000 The second place they bought on their own was a one bedroom house for $63. The asking price was $67. This was their first own deal. They did this all that in 12 months.500 JV 4 $102.000.000.000 so they put a tenant in place for $125 as it already had a profit of $12. They spent $22.From Virtually Zero to $3.000 JV 2 $ 80.500 and renovated over 3 ½ months and then rented it at the end for $220.000. Joint Venture Summary Property Profit JV 1 $ 78. It desperately needed a renovation. It was revalued at $130. Rented for $220 / week Re-valued House $130.000 Renovation took 3 ½ mths. $12.000 $ 48 $ 80 $ 49 $ 61 $270 Cash Flow / wk / wk / wk / wk / wk www.
knowledgesource.5 Million in My First 18 Month in Real Estate JV 6 $ 35. 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. She said that they wanted subdivide themselves but didn’t know how to go about it so she thought that she could maybe do it for them.000 $ 82 / wk Own 1 $ 47. Anyway. consultants and everything else you need to make a development approval work and there was this young girl in the audience who was about 19 years of age. She said that she could do that work for them and that if she managed to obtain development approval on that land. it would be worth much more. to speak to me throughout the process and she ran into any difficulties.500 $578 / wk Now. How to actually submit the paperwork with all the councils.2 million to buy the property to develop it.000 $ 82 / wk Own 2 $ 12 000 $ 20 / wk Total $557. to let me know. 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. 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. Another one of my students did a no money down deal as well. that has to be shared but basically. they are the JV’s and obviously. She asked them to give her six months to try and get the development approval for them. I said if she was prepared to stick her neck out and make that happen.000 $-42 / wk JV 8 $ 47.au/dymphna 70 .com. They had been offering them as much as $1. 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.From Virtually Zero to $3.800 $ 11 / wk JV 7 $ 56. The parents agreed and as part of the agreement she did it together with www.
000 to start their own property portfolio to buy their very first homes. She and her best friend now had $100. but she increased the value of the property by $400.From Virtually Zero to $3.au/dymphna 71 .5 Million in My First 18 Month in Real Estate her friend. It took her nine months to do. any increase in the value.knowledgesource.000 went to the parents and the remaining $200. her friend so their daughter was getting a quota and learning the process. any extra money that was made over the $1.000.com. But her share would be split with the daughter. that she could create by doing that development would be split 50/50.2 million that they were being offered for their property.000 out of the deal . 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. Would that not be a really good kick start to get into your first property at the age of 19? www.000 got split between her and her best friend. Part of the deal also was that any profit. their daughter and through this process she would learn how to do this also. That meant that she got $100.$200.
When you start with commercial properties.000 spend is not too bad but is it going to cost 30% equity because it is commercial. Everything was done through their solicitors.au/dymphna 72 .125 0 $ 7. This was a little commercial property in Reginald. Upstairs was actually residential but it was all under a commercial lease and rented together.knowledgesource. www. In this instance they used applied knowledge to make it happen.88% of $175.000 $ 20. NSW Commercial Office $175.025 passive income for a $175.88% 2 Bedroom Unit Upstairs + Commercial Shop downstairs Analysis: Purchase Income Rates Insurance Interest ($175.5%) Mgt Fees ( @ 8%) Passive Income $175.000 that was rented for $400 a week. it does not have to be with millions of dollars. If you are paying 8% at the bank. $7. the percentage point split is 3. 3.From Virtually Zero to $3. 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. In this case the tenants paid the rates but they did not pay the insurance and there was no body corporate. New South Wales for $175.com.5 Million in My First 18 Month in Real Estate Example: Reginal. ROI or Return on Investment of 11. The passive income on this particular property was just over $firstname.lastname@example.org $ $ $ 0 650 $ 13. There was $20.800 income coming in.000 is $6790.000 Current Rental $400/wk ROI 11.88%.025 Another story starting with no money.
How do I get 12%? $7. It is going to cost $58.000 or not. 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. 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. This is where your opportunity cost analysis starts to come in.000 but the next deal might require $200.000 that I am choosing to put into this deal that I could be putting somewhere else. It is 12%.000 worth of equity? Is this deal good enough? This deal might require $58.000 into this deal as opposed to www. Your real return on investment is infinite because the entire amount was borrowed but what is important is your opportunity cost ROI.5 Million in My First 18 Month in Real Estate Let us look at those figures. unless your income from your commercial property exceeds $75. It is $20.000 so in this instance you would not have to be registered for GST so it would not come into it.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. In this particular case we have got $52. This is a calculation that gives you the ability to be able to compare one investment with another.000 to get into this deal so that is $58.au/dymphna 73 . How do you compare two deals like that? The answer is in the calculation of an opportunity cost analysis.500 (30% of $175.com.From Virtually Zero to $3. 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. So $52.knowledgesource.000 which is the passive income that we have got coming in for the opportunity cost of investing $58. to be able buy this property. it would depend on whether the owner is actually registered for GST as to whether that is plus GST. opportunity cost ROI.000) that is going to be required in equity or money from somewhere else.500 is required plus approximately 5 % in estimated costs to cover other bits and pieces involved in the purchasing of the property. In this case.
my real yield on this property is actually 12% plus 7. But 7. I am actually investing money through borrowing the lot.knowledgesource. 12% after paying interest on my money. gives you roughly 12%.5% return. So $7.au/dymphna 74 . www.000.5 Million in My First 18 Month in Real Estate another deal.000 divided by $58. So you need to think where else could I place that money and get about 19. Since I have no money to invest.com. I am actually getting a 19.5%.5% is going to pay the interest on the money where I borrowed the $58. I need to ask myself if I could a 12% yield somewhere else because really if I am paying 7. So it is 12% return investment.From Virtually Zero to $3.5% yield.000.5%.
They sold enough signage so that in a few years’ time.900 $ 58. 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. This is a rock solid investment that will continue to perform.400 The place you could get more return would be in another property deal.au/dymphna 75 .050 Positioned at the entrance to a thriving retail/commercial estate. www. You are not going to get it anywhere else but I am biased. I saw an ad to sell their sign business and this little piece of land for $300.000 plus GST promising a 10% return on your money.From Virtually Zero to $3.a. There was a particular property that was one of those properties that I drove past for 10 years on the way to work.knowledgesource. .com. UNIQUE INVESTMENT OPPORTUNITY Sale by Negotiation $300.500 $ 5. This little handkerchief piece of real estate used to be just a hedge.$30. This particular property is a handkerchief sized piece of real estate on the corner of an industrial estate. In some instances.000 $ 7. So they went to the council that owned it and actually negotiated to buy the land free hold.000. 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. 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.025 Infinite?? 12% $ 52.5 Million in My First 18 Month in Real Estate Analysis Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $175.
This is a perfect example. People driving the other way can see those signs.5 Million in My First 18 Month in Real Estate If you were offered a deal that had 10% return on your money. The person who bought this business. would you be interested? Yes. $10.From Virtually Zero to $3.knowledgesource. There is nothing on the backs of those signs.$510 a week return on a $250. She is a New Zealander and this property was actually in New www. There was a lady in one of my mentoring programs who bought a property. 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. your property is going to be trashed and you will have to replace everything. Buying sight unseen Always do you due diligence. Only in five years time. Now.000 return.000 purchase This is the same amount of money as what it would cost to buy a four bedroom apartment in a university complex. Which now makes that property worth $400. I am not a great believer in buying a property that I have not seen. It is an opportunity that everybody including me drove past and missed and it is a cash cow in a high growth area.000 purchase price and it cost you 7.000 income coming in.000. There it is: $30. 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. He was able to increase the income on this property by a third. 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. I am going to sell signage on the other side particularly the front ones and he actually erected one on the other side. You would get 2.5% or 3% roughly on your $300. 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 a year so it is now $40. on something that was totally hands free and you did not really have to do very much with it at all.000 worth of income. not gross.au/dymphna 76 . Passive. $300.000 . Or that somebody that I trust implicitly has not seen.com.5% or 8% let us say to pay the interest on your $300.
She wasn’t overly concerned because she thought she could easily get out of the contract due to the finance clause.000 and the rent on it was really good. if in doubt. it was now burnt out.From Virtually Zero to $3.000. There had been little fire that burned out the street so naturally she wanted to get out of the contract. This property and the other properties on the street had had a gang move in but not only that although at the moment the tenants appeared to be paying their rent but in the adjacent street one street over where the gang had previously resided. 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. 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. It did not so she had no out.5 Million in My First 18 Month in Real Estate Zealand.au/dymphna 77 . Unfortunately her contract only said ‘subject to finance’ .it should have said ‘subject to finance sufficient to complete to buyer’s satisfaction’. It had positive cash flow and sounded fantastic. She had to legally accept his offer of the finance. In the contract she made sure she had a pest.knowledgesource. building and finance clause in there. Previously I mentioned under market rentals and things like that. 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. A typical example is 100 km out of Brisbane. Advertisement Block of 4 x 2 x 2 Price $550. That is the only reason she got out of that contract so worse case scenario. It was a block of four units that she could buy for $176. a property is for sale for $550. The vendor however said that this was not a problem and that he would provide the finance – at a 10% interest rate. try crying! Example: Here are some other scenarios.000 Brisbane: 105km (direct line) “Perfect Investment” Both sets are excellently maintained with one block www.com.
