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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
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. For me. I had created my own practice. very different from the situation that I am in now.knowledgesource. I was pregnant and had a small baby as well. pick up a few tips that you might be able to implement. It was not that long ago that I was in a situation that was very. you are a product of your past. At that time. The fact was. but when I found myself going through a divorce. I was really stuck in my job.5 Million in My First 18 Month in Real Estate Introduction Congratulations for beginning. All things aside. because for me survival mode was accounting. I moved up to the Sunshine Coast in the mid 1990’s. It was the easiest thing for me to fall back on. So that means you can learn from it to move forward. In my earlier career. I found myself in a situation where I had $40.au/dymphna 4 . or an event like a divorce or similar. For some people. I have done a lot of different things. After 10 years of earning really good money. At that point I went into survival mode. that trigger comes slowly while for other people it may be a major catastrophe such as an illness. and I wasted a lot of money on my first husband. So congratulations for making the effort to be interested to learn a little bit more. I had worked in the banking industry. I spent a lot of money. That was what I knew.000 out of 10 years of earning an exorbitant amount of money and that was not very much to start with. It puts you in the minority. Even though I owned my own accountancy practice.000 out of the property settlement from my divorce. I only ended up with $40.com. I was still working 40-60 hours a week. It puts you in the percentile that actually gets out there and does something to actually succeed. I moved there in the midst of a very messy divorce.From Virtually Zero to $3. I had been a financial adviser. www. I had run a very large mining company from a financial standpoint. reality set in and at some point everyone will have a trigger. I had been a financial controller.
I realized that that is exactly what I was still doing even though I was doing all the right things. 30. I was still trading time for money and thought there was something that had to give here. where after my speech I listened to the next speaker and he said something about trading time for money.From Virtually Zero to $3. Even though I was an accountant and an economist and had worked in the finance industry for a long. This reality was single parenting. But the plan was like a 25 – 30 year plan. rather than my kids. So I had to redefine the boundaries to those ‘boxes’ and for me that took a lot of effort. I had to unlearn so much stuff. 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. an entrepreneur. these 20.au/dymphna 5 . The reason I had to unlearn it was because I expected everybody to ‘fit’ into this ‘box’. It came very slowly as my reality started to set in. We did not have a place to live. There was a defining moment when giving a talk on asset protection and taxes as I do. an economist. When I decided that things would have to change I looked at my home and then my business.knowledgesource. was actually a disadvantage to being wealthy.com. I expected to ‘fit’ into this ‘box’ because that is how things were. My trigger came very slowly. looking after two kids and doing it all on my own and what this actually meant. all of that stuff. and had the office which from which I ran the accountancy practice. as most people do. I realized that even though I was in my own business. Even though I had savings. long time and I understood things from a technical perspective easily. because that is what the books says you are able to do. I remember my little kids would say “Mommy. Everybody I had spoken to at select points in time. If I did not work. It took a lot of trust in my own intuition and all of those sorts of things. I thought that because I was in business I could www. Being an accountant. But I didn’t want to fit things into these ‘boxes’. It is as simple as that. we did not eat. 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. or 40-year timeframe ‘boxes’ where I would end up spending time with my grandkids. and it was those little things were what niggled at me. That is how it says that reality works.5 Million in My First 18 Month in Real Estate For me the divorce was not actually my trigger. I had this plan. it was actually a disadvantage to me.
knowledgesource. 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.com. where it brings in more money than it costs. As time progressed. I did do that but it did not happen quickly enough for me at that point in time. I looked at my clients: I had some clients that were doing really. I looked for what else that I could do to change my position.au/dymphna 6 . 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. So that is what I looked for. I did not have a lot of money at this point. then at least I would be heading in the right direction. all not my thing. they had certain characteristics. I had made my $40.000 property settlement stretch a fair way. but it wasn’t. I needed something a little bit more secure that would as a conservative accountant suit me.5 Million in My First 18 Month in Real Estate leverage myself out of that business and work on it rather than in it. learning and absorbing as much as I possibly could and it took me six months until I put a plan in place that I thought would work for me. I looked at clients who were network marketers or multi-level marketers and thought that maybe I can do that but again it was not my thing. 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.From Virtually Zero to $3. It continues to keep you in the rat race that you are trying to get out of. 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. When I started to look at the characteristics of what I now call a cash cow. but more quickly. well through the internet and thought that this could be my thing. but I needed a lot more money to be able to do what I want to do and replace my income. I looked at shares and options. I looked at other models that worked but they were all not my thing. I managed to buy some properties in the early stages without it costing me any money to get into www. I really started to research and study. Multiple negative flowing properties will just worsen the situation. All of these things just did not suite me.