Unit blocks of this caliber rarely come on the market so act quickly. first of all.au/dymphna 78 . Under six units is normally considered residential depending on which bank you are dealing with but complexes above six.knowledgesource. Fully tenanted and showing excellent returns and located in a top class east side location.com. It does not sound like a lot but when we look at that.150 a week and could probably be increased to $1. 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. how much money do you think we would need to buy that property? What percentage are we going to have to put in to buy that property? How much are we talking about? Normally it would be 20% for residential. but because it is eight units it is considered a commercial deal. www.From Virtually Zero to $3. 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%. However in this instance they did actually only put in 20% which means they have obtained finance as a residential property.320 a week.5 Million in My First 18 Month in Real Estate undergoing a refurbishment in the last five years. There is a total return of $1150 per week potential to increase rents to $1320 per week. 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.
email@example.com Passive Income This property was $550.9% real return on the property. is the passive income.800 $ 3.366 as passive income. Our opportunity cost ROI.150 into this deal as opposed to using that equity somewhere else comes in at 7.knowledgesource.150 a week as the current rent and it could $1.000 $ 17.5%) Mgt Fees ( @ 8%) $550.000 $ 9.150 $127.com. Taking out the costs such as the interest rate. Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $ 550. We are going to have to put in 20% plus our costs that we will round off at 5%.500 $ 900 $ 41.From Virtually Zero to $3. This is pretty good but the property was under market rental. $9366 divided by $127. you need to work out what the opportunity cost ROI is.4% $ 110.366 Infinite?? 7.5% somewhere else means you are going to get a return of around about 14. The opportunity costs of putting $127.150 which is the equity that you have put in from somewhere else. Remember that we have $1.5 Million in My First 18 Month in Real Estate Analysis Purchase Income Rates Insurance Interest ($550.au/dymphna 79 .250 $ 4.000 $ 59.150 First of all. The fact that you are paying 7.320 so that is $170 a week extra.4%. rates and management fees leaves $9.784 $ 9.000 with the income just under $60.
From Virtually Zero to $3.76% return.com. Ballarat Central Two Road Frontage Close to Lake and CBD $125.76% $110.150 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 13.150 $127.au/dymphna 80 . more cash cows. weatherboard home in need of a bit of T. All these things create more income. a duplex.000 $ 17.D. whether it be a parking facility.L. Maximum return Look for maximum return on your property where ever possible.B.5 Million in My First 18 Month in Real Estate Analysis reworked Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $550.C is located in a prominent central location within walking distance of Lake Wendouree and the C. to maximize the income from any one property.000 $ 17. or by adding extra dwellings. Be quick. Why would I be interested in this ad if it was among thousands I have seen on realestate.000 What a ripper! This two bedroom with study.knowledgesource. Set to the front of an approximately 825m2 block with two road frontage. If you add the 7.5% interest you would be actually paying on the deal it makes the return on that property in excess of 20% return. Now it sounds even better and where else are you going to get that kind of yield? In my opinion there is nowhere else except in property.499 Infinite?? 13. Advertisement: 438 Creswick Road.com or domain.com or any of the others that are out www. Consider putting in storage facilities and things like that.
The total equity at that point in time was $210. That is actually what happened with this block.From Virtually Zero to $3.com. Because this property has a two lane frontage. a Fireman PPR value Mortgage Equity Survival Mode! I would like to mention Helen and Ian. Alternatively. Assuming I can. $18 an hour and that was their financial position at that point in time. that means it is probably bigger depending on the council requirements in that area. Helen was my hairdresser. This was a multiple use property. 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. Needs TLC (Tender loving care) – that means it is a renovators delight. That also gets my attention.knowledgesource.000 property that they owned with a mortgage of $380.000.000 $380. She earned $18 an hour when she came to one of my mentoring programs. I might go and build some storage facilities on the land. By fixing it up. depending on the council. 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.000 $210. 800 square meter block. They had a $590.5 Million in My First 18 Month in Real Estate there? ‘Two road frontage’ absolutely peaks my attention.000 and this $590. It may or may not. Case study: Ian & Helen Age 40’ish.000 www. assuming that is fitting in with the council guidelines of an 825 square meter block. Married 3 Kids Financial Position when they started with Dymphna Helen working 6 days as hairdresser and a Ian.au/dymphna 81 . It means that I can fix it up and compound my return. I can increase the value of the property and I can increase my yield on the property. I can build another residence on the back.
2 titles List Price Purchase Price Immediate Costs Rented at Estimated value $228. post negotiation.000 $ 660/wk $550. 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.com.000 property in good condition. It was listed for $228. The vendor walked away from the problem because he did not want to do it.000 Good condition. Deal 1: Purchase Price $110.000!!! $ 55. That was why he was selling. but they purchased it for $138.000.000 Then they bought an ugly block of four units that was on two titles. market value $240. www.au/dymphna 82 .000.000 if they would fix it rather than the vendor. doesn’t need repairs. Deal 2: Block of 4. So they got a quote to show the vendor how much that this was going to cost and through negotiation they were able to bring the price down to $138.000 They bought an $110. They fixed a few things up and brought the estimated market value up to $240.000 $138. They had signed a contract at $228.000 but because there was documentation that only came up in the searches after the contract had been signed that through a good solicitor showed that the council was demanding a retaining wall be put in on this property and that was going to cost a lot of money.From Virtually Zero to $3. in a regional area and rented it for $230 a week. they were in their 40’s.5 Million in My First 18 Month in Real Estate was where they started with me.knowledgesource. Currently rented $ 230/wk Est. In their own words they were in survival mode. good part of town.000.
000 as well as being positively cash flowed.000 Then they bought a block of land off the plan stage. one of an eight stage development which they sold within an eight month timeframe for $120.From Virtually Zero to $3. www.au/dymphna 83 .com.knowledgesource.000 $120.000 and with the problem fixed it was now worth $550. Deal 3: Land New residential subdivision Sold for Time Frame 8 mths $83.5 Million in My First 18 Month in Real Estate The property was rented at $660 a week. They revalued the property after a few renovations and other bits and pieces and the retaining wall which cost $55.000.
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
$ 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
From Virtually Zero to $3. A girl I know. She fixed them up and rented them out.000 $3.5 Million in My First 18 Month in Real Estate Insurance & other ROI $ 900 26. one for $4.520/yr $4.au/dymphna 87 .knowledgesource. Purchases Improvements Rental Income Park costs Passive income $13.000 + $6.000 for the other.000 but she could not borrow to buy them so had to have the savings help from her father. The improvements cost her $3.000 and $6. She bought two caravans. The rental on them was $440 a week.com. Natasha who was 19 at the time and in party mode when I first met her but prepared to give anything and go.000 $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.9% Case Study: Natasha – age 19 .Party Mode Cash cows come in many different shapes and sizes. www.
000 $ 15. think outside the box constantly! Equity down. Hughenden – Cash Cow Purchase Rental Income Current value $ 35.000 and the rental of the property was $160 a week. that is the slow method but basically if you are putting money in.000 $130. The current value is $130.knowledgesource.500 and was rented for $100 a week. Characteristics of a manufactured cash cow • • • • • • • • Under Market Rentals Improve for Higher Yield . create more income streams. make it.5 Million in My First 18 Month in Real Estate Ravenshoe – Reno Purchase Reno cost Current value Will rent for $ 62. improve for a higher yield. build it. The renovation cost her $15.000 $ 160/wk She then went on to buy a property in her hometown for $62. it is going to be positively cash flowed and by www. think laterally. The value immediately after buying it was $40.com. obviously. It cost $35.au/dymphna 88 .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. reduce your debt for a higher yield. Creative management.000 which she did herself with the help of her father.000 Then she did a similar kind of deal but the next property did not really need much of a renovation.From Virtually Zero to $3.000 so although it was not much under market value it gave her a bit of a boost.500 $ 100/wk $ 40. It was a cash cow from the beginning.000.
This property here was a property that a gentleman on the Sunshine Coast owned. previously I mentioned when a business not making any money. train & shops Purchase Price $265. So he decided to buy a property near the university. it is your problem. She gets $12. How do you get the real estate to ring you with that kind of deal.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.000 Rented to Uni Students at Positive cash flow $100/room $12.com. which may cost www. He did a lease with his daughter. They don’t. 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. Is it on a busy road? Look at the entrance.300 passive income per year. Look at what it is needing.000 for the house. This is an example of a business that was not making very much money. close to Uni.300/Yr This was cheaper than putting her into housing at the university and he has an asset that is increasing in value. His daughter was going to university in Brisbane. She then subleased all the other rooms for $100 a week. so he decided to throw in a car.000 Converted to 7 individually rented rooms after garage Conversion Costs and some additional plumbing $15. You have got to start to recognize those kinds of deals. after renting out the other rooms a $12. 3 Bathrooms. Large 5 Br house. She took out the lease with the ability to be able to sublease out the other rooms. So that property produced. He looked at the prices of sending his daughter to university and he found that they were exorbitant. Remember. you have got to chase it. DLUG. Living area upstairs and down. Plenty for the daughter to be able to have some spending money while at university.From Virtually Zero to $3.au/dymphna 89 . It was a large house and he converted the garages into two more bedrooms. a commercial lease. He paid $265.000 a year to live on while she is at university and it did not cost him anything. A new entrance. That is not what you want when you are looking for a commercial property.knowledgesource.
She agreed. She negotiated with the architects. She went to university next year and became a teacher. from the day she was really little.From Virtually Zero to $3. It will increase the rents. he was going to do this project together. But the difference between her and the kid that would www. She wanted to be a teacher so he said to her. where you have a property where you might build eight units and you might sell six and keep two.knowledgesource. She wanted to go to university and she wanted to be a teacher. Of the five that she kept. He has been doing this for years and years and his daughter did not want to have anything to do with this business. It will increase the business. The project began and she negotiated on the land. She had negotiated to buy a block of land that they could build 16 townhouses on which they did. She took what we call a gap year before she went to university. They got it through council and built the townhouses and then she sold eleven of those townhouses and kept five. He wanted to teach how how to do this. he is a very successful developer. Instead. Right or wrong. she agreed.au/dymphna 90 . that he had no problem with her being a teacher but he would like her to take 12 months off and spend it with him so that she has some other skills as well as being a teacher that she can rely on. That property could be in a growth area that is positively cash flowed. the building and the DA through the council as well as the town planners and everybody else along the way. it was her thing. she used the money from the sale of the eleven to pay down the debt.000. That is what she wanted to do. He would put in the money required to do the project but she was going to be the one to do the project. 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.5 Million in My First 18 Month in Real Estate $25. not completely but mostly down on the remaining five. Equity down deals This is where I was talking about paying down debt earlier. It will increase the profitability of the tenant in there. a repaint and some signage will mean that the property is worth more. Again. You use the profit that you make on the other six to pay down the debt on the remaining two and keep them.com. 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. Another mate of mine.
not because she has to. she is still a teacher and the property is going up in value and she has never done any more but she never has to worry about having to work again because the rents have gone up and the townhouses are paid down. She has got that covered. She did not have to worry about her income anymore.From Virtually Zero to $3. She has that bench mark that I spoke about in the beginning.au/dymphna 91 . She has her basic needs more than covered. So now. She is doing it because she loves it.000. That is why you have got to be balancing this portfolio. She went into teaching with a pension of $50. Is that not something that you think you would like to strive for? That is what cash cows can do for you.com. www.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. She has got that done and dusted. She had done it.000 that she could live on. 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 can do what she loves because she wants to do it. Se loves being a teacher teaching lower primary school children.knowledgesource.
The current value is $240. which produces $170 a week passive income. or for her lifestyle or any of those things.000. This is their principle place of residence. She had twin sons in their late teens and she did one of my programs and then bought a block of four units in Haywood in Victoria.au/dymphna 92 . The current value of the property is about $250. Everybody’s trigger is different. You are looking for a mortgage in your possession. Gwyneth did one of my programs. you are looking for a deal. 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. You are not just looking for an average kind of property. Since they joined a coaching program they have bought as a result of that program a duplex for $90. you are looking for a deal. It may be an estate.000 $ 8.000 $ 440/wk $ 90. Judy and Greg are a couple that are in my Platinum Program. Financial Pressure Rates Defaults Public and Perpetual Trustee Ill-informed Seller or Agent When you are buying.000.155 www. She did it because she wanted to motivate her lazy sons. a default mortgage.000 $ 340/wk $ 90. an ill informed seller or an agent. The units rented for $340 a week. passive income $100 week just to give you an indication of how things can start to add up.000.000. an illness. an old age.000 and the rental on the property is $360 a week. Moving. Then there was a triplex. Old Age. They paid $120. not for her.5 Million in My First 18 Month in Real Estate Discount buying • • • • • • Mortgagee in Possession Deceased Estates Forced Sales – Divorce.knowledgesource. Heywood. a divorce settlement. They bought a property in 2000 for $8.From Virtually Zero to $3. a financial pressure. The rent is $120 each. Illness. a moving. The current value of that property is now about $180.000.com.
It would have continued to exponentially increase their wealth. it is now gone. it could have been positively cash flowed and it would have continued to grow. you are creating income which you pay tax on. They will continue to do what they do. You accumulate because those properties will continue to grow. It worked. If you are selling properties. but it is accumulation that gives you real wealth. etc. it is completely gone. not trading. Sometimes. The profit on the deal was $90. If you were trading. If you use it for lifestyle. you are trading. Her two lazy sons are now full time real estate investors.com. you have to sell but it should be the minority.5 Million in My First 18 Month in Real Estate She manufactured growth by making those two lazy sons go down and renovate them. not trading. But they sold it and they made a great deal and that is great. you might make a great profit and you sold it and you paid tax on it but guess what. They will continue to earn income. they sell it.00. If you want to create real wealth. and they think wow I did so well.000. 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. If I kept it. you do not sell. They see the money. you have got nothing left to go off and do it again with so you have got to do it again just to earn the income.000 which produced her a passive income of $8. not the majority.From Virtually Zero to $3. But they have got to do it again next year because they sold it.au/dymphna 93 . My motto and I want you to remember this is: Real wealth comes from accumulation.knowledgesource. www.
Just think of your first parallel park. do your own thing and you suddenly become conscious of the fact that you do not know how to drive. It is a deep hypnosis that we need to wake up from.From Virtually Zero to $3. you have to have your finance in order. I believe that all of us are hypnotized to work for money. you develop a sense of independence. 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. one minute you are going to love me for the insights that I have given you and the next minute you will hate me for all of the emotions that you will go through. you have to have your financial plan. When you become conscious of something.au/dymphna 94 . in order. Once you wake up you will get depressed. My purpose is not just to wake you up. It is impossible for you to become rich if your internal language will not allow you. Even at this age you knew that this machine would take you places. but as far as driving was concerned. 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. Then when you reach 15 or 16 years of age. as in your personal mindset towards money and wealth. you have to have your house in order. 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. in this instance it may have been your grandmother’s house. you were unconscious and incompetent about driving. yet you understood the concept of where the car would take you. you have to have your accounts. driving. and you have to have a greater understanding of how things work and that is what I am helping you to do. that is where pain can begin which is hard but the excitement about learning. you will get excited. but to empower you.knowledgesource. in this instance. because you did not know how to drive. Then you begin to get really excited about the possibility of driving. That is when you actually get behind the wheel and start driving. you wanted to go places..5 Million in My First 18 Month in Real Estate Finance You need to be mindful of your internal language. is where you reach a break through.com.
the conversations we did or didn’t have at school or with our parents.5 Million in My First 18 Month in Real Estate competent until you reach a point where you are on automatic pilot. owing $200.From Virtually Zero to $3.knowledgesource. the kids help to look after them in retirement. In Australia the belief is that if you get a good education you will get a great job. get that money to work for you.000 on it and they have about $150. When I had my accountancy practice. 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. but what would be a much better thing to instill in people is to go and get a good education. But then we grow up and we forget about it. but in Australia. we all know that money makes money and we all know that investment opportunities are all around us but the truth is. 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.com. because of the education we have.000 in superannuation. In third world countries they have lots of kids. Think about this from an investment perspective. we are unconsciously incompetent. Let me give an example of how deeply hypnotized people are. 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.000.au/dymphna 95 . Most of us drive from work to home every day and don’t even know remember the process it is so automatic. the average family only has two kids and it doesn’t quite work in the same way. so that you can get that fabulous job and from the moment you start to get money coming in. But once you recognize that it is something that you need to learn about that is when you break through and become competent and conscious in your conversations with others. the average client would be 46 years of age with a house that is worth $600. Imagine that you are at an investment seminar where you can talk about money and it is acceptable to do so. Take a percentage of each dollar that you earn and make it www. Imagine that started asking people how their superannuation was doing.
the market place for investment is exactly the same as the market place for food. but the truth is that five years later. 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. 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 start life in debt and end up working for money. You will find a similar situation when you go into the market place looking for real estate. The person dealing with shares is going to tell you the only thing worth investing in. but taking those away I would like to propose that regardless of the bills that you have.au/dymphna 96 .000 . you should buy some eggs? It would never happen. is shares. then you can switch from working for money to making your money work for you.knowledgesource. they are going to recommend a managed fund. 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.From Virtually Zero to $3.000 from the bank. You need to send your money into the market place so it will bring a return and get this. to pay for the debt on the car. you have to have the money in the first place. Having done that.000. There are certain bills that are nonnegotiable such as your mortgage or car repayments etc.000 for that car and it will now be worth only $13. Then you will have what we call the petrol for driving the engine. Everybody is trying to sell you their fish! www. If you go to a financial planner. The truth is. The whole point here is to pay yourself first.$15.com. 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. some shares and perhaps some insurance. the next problem that you will face is what to do with the money that you have put aside.5 Million in My First 18 Month in Real Estate bring you an additional return. The whole idea of having money work for you. that you pay yourself first. they will have paid $40. Make an agreement with yourself that you are going to pay yourself a certain amount of money and you will put this amount of money to work for you. the person in real estate is going to tell you that property is the investment vehicle for you. your wealth creation engine. Send it to the market place to work for you.