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. But when I just focused on cash cows I eventually ran out of equity so I could not keep using this strategy. You have the perfect opportunity right now to make your own little money machine in the property market. it is not surprising that the first and the second place go to California and Texas. 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. To do business in this society. I know it is bit heavy to begin with but it is one of those things that you just have to do. We have a market that is dynamic and changing and in economic terms what we call an imperfect market place. You can put yourself in a position where you are tax efficient. It does not matter what the market is going to do. as you accumulate them. 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.knowledgesource.From Virtually Zero to $3. Whenever you have an imperfect market place with imperfect knowledge and imperfect scenario. but New South Wales as www. you have got opportunities to make profit. Fundamental economics and an imperfect market place = Opportunity to make profit. New South Wales is the third most litigated State in the world. It was not about one or the other.au/dymphna 7 . I love the real estate marketers as it is at the moment. In fact. The market today is different but in many ways is very much the same. where you are not paying too much tax and that your assets. I had to do some growth strategies as well and that was the key.com. It was about balance and balancing your portfolio and knowing what you need next. are actually protected. Compare that to America and all of the litigations that goes on over there. We live in a very litigated society.
You have to put yourself in positions where you make decisions. Because the very worst thing you can do is not make a decision. If you are serious about changing your paradigm and serious about changing where your life is right now.com. You will know what should have happened and what www. to be successful in absolutely anything that you can possibly think about. one property is not going to be enough. That is really sad.knowledgesource. a reality as we see it right now.5 Million in My First 18 Month in Real Estate third is ridiculous. One of the things that you have to be to be successful is a decision maker. in any game. you get the opportunity to look at what you did and analyze the circumstances. You actually have to take action. you will be sitting on the sidelines. So. One property is not going to cut it. you have to be focused. If you make a bad decision then at least you got the opportunity to learn from that. So it is a fact. Let us start with some statistics: 82. Another statistic: Approximately 13% of investors only own between two and four properties. number one. and you have to be determined and you have to participate. you should be deciding if you are committed to this process or not? If you are.au/dymphna 8 . Queensland and Victoria rank in the top ten. 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. If you do not participate and sit on the sidelines then that is exactly what you will be doing the day you die. 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. I am a straight shooter and if you don’t want to own more than four properties then you are not going to cut it. because in this game.From Virtually Zero to $3. you have to be committed.6% of property investors only buy one property.
you still have to do it. 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. Eight out of 10 Australians will retire with less than $14.000 a year. in the 1950’s and 60’s. By 2020. they expect there will be only one taxpayer for every pensioner. which means. and it is the thing that is going to always be there. Everyday millions of innocent people are forced from their homes by a disaster called ‘work’. there was six taxpayers for every pensioner.au/dymphna 9 . I have made some mistakes. You have your basic needs covered but you are choosing build an additional base. that I am highly unlikely to ever make that same mistake again. as it stands now. if you love your work. keep doing what you are doing. This way if for any reason at any point in time.From Virtually Zero to $3. but it is not impossible and the climate we have in the market right now is so opportune to do exactly that. No matter how you feel about what you do now.knowledgesource. you have got something to fall back on. Real estate and investing is your vehicle to change this situation. you cannot do what you love doing in your work. www. but at the same time. you have always got a buffer and you have always got a Plan B. fantastic! Use it. Not every decision that I ever made has been fantastic. When you look out sound economic models.com. it is the thing that is solid behind you. 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. Real estate is your Plan B every single time because it is the thing that grows your wealth. It is going to be hard.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. a wealth asset on the side. build yourself portfolio. when there were 18 taxpayers for every pensioner now means that in the 1990’s. That is $269 a week! The baby boom explosion that we had post war. but it has never been lost. If it has not been lost it means that I learned from it.
There are a number of things that you can do to help change this situation. There are lots of ways of doing things. 1. 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. whether it is properties or a business. You have to be the one who takes control of this situation and be the one that knows enough to ask the right questions and know enough to know whether the answers are you getting are good enough for you or not. 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. This is what you have got to do.knowledgesource.au/dymphna 10 . As an astute successful investor.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. 2. Dealing with people whether they are professionals 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. The tax act would probably stand about two meters high if you piled it on top of each other. it could be anything. Be Tax smart and Tax efficient in your investing You have got to be tax smart and tax efficient in investing. this is something that you have to know because you are the one that has to stand up and take responsibility. I do not even know all of it myself but I do know the stuff that I deal in. Protect what assets you do have and those you may accumulate in the future You have got to protect your assets. www. You can read books but the reality is you do know it until you have experienced it. you do not know it until you are street smart. 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. I call it being street smart. I am not going to try and teach you all of it.com.