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. we usually go and spend it. cleans it and puts it in a truck where it gets taken to a facility that puts it into bottles. you can command that money to go and work for you and diversify that money into more risk or less risk. today . we put the smallest deposit on the biggest possible house.knowledgesource. after working for 26 years.From Virtually Zero to $3. gets taken to the stores and cafés that use it to make your lattes. first one. What you need to get is a balanced diet. www.au/dymphna 97 . We live in an age where anything is possible so the most important thing is to find out what you are passionate about. If you are passionate about hair. 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. Imagine how many people get employed because of mobile phones. From there it is refrigerated and with another truck. The problem in today’s society is that the minute we save some money. What happened? Capitalism did. 20 years ago . The solution is capitalism! You live in the land of opportunity.com. or whatever. or food. you find yourself looking at higher risk investments so that you can retire as soon as you can because your superannuation is not enough. a farmer had to milk his cows. because we have two incomes. It means that there is so much money going around that surely if you put your hand up some money ought to stick.$32 billion. Mobile phones. but at least you will have your money working for you. A few days ago. Then at 46 years of age. We spend it on gadgets and overseas trips. The milk was put it through a system that cools the milk. Then we have children. we buy everything on credit and we think it is alright to do. There is no such thing as investing without risk but if you start paying yourself first. then open a business that works with that because then you have that motivation.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. you need to understand a little bit of everything.worthless. Capitalism is going on.
we fought for freedom. the freedom to go into business. That is why it is possible for you to read information such as what you are reading now. My parents expected me to go to school. the teachers expected me to do an exam so I did. Nothing that I read was because I actually wanted to read it. Capitalism is not something that we just need to understand. This is everybody you know. for you to pay back that money you will have had to earn $371.knowledgesource.000. to own land and the freedom to do as we please. this is everybody that ever borrowed money. they put books in front of me. I began reading the things that I wanted to read on all sorts of subjects. there are tons of books on the subject. American. This is what personal debt does to you.au/dymphna 98 . when I got my degree in economics.000 in taxes and the only thing you truly meant to do was to borrow $100.000. If you really think about it. Our forefathers did not go to war for the freedom of speech. you will find that you will have paid the bank back. and I read was because it was expected. then you are in the top 6% of people alive in terms of wealth. www. What sounds even scarier is.000.000.5 Million in My First 18 Month in Real Estate The truth is. so I went. Debt Let’s say you have borrowed $100.com.5%. If you have a car key in your pocket and you can choose to have a hot water bath or shower at any time. $241. your family. The reality of capitalism is all around us. If you want to know anything about investing in property. it is something that we also need to take part in.000 from the bank. they went to war for the freedom of ownership. in actual fact over that 25 year lifespan of the loan at 8. Although you have borrowed $100. This is because in the beginning you will have paid mostly the interest upon the interest. it is the Great Canadian. English. 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. your coworkers. The moment that realization came to me. to buy your house and we all think that is fantastic because it is the Great Australian Dream to own our own home.From Virtually Zero to $3. That is why they went to fight. I realized that every single thing I had ever read was because somebody forced me.000 and pay $130. Then the government comes along and gives you $7. so the principal does not go down.
debt is debt.5 Million in My First 18 Month in Real Estate the Great Human Dream for that matter. 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.000 in tax. when they buy a house. The distinction is that there is debt that is non tax-deductible and tax-deductible.com. saying that they are worth $70. you are totally emotionally driven. It is because most people. So you have to gross over $1 million which means paying $400. That’s three minutes for free www. The government gave you $7. If you call your accountant and say “I love you”. just to manage to pay your $300. So knowing that the average mortgage is $300. The government has changed the rules which means even more work. it is if you are not investing.au/dymphna 99 .knowledgesource.000 but think about the return on the money from the government’s perspective as far as investments are concerned. If a young couple came to see me.000 each. he is going ask who you are and when it comes to your file. then buy their own home.000 multiply all those numbers previously mentioned times three. you bought a house.000 mortgage. There are a lot of books out there saying there is good debt and bad debt as far as I am concerned. The debt that is taxdeductible does not hurt as much. In other words. you only see the total sum later. But the average Australian within seven years of purchasing that house will upgrade and then you wonder why you are in the financial situation that you are in when you come to my office at age 46 wanting to retire.000. Is it a dream or a nightmare? When you go and buy a house. I would say they should build a chain reaction first and once the chain reaction is up and running. he is going to remember your call and he might spend three minutes more on you. They invest in you $7. 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”. let their chain reaction buy the house that they are going to live in. Why do I want you to do that? Because your accountant is stressed and overworked. you are accumulating capital but in the background you have a debt elimination process that is quietly working away reducing your debt. There is the perception that renting is a waste of money.From Virtually Zero to $3. I would suggest that you always have a debt elimination process in place. but you only ever pay for the house after you have paid tax.
you do your taxes.000 a year. it is every person’s right as a citizen. 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.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.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 paying. However. In that new job. 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 of it in your pocket because the $100. but essentially it is too late. who told you he was making $150. yet so many people view getting a little money back as merely being lucky. Most accountants are a www. not his either. 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. Tax planning is not the privilege of a select few. Australia is a tax haven.knowledgesource. it’s leased. The truth is. that hot guy that were dating. it is because they didn’t put enough in. Moreover. It has nothing to do with luck and if they have to pay more.From Virtually Zero to $3. All year you barely think about tax. There is nothing wrong with the accounting profession. only makes $90. 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. the more they give their accountant the flexibility and ability to tax plan for them. you may have been promised $100. the money is already gone but if you look at taxation strategically you can work towards getting some of that money back. 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.000 but you only end up with $70.com. you cannot expect them to get the greatest possible tax deduction. by the time you go to see your accountant.000 and that flash car he is driving. 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. and then tax time comes along and because it is the law.au/dymphna 100 .
au/dymphna 101 .000 tax payable. now you may pay $1.000 ahead.000 instead of paying the $30.From Virtually Zero to $3. The banks lend me money and they can’t wait to give me more.500 – that’s saving of $3. That $18.000 and are therefore $18. 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. Where previously as an individual you may have paid $300 to your accountant and paid $12. In other words they try to link any loans with existing assets and take control of everything you own.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. Unify against debt. you will start to become more competent. Why? Because I can. When you start to become conscious of the effects that these things can have on you. Please understand the power of emotional drive. www.600 because the accountant was able to spend more time on your return. Or in the instance of a company where paying $6. It is dependent on the time that they spend working on your tax assessments. Most people know that you can pull equity out of your own home and go on a holiday or buy a car. 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. 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 can then go straight in to your mortgage to reduce your personal debt. 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.000 in tax. I knew I was going to be a multimillionaire. you may now only pay $22.200 to your accountant but your tax has been reduced to $7. then it may well cost you more money. but it will also save you money in tax. if the accountant spends extra time strategizing and charges you $12. so it is fair to say that if they spend more time strategizing your assessments.com.000 to your accountant may result in $32. Tax laws change all the time and this can make a huge difference as well. What I am saying is pull the equity of your own home and go and buy another house. Every bank will try to collateralize everything you have.knowledgesource.
The less debt you have the more you invest. 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. Imagine if you could pay your house off now and all of your financial intelligence then can focus on your investment property. The less tax you pay the more you will drive your debt down. The reason for this is because if you default on your loans.000 is used as security by that bank to ensure that you are not going to run away with the money they lend you. 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. Get rid of it ASAP. but because they are exposed to more risk. In actual fact they do not lend money. The $100. My own house is protected. So if someone is paying you rent park the money as long as you can. walk away and do not do business with that bank.000 of the equity from your house. 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 overall the more that you invest the less tax you will pay. use it to pay down your personal debt.From Virtually Zero to $3. they sell money. they could come after you and your house. So if you have any investment shares or property that has dividends or income. You put in 20% and they lend you 80% and they take control of everything because they lend money for a return.au/dymphna 102 .25% off the interest rate and offer you more money.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. If you have any personal debt this is the debt that you are going to target first. If a bank does not allow you to separate the loans. The less tax you pay the more you drive your debt down.knowledgesource. 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. 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.com. they will cross-securitize the two loans and it becomes your risk.
5 Million in My First 18 Month in Real Estate off. www. Make a decision.knowledgesource. save $20 a week. However big or small. What you are doing driving capital. it will build a chain reaction.com. with which to buy number three. if you can only save $20 a week.From Virtually Zero to $3.au/dymphna 103 . you are a building a chain reaction. Drive capital. If you can save $200 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. no matter what your age is. you now have the income of the first property and the second property. save $200.
Or you can do all of that and put it into another investment property. That ‘x’ factor may be shuffling some paper or it might be time. It will www. It might be changing the nature (use or zoning) of something. It has got to say volumes about this whole process. That chunk of money is important because you have got a number of opportunities which you can do with that chunk of money. It might be changing the appearance of something. 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.From Virtually Zero to $3.com.knowledgesource.au/dymphna 104 . 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. 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. 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. plus an ‘x’ factor. That has got to say volumes about property. the purchase price. That ‘x’ factor means that at the end of the day. you have earned yourself a chunk of money. It might be renovations. It is basically. It might be building something or creating something. Think about that.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 might be the right strategy for you or you can do all of that and not sell it. draw the equity out and go and do another investment property or go on your merry way doing other style of investments. You could revalue the property.
you are actually going to still be in a mutual position or a positive position in whether your current serviceability can actually withstand that. It all comes down to your ability to be able to work out your circumstances.knowledgesource.au/dymphna 105 . Whether by drawing the equity out. what is right. It is not that hard. www.com. But that is the stuff that all comes down to a mathematical equation.From Virtually Zero to $3.5 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 just going to sit on it.6789%. so if that property doubled in value and you were getting $600 a week and you bought it today for $250.com. if it is going to increase by 8%. 10% ÷ 72 = 7.From Virtually Zero to $3. telling you that the property is in such a good area and that it has increased by 10% and blah. This is really handy. If you divide that number by 72 then it will give you the number of years it will take to double in value. 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. while it is not positively cash flowed now.2 years. with those kind of ratios. If you get a 10% growth on this property. Not only is this really useful to work out how much your properties are expected to grow over varying periods of time. It is a really handy tool to use while out in the field. It gives you an indication.. If you are looking at a property and you have got this real estate agent jabbering in your ear.000. as to how long it is going take before that property would start to become positively cash flowed www. it is really useful to work out. So if that property increases by 10% per annum that is what happened in the past and that is what the real estate agent is telling you is going to happen in the future. it will take 7. Because if you are out in the field and you are looking at a particular property and at the moment.5 Million in My First 18 Month in Real Estate The Rule of 72 There is a rule called the Rule of 72.au/dymphna 106 .. then at that ratio it will be a positive cash flow property. if that property doubled in value.. or by 14% or by 22. It does not matter what figure you pick. For instance.knowledgesource. blah.2 years for that property to double in value. it is worth $250.000 and you know that the current rent on this property is $300 a week. the thing you remember is 10%.2 years What you do is you take 10 and divide it into 72 and you get 7. you can work out if it may be in the future. 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. how long is it going to take for this property to double in value? 7. what do you think the rent would be on that kind of ratio? Probably about $600 a week.
5 Million in My First 18 Month in Real Estate as well as how long it is going to take for that property to increase in value and double in value. www.au/dymphna 107 .From Virtually Zero to $3.com.knowledgesource.
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.
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.
Let us have a look at areas that are going to give you potentially a better than the average return on your investment. this is really apparent when you look at one suburb. views. But for whatever reason. This is not hard to do. www. the suburb beside it does not. 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. Have a look for that strategy. Infrastructure.au/dymphna 111 . Employment. it happens everywhere. Have a look at the dynamics of what is going on side by side. You have got a lag effect. For some reason. It happens in Sydney and it happens in Melbourne.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. Transport. it is for no apparent reason that this suburb is lower than that suburb in median prices. Building Trends Adverse public perception Media attention Do Your Due Diligence Look for Emerging Economies – Do your own Micro Economic Analysis Prime Location – water. let us look at transition zones. Have a look for that when that happens and look for areas where that is in existence. There were these two suburbs what were going berserk. Let us look at properties in lag growth areas. sometimes. I was watching a particular suburb in Melbourne late last year. next to another. a suburb starts to go up in value. What do you think is going to happen over time? Possibly. rapidly increasing in value. Population.com.From Virtually Zero to $3. in Perth and Brisbane.knowledgesource. one could come down slightly and generally what happens is the other comes up to meet it or at least get a lot closer.
When you look at growth. I am never more energized than when I am talking about real estate and making real estate deals or doing stuff. open your eyes. 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.From Virtually Zero to $3. 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.com. There was a lag there of about three to six months. if you did not know that was in existence then of course you won’t be able to take advantage of these opportunities. When you are looking at property. But this target little area did because of what had happened. 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. Think about what you are you exposing yourself to? Feed your brain. www. 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. For me that is so much fun. if you have your blinkers on and all you do is get up and listen to the crap on the radio. if you did not know that this was something you should be looking for. you go to work do your things and you come home still listening to the crap on the radio .knowledgesource. or television. it makes sense.5 Million in My First 18 Month in Real Estate But the one in the middle did not. But if you did not look. The great thing about property is that it actually reacts slowly.what is your life going to be like? It can only be as good as you allow it to be. The fact is when you look at the broader picture you will see that is not happening everywhere. it is not rocket science but if you are not alert to it. When you think about it.au/dymphna 112 . 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. get those blinkers off and start to have a look around. the whole of Melbourne did not go up by 30 or 40%. micro economics start to become very important. this little micro economy. Property works slowly and you can be a really slow thinker and still make a lot of money in the property market.
normally prime kind of properties vary dramatically to what is on the other side of the street. Lag effects Lag effects can happen in a street. I have seen properties.000 but the house across the road was still $350. There is money to be made in that. look at your motivations and listen to what you are thinking.5 million property. Ask yourself how much television you watch. 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. Prices start to increase and start to go out from the center. Prices then start to increase around the surrounding CBD and www. It does not have a view.000. Melbourne. one side of the street.au/dymphna 113 .000 property. you change.5 Million in My First 18 Month in Real Estate Do a home study course.000. a view it may be a million dollar property.000 and across the road. it is not on a golf course. but watch how you start react to people. admittedly.5 million. 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. The house across the road then moves up to about $650/ $850/ $950. a canal. It changes. while directly opposite. Just watch the change in your attitude and your performance even in your daily work.From Virtually Zero to $3. The house across the road started to move as well but you could still buy one for $350.$900. Desperate Housewives is not going to further your financial stability. it does not even have to be a suburb. downtown Sydney. the house across the road moved up and came up to $500. When they first started to move. but the $300.com. still too much of a lag. without these features you have only a $300. you have got the $1. The canal front property moved to $800. you could buy a canal front property for $650.000 property is in a very good area. just try putting the CDs on in your car and listening to them instead of the crap on the radio. Brisbane. Eventually. It may have nothing to do with real estate. You become more of a receptor. Jump on top of the pebble in the pond effect.000 and the canal front property went up to $1.000 . it does not matter where it is. You have got to recognize that opportunity as a lag.knowledgesource. If there is a golf course.000. What happens is you get a ripple effect.
There will be a lag. where they can go to hospital when they get sick. to buy. Sometimes it goes up and down the coast where you look at it from the CBD area and you will see it happening. Clason who wrote the book was actually a guy who mapped the original map of North www. 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. Newcastle and Coffs Harbor follow suit. If you open your eyes to that effect. one of my favourite books. 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.that is how it works. 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. George S.knowledgesource. 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. But that is okay. When you have an economic event. What you look at here is the core economic factors that have an impact.com. how you can make money out of that situation. For example. you will see it happening all around you and you can take advantage of it. Fundamental analysis This is my favorite topic. where they can continue their learning through higher learning education places.au/dymphna 114 . population. for infrastructure. They are creating more demand for houses to rent.From Virtually Zero to $3. but the core fundamental issues behind it are just amazing.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. where they can send their kids to school. that just allows you to be a slow thinker and get in on it. The pebble in the pond effect . for places to spend their money at shops. What is actually happening? People are moving into that area. It ripples out from a lot of different areas. Eventually it gets there. The Richest Man in Babylon.
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. when you look at the lessons behind it. housing. By recognizing the similarity it allows you to potentially duplicate what happened somewhere else. That is the core of economics. people coming in with demand for infrastructure and demand for property. schools and hospitals. 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 cannot be anything but excited about it because there is a huge opportunity there. you have an event that is an explosion. 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 have an activity. When you have something like that. is amazing. One of the lessons talks about the effect of a dollar and the circulation of a dollar. How when you can make one person richer by a dollar. Start to recognize that something similar happened last year in such and such place and when that happened.com. You need to be taking part of that. these were the conditions and these were the types of businesses that went in. They can trade with other economies and that brings an influx of funds back into that community and more money starts circulating. You need to be recognizing in the early stages that this is taking place and jump on the bandwagon. they spend more and the people they spend more with are richer accordingly. That is what he did for a living but his passion was writing about fundamental economic issues. He lived in the early 1900’s. That book. I think he died about 1958. having money come in. He wrote about them in a biblical kind of way so people would read them and he published them paying for them himself.au/dymphna 115 . You have got a model to create money because it is quite likely that what happened in the other instance may happen again. that one dollar building an incredible amount of wealth. Somebody eventually collected all of these papers together and compiled them into a book called the Richest Man of Babylon and printed it.5 Million in My First 18 Month in Real Estate America.knowledgesource. rental. www. the types of houses that went in.From Virtually Zero to $3. when he was doing this. When you start opening your eyes and actually watching it and seeing it happen around you.
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. This first program that came on was amazing.com.au/dymphna 116 . where are they spending money? I buy property in the US. I was not looking for Desperate Housewives either. being able to take advantage of what was happening in this town. 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. Money was going to be spent by the governments. roads and transport and the hub as well as a lot of other things had to be changed to accommodate this. 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. The program talked about this multinational company coming to a particular suburb in Phoenix.knowledgesource. A number of years ago when I was in the US. So you should follow the money. I remember sitting in a hotel room on a Sunday morning clicking through my television’s.5 Million in My First 18 Month in Real Estate Money follows money. What do you think that meant for me? Excitement! It was like gold.From Virtually Zero to $3. do you think I would have ever made any money on that? No. Where is the money going? Where is it being spent? Governments. Where is private industry going. welfare centers or other kind of centers. but if I had not been tuned to the fact that I wanted to watch this program. 800 channels. This also meant single housing would be encouraged to be changed into multiple dwellings. www. rebates would be given to encourage more housing in this area and this was all on television. what are they doing. The flow on effect was that it was going to effect people’s wages. I found this little local channel that was talking about what was happening in the local area and I thought this might be handy. I buy property all over the place. like a lump of gold just got dropped into my lap.