com. Everyone has areas of specialty. some specialize in personal income tax deductions for plumbers.Cash flow Properties (Cash Cows) . very important but they specialize in all different things. Professionals are very. Without all of this you are not in a financially strong position to be able to act. This is where you need to step up to the mark and take responsibility for not only where you are at right now. you are able to do a deal so when the right deal comes along. you can actually act. It means having your structures ready to go into the market and buy. Always be market ready The next thing is that you have to be market ready. When you are always market ready. some specialize in double tax agreements across the country. Focus on sound investment strategies . Market ready means getting your financial position in order and tidying up your loans and reorganizing your finances.knowledgesource. 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. Some specialize in criminal laws and some specialize in property law. but where you are going to go in the future. 3.Property Money Machine (Chunk Deals) .Growth Properties .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. you can only act if you are market ready so you always want to be market ready. 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. This is where you need to be www. I see this all the time where people have not done their tax returns for the last two years and are not market ready. some specialize in just GST.au/dymphna 11 .From Virtually Zero to $3. Some specialize in corporate mergers. because you have got to know enough to know whether you are getting the maximum out of your professionals.Balanced Portfolio I am not one size fits all kind of girl. 4.
The lower the level of debt.au/dymphna 12 . If you are negative gearing. www. what do I need next? Am I going to go out there and buy myself a cash cow? Is that what I am really looking for? How does that affect me? Or is it a gross deal or what I call a chunk deal. the size of your portfolio and what the mix of your portfolio is. then you might be looking for a cash cow to help fund or support that activity. if you are heavily into negatively geared investment properties.knowledgesource. Or you could also be looking for a chunk deal that you can turn over relatively quickly. the higher the level of income from that property. your personality.com. a deal that makes you a chunk of money.5 Million in My First 18 Month in Real Estate looking at your situation and saying. that I need? Where is the balance? This is a factor of you. For instance. it means you have got debt if it is rent or not. so debt can be a factor with that.From Virtually Zero to $3. 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.
www. Protecting assets if successfully sued. prevention is better than cure. 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. they have more of a chance at winning a lawsuit with the person who everything under their own name. It tells of lawsuits that have happened that now result in certain products needing to have a warning sticker put on them so you can imagine what some of the legal lawsuits were. Public toilets: Warning: Recycled water. 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. 2.au/dymphna 13 . 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. but our influence today is not England.From Virtually Zero to $3. We are definitely one of the most litigated countries in the world. If a lawyer who is litigating looks at one person who has everything on their own name and another person who has got lots of trusts and companies and these structures have mortgages. You should be looking to put walls around you and your assets. unsafe for drinking. Firstly. with our law being passed down through prime ministers over the generations. Yes. Minimising the risk of being sued. The first example was on a baby stroller: Warning: Remove child before folding.knowledgesource. Which one you think they are going to sue first? The person with everything under their own name . our legal system has come from predominantly England.5 Million in My First 18 Month in Real Estate Asset Protection & Tax What is Asset Protection? 1.com.every single time. We really do follow in the footsteps of America in so many ways and our legal system is no different.
it wasn’t until after the www.au/dymphna 14 .com. should not be used orally’. 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. Sleeping pills: Warning: May cause drowsiness. So you can get lawsuits from anything! I would like to tell you about Mark Shanahan. He went on to invite him to take part in a charity golf game on Magnetic Island to which Mark agreed.knowledgesource. In 1994. he has come to a number of my seminars and I consulted for him to see what we could do for him. You think with a wheelbarrow. a digital thermometer. Mark is sitting his the office on a Thursday afternoon. He gets a phone call from his bank manager asking what he was doing on the following Saturday. He lives in Townsville.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate An electric router: Warning: Not intended as a dental drill. 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. you would be relatively safe: Warning: Not intended for the highway use An electric hair dyer: Warning: Never use hair dyer while sleeping. imagine this. A laser ink cartridge: Warning: Toner not intended to be consumed. The gentleman that the ball hit was obviously hurt he played on. read ‘Warning: Once used rectally. duh… An electric iron: Warning: Never iron clothes while being worn. So he turned up for the charity game and teed off as the third player in his group.
owning real estate. Now at the time he went off to go and play golf with his bank manager he was happily married. when he still wasn’t feeling that well. In Australia the three main areas of litigation come from owning civil business. on top of the legal bill and the $2. He lost everything he had for playing a game of golf. because somebody told him it was a good idea. owned a business.au/dymphna 15 . Mark of course was really sorry about what had happened because he sincerely did not see him down the other end of the green. he had lost his company and all of his assets. he was not negligent.000. www. it would go away. Now. It was too late for Mark.com. It is a very sad story but a true story.5 Million in My First 18 Month in Real Estate game. had a couple of kids. unable to do anything yet. 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. A couple of months later Mark had a lawsuit delivered and they were suing him for what he thought was a bit over a million dollars.6 million in debt. Many weeks after the incident back in 1994.6 million which he did not have. Mark went to his local insurance broker and got his insurances reviewed. Ten years of his life had been put on hold. that he went to the hospital and discovered that he has a fractured skull and was really hurt.knowledgesource.6 million. owned a couple of investment companies and was in quite a good financial position but by the end of the 10 years of legal wrangling his marriage had collapsed. he is now on hold again for a further 12 years because they have 12 years to recruit the $2. So 10 years plus 12 years equals 22 years of your life where you are unable to accumulate wealth. But for 10 years it continued to drag and he had built up a legal bill in excess of $500. and personal actions involving motor vehicles. He was not sure what to do and sought legal advice where he was told not to worry. unable to know where your life is going or anything else.From Virtually Zero to $3. he had become totally penniless and the high court awarded against him to the sum of $2.
but if something should happen whether it is bad credit or a legal issue. he would have to pay the remaining two-fifths that he was underinsured himself. This is the type of thing that can happen. it was informed knowledge.com. The inevitable happened someone slipped on the back step. if it is upheld.000. they just bought under their own name.au/dymphna 16 .000 claim. they can access not only the assets of the business but any assets that you own in that same name.knowledgesource. So if you have your business under your own name or if you are sole proprietor or in a partnership. I had a case on the Sunshine Coast where there was a fire in a warehouse.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. Unfortunately this was not the end of the story. They went in a little bit negative because it was a good idea for tax and rather than pay to set up a structure.000 and he put a claim for $80. Then there is property ownership. Another similar case was with a balcony down in Victoria a couple of years ago.000 not $300. That is how insurance companies work.From Virtually Zero to $3. You would think this would be fine. Because of this the insurance company was required to only going pay out three fifths of his $80. It was considered criminal negligence and therefore not covered under their insurance policy. They now lost their house. So you take out public insurance and you do your best to cover everything. but an assessor came out to look at the damage his assessment implied that he was underinsured.000 so according to the assessor they were definitely underinsured. their investment house and their own house. They got the building inspection report which said that the back step was an illegal item that had to be fixed. 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. The insurance company believed that he should have been insured for $500. they can then go after your assets as the individuals of the partnership or the individual. because they had it all in their own name all to save a little bit of tax. A few years ago in Bridgeton. for your business. They got sued because of the illegal step and they lost because they knew about the problem and they did not fix it. They decided that they could fix that themselves but it never ended up getting done. He was insured for $300. a young couple invested in a property.
5 Million in My First 18 Month in Real Estate pay. So yes. He was quite wealthy and had a nice home. It is a very sad case on both sides where the only person who really wins is the lawyer.knowledgesource. There was also damage to the next door neighbor’s property.com. Fortunately he had a good business and he was able pay this and to move on. a couple of canal properties and businesses and he wanted to give something back to those who had helped his wife. settle out of court because if you go to court you will lose everything. 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. A foundation on the coast had really looked after his wife during her treatment so he was very committed to the foundation. the next door neighbor’s landlord wanted reimbursing for the twofifths that the insurance company did not pay. Number one priority. have a look at your insurance policy reconfirm what you are covered for and make sure that you are not actually underinsured. All in all it up ended up costing him an additional $120. Another case on the Sunshine Coast is a gentleman I know.au/dymphna 17 . 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. So again.000. 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 would have gone bankrupt. we are following in the footsteps of America when it comes to litigation. www. 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.From Virtually Zero to $3. If that fire had burnt down a house in the street. health care and legal bills. He went to every barrister in Queensland and they all told him the same thing. He was told to give her anything that she wanted to make it go away. 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. His wife had recently died from cancer.