Consequently. on the Sunshine Coast there is a particular place that about 15 years ago used to have a big problem with sand flies. Employment. Take advantage of that.au/dymphna 117 . they are mainly a migrant population who want a certain style of property. They tend to live in certain areas. Charge them a market rental for providing them for the service. www. look at the movement across the country. They have a different set of attitudes and they have a different set of requirements. When people are moving into a particular state or area. we will have some of this. For example. But what happened.com. people from Sydney came up and said this is pretty good. People are moving into southeast Queensland but they tend to be coming from the rest of Australia. But all the locals started saying. all the areas around it were going up in value and this place is still at least $100. Private industry.From Virtually Zero to $3. Follow the money.5 Million in My First 18 Month in Real Estate Open yourself up to those kinds of premises of what is happening. the local council took some action and got rid of that problem.000 below market value.knowledgesource. They did a big spraying exercise and whatever else and there really has never been a problem since. give it to them. where are they coming from and what kind of housing needs are they going to need or want. About that time. When you start opening your eyes to this. you get eaten by sand flies that carry you alive. Adverse public perception This is where you look at what is happening in the short term. building trends. the house prices in that area remained low for a very long time. The boom came. the amount of money that can be made is phenomenal. 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. Provide it. People moving into Victoria or maybe moving from overseas. where are they spending money? Governments. you do not want to buy there.
So when I am in an environment like that. The prices went up. Filter through what you are being told and form your own opinions and be responsible for your own opinions. There is always a window of opportunity but you will always have an evening out of the market. I was in a small town in Kentucky in America. They need to extend the runway so it was the airport authority that was doing it. 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. public perception and an influx of outside funds. 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. I talk to the waitress. Always back up what you are being told. They do not know the public perception. Ask everybody. It happened to be closed down 10 years ago.com. Public perception is something that never lasts. Watch the media attention and watch the markets and how they react. Get information from everybody. I do not know what they are going to do with it. But always do your own due diligence. Exactly the same thing happened in Auckland where there used to be sewage plant. Same thing. Take advantage of them if you can. I am like this big sponge. Media attention could be good or bad depending on what is happening. I want to know everything about everything from everybody. I talk to everybody. They did not know about the sand fly problem that used to be there. there is a conglomerate buying up a lot of land at the end of the runway.5 Million in My First 18 Month in Real Estate People from Victoria came up as well. They will probably ruin it like they always do. I talk to the lady behind me at the K-Mart line. Do not believe what you are told just because she was a nice looking girl that told you at that time.au/dymphna 118 . The worst thing you can do is not have an opinion. They were not paying fair price but everybody seemed to be selling to them so her sister-in-law did too and where is this place that you are talking about? What is going on? It is near the airport. I talk to the real estate agents. www. Talk to people. Have a look at the fundamentals.knowledgesource.From Virtually Zero to $3. do your own microanalysis. the prices eventually go up. So they needed to have larger planes be able to fly into this town which was why the airport needed to be extended. Look for emerging economies. As a foreigner I do not have any preconceived ideas about any particular town over there and neither do you. I asked a few more questions. Yes.
They are not run down. You started to see buildings being transformed. They have already made their money and you are the piggy in the middle who has paid it.000. When you are looking at prime locations like water. 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.000. how much are you getting as an increase? $150. they are rebuilding. they have landscaping. Things were starting to happen. I got into the deal without any money down. Never. you have still got a 15% return on your money .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. built.knowledgesource.com. But if you bought another place that only cost you $100. If you are getting a 15% return on a million dollar property. It is proportionate to the dollar that you have got to put in to actually make it happen as well. That is what I did. proximity to amenities. You start to see movement in the market and that gives you an opportunity to take advantage of that. and it did not cost me much to get or to hold on to it. they are improving their property. I bought a block of four. neutrally geared with the seller financing. It was a little bit positive. it would probably be worthwhile. All of that indicates an area in transition so in that area. more people will come in and the general socioeconomics of this town was going to go up. They will always be in higher demand. these are properties that will always sell first. but not a huge amount. They are fixing their gutters.000. those kinds of things. You have got people that are starting to take pride in their property. So depending on how liquid you want your assets. This is an area that is improving. 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. or renovated. they could be better areas to focus on. That means no money down. ever buy in a stage eight of an eight stage development. When you see rising renovations and constructions in an area. so it was mutually or positively geared. 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.au/dymphna 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. views. what you are normally finding is an area that is in transition.$15.From Virtually Zero to $3.
If you are putting in a 20% deposit and claiming depreciation along the way. www.000. 2 children aged 3 & 6 yrs Employed as a disabilities carer Husband employed as a postman. you would have made $250.000 and after seven years it goes to $500.knowledgesource. When you are in that situation.com. These are the kind of circumstances where sometimes negative gearing is the right thing to do.From Virtually Zero to $3. You cannot go wrong. You are just riding the wave with them. Case Study: Suzanne Position pre Dymphna two day conference June 2004 PPR value $320. your fortunes are guaranteed so all you have got to do is be able to keep your eyes open and identify areas that are going to achieve at least a 10% or better return on your money. you have got to work it into your overall strategy. 10% is what you predict a particular area to do and you are putting in your 20% or your 10%. what you are doing is riding on the back of their bucks or their dollar because they will force the market. 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. If you look for areas that have got a 10% growth strategy. But it has not cost you a lot to do that. it is going to be at least neutrally geared if not positively geared by the end of that five year period.000 Married. However. They will make that market increase because of their advertising and effort in the marketing of the whole process.000 Mortgage $256. If you bought something at $250. If you are putting in 20% deposit into something which is coming out of savings and other bits and pieces to be able to accumulate and you are buying in an area that has a 10% growth or better. you start to have a look at.5 Million in My First 18 Month in Real Estate that has got big pockets with big bucks to spend on advertising and marketing. Such areas.000 and would you be pretty happy with yourself.au/dymphna 120 .
000 $645. It was three units in Ballarat and she basically renovated and strata titled them.000 in eight months which was how long it took her to do that. three and six.000 and it had a mortgage of $256.From Virtually Zero to $3.000 for both Rental income $400 per week total Positive Cash flow $140 per week www.000 $190. Plan: Stata title units and build 2 new units (put these on separate titles) she had a few joint venture partners along the way but one of her properties. That is a pretty modest start.000. Victoria. Deal 2: Laverton Joint venture deal Two house – 4 bed. Deal 1: Price Cost of project End value Profit Time $270. Came with plans and permits to build 2 more units on the block. which gave her a profit of $190. 2 bathroom per house Purchase $170.au/dymphna 121 .knowledgesource.000 $185.000 8 months Chunk deal process: Block of 3 units in Ballarat. This is what Suzanne did in 18 months.000. She started with her principal place of residence of $320.5 Million in My First 18 Month in Real Estate Suzanne is from Melbourne. She was married with two children.000. She worked as a disabled carer and her husband was a postman. The cost of the project was $185. she bought for $270.000 and the end value when she finished doing things to it was $645.com.
It was two houses. The rental was $400 a week and the positive cash flow in this one just as it sat.com. both with four bedrooms. the purchase price of $170.000.From Virtually Zero to $3.knowledgesource.5 Million in My First 18 Month in Real Estate This property in Laverton was a joint venture deal. just for buying it. two bathrooms per house. was $140 a week because of the way she structured the loan. www.au/dymphna 122 .
The cost of the project was $70.au/dymphna 123 .000.00 profit. subdivided them and then put them under separate titles. washing machine income $295.000 $335.100 per week.5 Million in My First 18 Month in Real Estate Deal 3: Price $245. Additionally she had passive income at the end of the 18 months that was $1.000.625 p/week $ 1.com.000 The next deal cost $245. it was a 23 unit complex purchased for $295.000 $ 1. Rental on the property was $1.From Virtually Zero to $3. This property is now worth over $1 million.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. Victoria.000 after just six months time which resulted in a $120. Plan: Renovate each house and subdivide so that each house is on a separate title.000.000 Time 6 months Profit $120. She renovated each house. Deal 5: www. It was four dwellings on half an acre in Victoria. Deal 4: Kalgoorlie 23 units complex Purchase price Current value Rental per week Positive cash flow Est.000 End Value $435. The end value was $435.knowledgesource. I spoke to recently and she said the rental on that now is $2.000.149 p/week + $ 50 p/week This deal was in Kalgoorlie. The current value.000.000 Four dwellings on ½ an acre in Newborough. Cost of project $ 70. at the end of the 18 months was $335.625 per week.