It is non tax-deductible. Debt There are two types of debt: friendly debt and non-friendly debt. Nonfriendly debt is debt incurred through credit cards or a store card or the debt on your own home. A friendly debt is a debt that you have with yourself or one of your other structures. Some of you will be covered but if there are ‘uninvited guests’ and something happens. 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’.com. Friendly debt is a debt that is tax deductible.” Insurance is usually piece of mind.things like the golf club would it be covered in that kind of circumstance. as in the story of the three year old girl.au/dymphna 18 . you may lose your house.5 Million in My First 18 Month in Real Estate Types of Asset Protection. Please look at your insurance policies and these types of clauses and exactly what it covers. Insurance is simply peace of mind. The trouble with insurance is that you can never buy it when you need it. That is not necessarily my definition. the interest is a tax deduction. www.knowledgesource. It is a debt that you have with banker or financial institution who lends you the money. My definition for asset protection purposes is that an unfriendly debt is a debt that you have with the third party. So you have to anticipate what you need and buy it hoping you’ll never need it.From Virtually Zero to $3. Have a look at your home and contents insurance and your lifestyle . • • • 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.
au/dymphna 19 . For instance.000 and it has a debt of $200. If somebody tried to sue your company they would get nothing. That is where internal mortgages can start to be a form of asset protection but it is important to have it set up.com.000 registered mortgage with one of your other companies. if you have a home and it is worth $500.000 but you may also have a $300.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate A friendly debt could be all sorts of things but it would still be a legally binding debt.knowledgesource. www.
knowledgesource. I will be equally liable for the actions of Derrick even though I may not have known about it. and did not benefit from all the money he took off to the Bahamas. The shareholders are limited. all you can do is lose your $10. Because we are in partnership together.000 worth of shares in BHP and BHP goes down. you are doing business in your own name and own assets in your own name.From Virtually Zero to $3. they have a limited liability. 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.000. Derrick pinches everybody’s money and runs off to the Bahamas. You will not lose any more than that.5 Million in My First 18 Month in Real Estate Structures • • • • • Sole Trader Partnership Company Trusts – Unit. Any credit that BHP has. but you can have partnership with companies where this is not the case. Company Now. So partnership. They come under the same category as if you did it directly in that structure. www. they cannot come after you as a shareholder and ask that you pay their debt.com. had nothing to do with it. You can have partnerships of trust which come under a different category. the previous example is that of the partnership of individuals. I would be equally liable for that debt. If anything goes wrong. That part comes from a limited liability. Discretionary Superannuation Funds Sole Trader If you sole trade. So if you have gone and bought $10. Partnership Derrick and I go into business together. belongs to them. A company is a structure that has directors and it has shareholders. Hybrid. Companies are a separate legal entity. you can lose the whole lot. it means that you trade in your own name.au/dymphna 20 .
au/dymphna 21 .From Virtually Zero to $3. when you are trading in a business.5 Million in My First 18 Month in Real Estate There are some rules governing the directors. meaning that they continued to trade when they knew the company could not pay its bills. Primarily the major rule is whether or not the directors were trading insolvently or illegally in any way. what you might want to do is not actually have the company directly doing the trading but a trust underneath it www.com. that is where most of them come unstuck. Now if they were trading insolvently.knowledgesource. So.
au/dymphna 22 . the trustee is the one that controls the trust. as in the case earlier. you have a trustee. I am the trustee and I have a number of beneficiaries of the trust. As an example for a unit trust.From Virtually Zero to $3. 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. I do not want to give him any of the income from that item and because I am the trustee and I have www. if you are in a trust on its own. In a unit trust. 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. even if you have unit trust but you own units in your own name. but not mine.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. it is a book of rules that says things have to be dealt with this way. the unit holders.knowledgesource. Derrick and I. Again. we can have a trust where for instance an item is the asset of the trust and because I am a control freak. A trustee in bankruptcy would be appointed on his side. it would not affect my half of the business per se. we have actually got beneficiaries. Discretionary Trust So let us have a look at a discretionary trust. you basically do not have any asset protection because should you get sued and you lose. Now. 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.com. Now. we have got a trustee but instead of having unit holders. 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. it is an outdated vehicle. A trust is basically is just a book of rules. The trustee is given the job to manage that book of rules. They are the manager of the trust. because Derrick did the dirty on me. If you have units in your own name. There are others that are better. those units can be taken away from you just as easily as market shares will be taken away from you. So.
com. now or at any time in the future. Your children will be automatically included anyway because in a family trust. Never. This is the best structure that we have from an asset protection perspective in Australia particularly for ownership of property. The settlor needs to be somebody totally independent that could never. so are the parents. Now. because at that point in time. So the trustee at any point could distribute any income to anybody in that family group. and they can specifically exclude people too. 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.5 Million in My First 18 Month in Real Estate total discretion. They can’t anyway. it controls them. You might have more kids later on.knowledgesource. if you so wish. Now.au/dymphna 23 . I can do that. the spouse and three generations all around. ever. the grandkids etc. the kids are already included. ever put the kids in there. There is a better structure for ownership of business but for the ownership of property. it will be the individual. or when you go to get a loan. it is up to me whether he gets any of that trust or not. ever. www. The individual and the spouse would be named as the primary beneficiaries. like a exhusbands. it says who does what. One important thing that you do need to understand is that of the role of an settlor. I can share the return of that item amongst anybody I chose except Derrick. so it is problem. A trustee can be an individual or it could be a company where I could be the director or the corporate trustee or a company that is the trustee. the individual and their spouse and three generations all around them. now or in the future be a potential beneficiary of the trust. ever. Once the trustee does not own the assets of the trust. the primary beneficiary has to sign the loan documents. the beneficiary group in most family trusts will be. ever. this is probably the best structure. you do not want a five-yearold signing a loan document. 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. ever. the sister. Either way.From Virtually Zero to $3. it is the ultimate discretion of the trustee. for a number of reasons.
As the uncle got older. who owns a property in New South Wales with his family (two brothers. The two brothers bought the property years ago. They both lived on the farm but there www. The trust was void.From Virtually Zero to $3. So the settlor is normally somebody in the accountancy office. Recently I spoke to a friend who is an accountant. As soon as they are in a relationship that trust is now invalid. 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.knowledgesource. somebody in the legal firm. her husband’s father and his uncle) that is worth some $20 million. She married this gentleman who is a grazier. 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. The invoice for that year showed $1020 whereas every other year. The appointer is sometimes also called the guardian or protector or sometimes the guarantor.5 million were now up for grabs. It loses all of its asset protection quality and is useless having it. This proved that a settlement fee was charged which meant that 15 years later. it was a $1000.com. The settlor of the trust was the boyfriend soon to be husband of the primary beneficiary. outdated way of doing things that came from the 12th century that was handed down through the generations when trusts were originally setup to protect the landholders and assets of the family from future frivolous generations.au/dymphna 24 . your grandmother’s mate or someone or other that settles the trust. This the position of real control. That is what it was originally setup for although they have changed their uses at they came down the generations. One brother (my friend’s husband’s uncle) owned a third and her husband’s father owned two thirds. It is the position which is the one that gets to appoint or sack the trustee. There was a case in the 1970’s where they subpoenaed the records to prove that the accountant who set up the trust charged the $20 settlement fee. It is an old. assets that had built up in that trust to the value of $1. A settlement fee cannot be charged. The important position is that of the appointer.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 you do when you are a younger entrepreneur. 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.knowledgesource. all of this transpired some 10 years later and what has happened is that his father. 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.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. Now.com. 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. But for safe guarding that. put it in the trust to own his third of the family farm. That is the importance of the appointership. not taking into consideration that he had actually purchased his third of the farm. 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. Trustees The appointer could be mum and dad and they could be the beneficiaries. When my friend’s husband bought out his uncle. The other thing you must do is make sure that you take care of it in your will.au/dymphna 25 . very sad case. appoint himself the trustee of bankruptcy and distribute all income and assets to the bankrupt estate and distribute it amongst the creditors. sacked my friend’s husband’s company as trustee and appointed his own company as trustee. 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. They are now in court. A very. to pass that job down to the next generation. and forced the sale of the property. who was the appointer of trust. let us say we have got a million dollars worth of assets in this trust and it builds up over a number www. Now. they wanted their share now rather than when the parents died. he went to the solicitors.From Virtually Zero to $3. which was the right thing to do. you have got to understand it and get that right.
this structure is useless unless you use specific wording in your trust to guard against that. you then only expose yourself to losing one property. I am recommending corporate all the time and this is ideal as a hybrid trust for a business. They cannot go to the directors because they are not doing anything wrong. So again. their spouse can step in and it goes to their estate.From Virtually Zero to $3. But.5 million. Hybrid Trusts A hybrid trust is a combination of a discretionary trust and a unit trust. So. they won’t get any of that million dollars.000? They can’t go to the beneficiaries so they go up the line and if the trustee is an individual. individual or corporate. so they sue the trust directly. It does not do anything. It will protect their principal place of residence or anything else that they may have in any other structures. it does not have any assets and cannot trade insolvently because it does not trade. We own this business 50/50. They should own their shares in a personal family www. I am now in business with someone else. The company is a $2 shop company that does not trade. so it is clear ownership of this business. So that is the end of the line. This is because now the lawsuit would be suing the trust not the beneficiaries. The lawsuit is going to the trust directly which is why you are only able to put one property in one trust because at any point in time. guess what? All the personal assets of the trustee are now up for grabs. What are they going to do about the outstanding $500. If lawsuits took place and they sued the owner of the property and the owner of the property is now the trust. because you have fixed entitlement to ownership.5 Million in My First 18 Month in Real Estate of years and this trust actually owned the house in Brisbane that had the illegal step height that I mentioned earlier. To illustrate this. As soon as anything happens to this person. I am not going to go into business with someone else unless they protect their side. not the rest of your empire.com. Again you have got trustees. It gets taken into my will and all the rest of it. let us say they win the lawsuit and they are awarded $1. They can sell their half independently from my half because I only own half the company.knowledgesource. but the best strategy is to not be there as an individual at all and appoint a company as trustee. I am not in business with Derrick anymore.au/dymphna 26 .