she is investing all over Australia.000 $ 90 p/week $ 23 p/week This next deal was in Western Australia.From Virtually Zero to $3. when you add up the income on these this deals. Queensland.5 Million in My First 18 Month in Real Estate Blackwater.000 $ 510 p/week $ 210 p/week The next deal was also in WA. in a very small town in Western Australia but in a town that had good strong rental. Deal 7: Purchase price Current Value Rental Positive cash flow $210. The purchase price of this property was $210. The current value at the end of the 18 months was $55.000 $55.au/dymphna 124 .000 5 months $28. Qld Residential block of land Purchase price Sold Time Profit $42.000 with the market value at the end of the 18 months at $310.000. remembering that Suzanne lives in Victoria.000.000 The Suzanne did a little land deal out in Blackwater.com. Purchased for $42.000 $310.000 it was sold for $70. The rental was $510 a week which resulted in a positive cash flow $210 per week which is $10. www.knowledgesource.000.000 in five months resulting in a $28.000 profit. Deal 6: Purchase price Current Value Rental Positive Cash Flow $27.000 a year! Will that make a difference in your life? Particularly. It was purchased for $27.000 $70. 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.
au/dymphna 125 . Because. your paradigm.6 billion a year industry. 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. Because she paid a PA to look manage things and everything else it amounts to a net figure of about $150. It gets easier and easier and easier.com.From Virtually Zero to $3. now that she is in that position.000 a year Now. it can be done and look. Yes. every time you do it. Renovations and rehabilitations The renovation industry is $3. How much Desperate Housewives do you think she watches? None . you will eventually run out of equity.000. do you think her journey was hard? Probably. she has got two small kids. Suzanne’s portfolio so far: Total income Total gross income Total net income $ 2. This is the difference that you can make and you only have to do it once. no. She is working part time as disabled carer and she is trying to fit this in around everything else that she does.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.885+ p/week $180. 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. but it can be done. Her husband is doing his bit as well. 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. In fact. She was earning a total passive income of $2885 a week which had a growth income of about $190. www.000+ a year! This amounts to such an enormous difference to your lifestyle.000+ p/year $150. if you just focus on income. working as a postman.knowledgesource.and that is what it takes. This is what you can do in such a short period of time. your everything. do you think she will ever have to do that again. This is the life.
000 $280. but I bought it for $30. I got misled. It was looking after itself so I did not really need to do that.000 had I kept it? I was too shy. Now. So believe it or not I put $3. 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. on my credit card and that was my deposit to buy this property.au/dymphna 126 .5 Million in My First 18 Month in Real Estate Renovation 1 Purchased Renovations Sold $135. It was totally dilapidated so I spent $45.000 3 months I bought another property.000 renovating it and sold it a year later for $290.000 $ 45.000 profit. The renovation costs $6. It was totally run down.knowledgesource..000 To create equity I bought a property for $135. it would have been the right decision. www. I did not need to sell it and pay tax on it to get it.000 $ 1. I can borrow equity and use it. who is still one of my good friends.. My darling real estate agent. If I needed the money.500 $51.000 for nearly $100.000. talked me into it.From Virtually Zero to $3.500 $ 6. Renovation 2 Purchase price Purchase Costs Renovation Renovation time Sold Profit Time frame $ 30.com. I needed the equity. No! I sold it! Why would I be so stupid to sell the property that is now worth over $450.000.000 and that also went on my credit card. I actually did not need the money.000 13 days $82.000. That was pretty good I thought at the time. but that time.
000 rebate for repairs) Renovation Costs $ 10. 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.knowledgesource.000 profit at $82.000 Rented $ 145 p/week Revalued $105. “Opportunities just usually disguised hard work so most people do not recognize them.500. The renovation cost $10. Again.000. After three months it was sold for $51. my darling husband and my brother went off and did this.000 The next renovation was a property purchased for $59.au/dymphna 127 .com.000 Cash back in pocket for next deal $ 34.From Virtually Zero to $3.” Roger Staubauch www. 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.5 Million in My First 18 Month in Real Estate The renovation time took 13 days. understandably. Now.000 in equity – tax free because it wasn’t sold. I made the mistake of selling! Renovation 3 Purchase price $ 59. the average person could not have done that in 13 days and it was not me either.000 renovation and I rented it out for $445 per week.000 (after $4. learning this time and not selling it but through revaluation allowing access $34.
Risk was very important to her.au/dymphna 128 . 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. After two years she has $5 million worth of property with $3 million worth of pure equity. 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. She wanted to pay down as much debt as she could on co-properties before she was 55 which is when she wanted to retire.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. www. we stuck to that philosophy.knowledgesource. Since then she has put a new peg in the sand. Case Study: Wanda Wanda has been part of a number of my courses. give you accelerated growth.From Virtually Zero to $3. manufacturing growth and making a chunk of money like the one I am about to explain. She was 53 when she started with me and she had a very distinct plan. Now. She did not want a lot of debts.com. 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.
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. the properties that she wanted to keep in the long term. for the rest of her life and with no debt. I was too slow of getting back to him.000.000 that she now had in her hand to pay down debt on one of her co-properties. You cannot normally borrow on a car park so she bought it and paid cash. That is the strategy that she did creating a chunk of money. She recognized where the area was that she liked to invest in and would not go outside of this area. She was not prepared to look at anything else. because I was not available.au/dymphna 129 .From Virtually Zero to $3. so I was not the one saying. Within three months. She found a medical suite not far away from the car park and she bought for $150.000 each Profit $430. Then she went shopping to try and find an office that she could marry up with it. This particular buyer focused on a certain type of property which I like.000 Time Span 3 months www. She worked full time over two years where she did most of this at night. paying it down on debt on the coproperties. her superannuation that she planned live on when she retired and she was paying down the debt on these properties very quickly. giving her $130. yes put a contract on it.knowledgesource. This was her safety net. This next deal that was sent to me by one of my buyer’s agents in New Zealand. A car park came available on its own for $20.000.com. So guess what? He picked up the phone to ring somebody else. But this was the deal: Deal: Waikato University’s doorstep! Purchase price $1. she sold the medical suite and the car park together as a unit for $300. This is just one of the possibilities. 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.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.
all that kind of stuff and he hired young butchers that were very good at cutting meat and were good at selling. Karen had a particular interest in Florida and these are some of the properties that she had picked. They should have been rented the $300 a week. As a butcher he would go in and buy a butcher business that was losing money.com. he would normally get rid of all the old stuff.From Virtually Zero to $3. Then he cleaned it up. Buying growth While in the US.000 each. no renovation nor anything individually for $205. big signs.5 Million in My First 18 Month in Real Estate $1.000 to $300. That is good money. Growth Pick: www. He would buy a business for like $20. His business boomed. The buyer that bought this negotiated a three month contract on it and then went about selling off those properties. 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. were currently rented at $250 a week. One of my students is actually a butcher and he took the philosophy that I use in real estate and applied it to his business. He had a particular way of presenting his meats. You can apply the same to a business. He had a particular philosophy as to how a butchery business should run. nice bright colors. They were all three bedroom units but they were at random market rental.62 million was the purchase price of 10 units. He is a butcher but what he does can be applied to a whole realm of businesses.000 without taking any money out of his own pocket.000 for the stock and typically would then sell it in three to six months. That is not bad work for three months and he did it part time on the side while doing whatever else he did.knowledgesource. but that were already Strata titled so they were already broken down onto individual titles. Number one. What the buyer did was negotiate a long contract.000.au/dymphna 130 . He sold all of them on simultaneous settlements within the three months and put into his pocket $430. sometimes 12 months for anywhere from $150.
knowledgesource.400 a year which has a return investment of 5.au/dymphna 131 .com.000 $ 14.From Virtually Zero to $3.400 / year 5. So when she entered the property market.4%. Why do you think she would be interested in this property? Because across the road was a beautiful house that was worth $950. Case study: Kemorine Kemorine is a model.000 and her calculated estimated growth was 20-30% based on the fact that this property was across the road. we had to define some deals so that she did not have to actually do anything or break one single nail with.5 Million in My First 18 Month in Real Estate Price Rental ROI $265.000. www.4% The purchase price on this one was $265. She would do anything not to break her fingernail. The rental on the property was $14.
000 profit. A couple of years ago I led a few groups in Victoria. Deal 2: 5x2 bedroom units Purchase price Rental Income Strata cost Value post strata titling Profit $340. The block of units was already renovated beautifully and they were rented out for $600 a week.com.000 Kemorine bought a property which was $275.au/dymphna 132 . she made over $200.000. She paid the consultant $10. Advertisement: Myrtleford House $10.000 FOR SALE AND REMOVAL www. The two deals took a total of three months and she had a positive cash flow on the property at the end.From Virtually Zero to $3. So just by shuffling paper and signing of few documents she made a profit of $95. 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. Each property went up.000 to do the strata title. So I started to have a look and found a house in Myrtleford.000 She bought another one very similar which was a block of five units at same deal and $110.5 Million in My First 18 Month in Real Estate Deal 1: Purchase price $275.000 $110.000 $460. She paid a consultant to strata title the units so she did not have to do anything herself.000 Current rental $ 600 p/week Current value of 2 bedroom units in this condition Strata Titling Profit $ 95. without too much challenges.000.000 Strata titling costs $ 10.000 $ 750 p/week $ 10.000 by merely only signing her name.knowledgesource.
heating and I could make mine fairly similar. this weatherboard dwelling with tin and aluminum cladding consists of kitchen / lounge / dining in an open plan living area.000 to move it onto the block.000 it would cost up to about $65.000. because I did not know. nothing very much different from the other property.000. Deal 1: www. Case study: Julie. One I found that would have been similar at the time was $140. 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. GREAT BARGAIN. two bedroom house. 39 divorced with 1 child Before starting with me Julie had no savings. it was not really flash but wasn’t too bad either. Look for the opportunity all the time.000. a low maintenance. Now I needed to find out what houses in Myrtleford were selling for. Okay.000 for mine.000 making it $75. 1 large and 2 small bedrooms. Now. floor boards throughout. no property.000 so with land and removal costs which would be about $10.au/dymphna 133 . There was another one for $138.000 it was aluminum clad with two bedrooms. Look for these deals. It was a two bedroom house that was quite pretty with timber floors.com. Land in Myrtleford sold at the time for about $40. that sounds fair.000 to connect it to all of the facilities etc. even if I could only get $120. no settlement. At $10.000 for landscaping.000. So I am now up to $85.00 reduced from $150. no debts. First of all I have to find out how to go about it. and then maybe another $10.knowledgesource. but a good job.000. I could still make $45.5 Million in My First 18 Month in Real Estate Easily transported. 1 bathroom and a laundry.From Virtually Zero to $3. It would be another $10. aluminum clad.