it is net zero for tax purposes. For business purposes. The one on the Gold Coast is mutually geared. The one in Dubbo gives us $10. we have also got beneficiaries.knowledgesource.au/dymphna 27 . It will cost us $30. but as well as the units.000 a year to keep. 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.com. the only thing that is exposed is whatever you own in that particular trust. So for tax purposes and income purposes. we can put money anywhere we want which is fantastic for reducing tax. so it does nothing at the moment. It does not affect your principle place of residence or anything else that you own elsewhere. one in Dubbo and one on the Gold Coast.5 Million in My First 18 Month in Real Estate discretionary trust as would I.000 positive cash flow so is a positively geared investment property. because of the beneficiary group and the discretionary side of things. www. The one in Sydney is negatively geared. We have protected the properties by putting them in different structures so if anything happens on any one of the properties. my own. Superannuation is basically a form of a trust.From Virtually Zero to $3. That means that you can put money into any of your company’s trusts or anywhere else you see fit. it would affect the other properties. We are going to buy one in Sydney. Example: We have got a company and directors of the company and we are going to buy three properties. 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.
com. therefore it is clearly divided from the others and there is no overlapping.au/dymphna 28 . you would put a company on top of each one because your company is your separate legal entity. 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.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate There is a school of thought that says in this structure.knowledgesource. But to get around this. www.
but that is overkill and unless there were three separate businesses.com. Let us have a look at a typical business and investment structure: www.au/dymphna 29 . They could also be set up as hybrid trusts. It is a registration thing.5 Million in My First 18 Month in Real Estate It is a practicality thing as to why you might choose the earlier one to this one. I would not go that way. 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.knowledgesource.
shares in other companies. 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.com. www. It does not interact with the public. has no employees.000. but rather than pay tax in their own right. they pass the income through to the beneficiaries. units in other businesses. The income is passed through these vehicles.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. It is the ultimate owner. does not do business. gold. Dubbo + $10. For tax purposes. we know what income each of those trusts have. the business would not be under the same structure as our investments. does not own a car. etc. Then we could also have a piggy bank trust that would be the ultimate owner of everything. It is protected.au/dymphna 30 . It is the ultimate.5 Million in My First 18 Month in Real Estate Going back to those three properties that were purchased (Sydney $30. If there is a business. It is the trust that if you have two children where you can split the trust and divide your assets between the children while you are still alive rather than being passed on through a will or estate or anything else.knowledgesource. through it you can own shares. a coin collection. This trust would be the one that owns the shares in the trustee company.
000 from our $100. At this point we have done everything that we can possibly do to minimize our tax payable in the business. Let us have a look at the flow if this income for tax purposes.000 off against one of the others so we distribute the $10.knowledgesource. We still make $100. So the best that you can really do from there is form a ‘bucket company’ to put the remaining money in which pays taxes at $0.000 to the $-20.000 and 0). we have got that plus we still have the properties (.000 to do something with.From Virtually Zero to $3. as they have already been paid salaries and don’t need any more. we pay ourselves a maximum salary. we are going to be in the top tax bracket.000 www.000.$30. We could invest or buy property with the $80. + $10. The three property trusts now all have a zero tax implication but we have still another $80.000 and it pays the tax on it. 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.5 Million in My First 18 Month in Real Estate To add to the example.000 so that trust also becomes zero. So we have maxed ourselves out. The company is the corporate trustee.000 becomes $20. with no earned income. Then we take $20. So now.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. First of all we write the -$30. We put the maximum amount we can into superannuation which can also be a tax deduction and we pay the kids. so that leaves $56. We give our children that are under the age of 18. which is going well. Tax would be about $24. let us say that in this business that we have.000 business trust which now becomes $80.000. $772 because that will be tax free.au/dymphna 31 .com. It cannot be given to the piggy bank trust because the piggy bank trust is purely a pass through vehicle.000 and distribute the $20.000 but we would still have to pay tax on it before we do.000.000 out of one trust and into the other so we now have two trusts with zero and the trust with -$30. so that if we take any more income.