She also has some room at the back of the property to put a duplex and to subdivide it. she had only painted the front of the house.000 www. It required major renovation. but was $230. Julie bought a property in the town where she lived which was in Western Australia in Port Hedland. Manufactured Growth example: Purchase price $340.com.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.000 End value $950.000 and she did make some money on it.au/dymphna 134 . Case study: Rob & Kylie Purchase Price $295. She renovated it doing most of the work herself so it only cost her $1200 so it looks good now.000 Intention to subdivide and build a duplex on site.000 spent on it to make really nice but it would then be valued at $950.5 Million in My First 18 Month in Real Estate Port Hedland $230. Upon questioning her about this. when I visited her and I walked around the property. It needed $100. she said nobody ever paints the back of the house in Port Hedland but.From Virtually Zero to $3.000 and it rent for $300 a week.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. she managed to increase the value of the property by $50.200 + hard work Across the road from the beach and Spoilt Bank Yacht Club Current estimated value $350.000 Rented for $ 300 p/week Renovation costs $ 1.000 Partly finished renovations – currently unlivable Paid $320.knowledgesource. It was pretty ugly and run down. But the thing is.000 Renovation $100.
000 back in their pocket in the way of equity after it was revalued at $390. It put $75.000.000 to build. Example: Old Pizza Hut Building Sold $ 680.000 $ 75.knowledgesource. I drove past it.au/dymphna 135 .com. renovation and new tenant Valuation $1.300. Just after settlement the building was revalued with the new tenant in place www. 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. It was one of those opportunities that you would have driven past everyday and missed. They put it on an extended settlement.000.000.From Virtually Zero to $3. and in the contract phase they built up the façade.000 house which cost $20. John bought a development block that had on it a little old house that needed renovating for $367. Tenant wants to stay. long contract.000 Another example is an old Pizza Hut building. Case Study: John Ballina Development $367.000 Current rental on existing house $ 220 p/week Medium density development block on Ballina Island.000.000 $390. On completion the duplex and the house was rented and the whole block was revalued in excess of $750.000 6 weeks Kylie is in my Platinum Program and her and Rob did a renovation on a $295.5 Million in My First 18 Month in Real Estate Renovation costs Revaluation Profit Time $ 20. 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.000 New façade. He also built a duplex out the back that cost $190.
That is what gives me the biggest thrill.3 million. Think about that. changes your life. 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. These guys have impacted an amazing amount of young people in their town by their success. Those savings alone will enable you to buy properties saving in the long term way more than the $3.au/dymphna 136 . Have a finance clause in there. You cannot help somebody unless you are successful yourself. it changes your circumstances making your life better.com. before the deal when it was ugly. So please open your eyes to this kind of possibility as you drive past. Remember that flexibility is always on your side. You will never know if a vendor is going to say ‘yes’. 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’. Negotiation skills One of the things that my course can teach you are techniques of actually how to negotiate.000 you will be paying to be part of my program and work with me for a year.From Virtually Zero to $3. www. you have already got a ‘no’. that ripple effect. Doing this. Find other plan. So if I can help you to get in that position of strength you can pass it on like pebble in the pond.5 Million in My First 18 Month in Real Estate for $1. Sharing Knowledge Sharon and Andrew started with me a number of years ago and they have done numerous courses with me. a building inspection clause. Good negotiation skills will allow you to purchase property at much lower prices than you might otherwise. opportunities are when you see the block with the for sale sign. sharing the knowledge. 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.knowledgesource. 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. Do something with it. look for some opportunities. You cannot lend somebody a hand to get to pull them up unless you are in a position of strength yourself. If you do not ask. passing it on to other people.
You have got to open yourselves up to the possibilities. you do not spend time actually thinking about what you want. 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. because if you do not know you cannot have it. a major ingredient for their success has been an awful lot of money spent on education. private use for the business model. www. he grates the road. He hates milking cows he tells me. So spend some time doing that stuff. and if you do not expose yourself to the things that you really want. to the realities that are there. You cannot achieve it.5 Million in My First 18 Month in Real Estate My reason for doing all of this is my kids and my husband Brian. That gives me the flexibility to go away. But I have set it up in such a way that I got a profit center operating. the only thing he doesn’t do at the moment is milk a cow which I am trying to convince him to do. maybe you like stamp collections. As you move forward you will be able to do exactly the same. maybe you like airplanes. he does the landscaping. I grow hydroponic lettuces. I produce 2. Or. he mows the lawn. whatever that is. Or. I do not know. I have set up a profit center on my property where I live. 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. travel. I love it. maybe you like boats.600 lettuces a week. and every single one of them will tell a major component. he grows my organic vegetables. Your possibilities shift. He looks after the garden. but when you start to think in business models and you start to think from profit centers you will paradigm shift. 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. This is a financial model that I put together to support my lifestyle decision.au/dymphna 137 . which produces sufficient income to pay for full time farm manager to be there plus a part time assistant.knowledgesource. do whatever I want and farm is maintained. completely surrounded by rainforest. From there I run a commercial farm that I can take advantage of for tax purposes and everything else. I know from experience and I know from my friends.com. We live on a beautiful property that I have cased out on the Sunshine Coast.From Virtually Zero to $3. where they are heading and what they actually want. I am a country girl. maybe you like crystals. Think about what you are going to achieve. some of them we consider exceptionally wealthy.
I had a lady come to me in my accountancy practice. She just came back from China and she was very emotional about her trip to China. She also saw the results of a policy in China called ‘one baby policy’. But. and she was in the process of negotiating with Western Societies to be able to adopt some of these children into the Western Societies.From Virtually Zero to $3. I would love to be able to make that difference in your life so that you can pass it on. many years to come. she was also smart enough to recognize that she could not do very much. Because. that is how you continue to get ahead. She needed to be in a position of relative strength to be able to achieve that. she could make much of a difference unless she was financially secure herself. so deeply that she wanted to make a difference. She saw little baby girls being killed at birth. how people lived. little baby girls were not favored as much as little baby boys. It never stops. and she was of Chinese descent.au/dymphna 138 . I would love to have you as part of that relationship for many. so special. 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. expanding. 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. This sort of thing is so rewarding. I feel satisfaction for all those www. I would love to have you part of the team. 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. continually learning and growing and experiencing. and what their reality and paradigms were. because she did not go on the trails and the tourist tracks.com. but it is always consistently going on.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. She wanted to change the lives or the potential lives of those little baby girls. she actually went back where her family came from.knowledgesource. That is how you continue to increase your wealth and have more success. 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. and this affected her so profoundly. and so amazing for me to have been a little part of making it happen. She saw first hand some of the tragedies that happened. Many years ago.
They now own a factory.au/dymphna 139 . www. no money. it was crumbling under itself. The farmers did not have the money to buy the bread so the grocers did not have the money to pay the supplies. I want you to think about what difference you are going to make. 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.com. She went on to teach the same skills to other people in her little country town. That is so special. That is amazingly special to me. It changed to an attitude of hope. 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 have been privileged to be able to see one lady that I helped in Central Western Queensland in a town that was devastated by drought for a lot of years. They realized that it did not have to be this way. they started to change their financial position by creating passive income. They set up this craft business with the wool industry and they exported to other countries and suddenly they have got this little industry. not able to even send their kids to the off the land or to private schools or anything else. I am privileged to have been able to see the effects of my work. That town’s attitude changed. What are you going to do to pass it on? Somebody very.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. The town had lost hope. Wherever you are at right now. 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. communally.knowledgesource.From Virtually Zero to $3. The town had lost hope. They employed the kids so they now have a future too. her aunt. I helped her initially and then her husband joined in as well. They created businesses. She taught the country women’s association. 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. The difference that you are going to make when you are in a financial secured position. She was a farmer’s wife. The whole town was dying. the lady down the street. I saw the difference that. I had the privilege to be able to help that one lady in that one society. She taught her sister. that woman and her husband made. Together.” I say the same thing to you here now.
knowledgesource.5 Million in My First 18 Month in Real Estate I hope I have been able to pass some of that on today.au/dymphna 140 . many years to come. 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.com. www.From Virtually Zero to $3. and to be part of that relationship for many.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.