In a newspaper article a few years back. Mercedes and the $7 million family home into the wife’s name. but like the piggy bank trust do not ever. you did not really want another property this point in time but you wanted an extension on your PPR (Principal Place of Residence). tighten out further registered mortgages for asset protection purposes. It is the perfect vehicle. and take out mortgages for protection. lend money in the structure. for tax purposes. etc. it has friendly debt. The $56. Let us say. The company’s sole job is to pay tax.From Virtually Zero to $3.000 as a deposit in that trust to buy that property. Now we have run out of money so if we were to purchase more properties we would need take out a registered mortgage through the company. and do not do anything else in that company because it compromises this integrity. The rest of the money would be lent from a bank or a financial institute. do not buy any asset directly. transferring the Rolls Royce. 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.au/dymphna 32 . Do not buy a car. It also talks about Rodney Adler and Ray Williams. Its sole purpose is to pay tax and lend money in the structure. it talks about some high-profile business crashes. do not have employee. ever.000 would be enough for a deposit on another property. They would have had full recognition and knowledge of pending litigation. It tells of one of the founding directors of One.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.Tel who transferred the $6 million family mansion solely into his wife’s name.knowledgesource. ever let anything hold you in there. through a company and trust’s name. do not interact with the public. www.com. Because your debt is going up as your property goes up your protection is going up also. 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. former directors of HIH Insurance. To purchase this new property we would form another trust and use our $56.
These assets probably still exist and are protected today even though he went through the Bankruptcy and Criminal Law Court. Allan Bond. this is really close to my heart. One in particular was Mr. who divested $60 million into trust at the height of his power. 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. where the man in the family controls all of the finances and he owned all of the assets. 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. He could not speak or communicate in any way. because my father (he was 51 when I was born. somebody else can act on your behalf. had a stroke and became incapacitated. it needs to be reviewed. Another important thing that is usually taken care of when you do your will is an Enduring Power of Attorney. the bank accounts were frozen because she had no authorization. but not dead. At the time of his stroke. Now.From Virtually Zero to $3. He was pretty old school. This is why it is so important to do it early not when it is nearly too late. the bank accounts.au/dymphna 33 . well before any bankruptcy proceedings. so I did not know much about his financial situation) who in his early 80’s. Get it right from the beginning and grow your tax efficiency accordingly.com. 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. Dad was in the middle of selling one property and buying another so the family incurred $25. if you haven’t reviewed your Will for a number of years.000 worth of interest and www. that if you are incapacitated. that in most cases says.knowledgesource. because they were in his name. pretty much everything and my mother was very reluctant to take over that role. An Enduring Power of Attorney is basically a single page document.
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. so a Prenuptial Agreement can be very important. Prenuptial Agreements never previously held up in Australia.com. 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.From Virtually Zero to $3. I can’t stress enough the importance of having an Enduring Power of Attorney in place. who hooks up with some guy that you may not approve of and they strip the assets from the trust and move on. You need to be aware of how these things play out so that you can protect yourself at all levels. Asset protection is effective for our current society with all litigation and legal issues.knowledgesource. 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. Imagine passing your assets down to your child who is relatively young. That whole experience cost my family an exorbitant amount of money simply because that was the way things were always done. Succession planning and the ownership of an asset is very. but they do now— straight out of the American courts. You can safeguard against this by establishing a ‘Bloodline™ trust’ where the beneficiaries are required to remain within the bloodline. 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.au/dymphna 34 . 22% within 20 years and 39% within 30 years. rather than you or how much interaction the new spouse might have. 19% within 10 years. 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. We talked about Australia following the footsteps of America. as in direct descendants or a www.
the trustees formed and from there a Bloodline™ trust created. So substitute the word company in the following extract. The family asset that you have at that point in time can then only be passed within the bloodline. you want a clone of you actually doing the business.5 Million in My First 18 Month in Real Estate blood connection depending on what you specify of the primary beneficiary. If you are serious about doing business. the reason being that if you give up your principal price of residency you will lose your capital gains tax exemption and have to pay tax on your property when www. Now. You do not want to do business or own anything as a private citizen…. If you want to be a rich private citizen. you would still have your home in your name. want to own everything in their name. especially in this day and age of lawsuits.knowledgesource. we do not have C-Corporations in Australia.au/dymphna 35 .” Extract from Rich Dad’s Guide to Investing by Robert Kiyosaki It is a beautiful statement and never a truer one. you need be as poor and penniless as possible on paper…. so you actually have control. A C-Corporation has the ability to be a clone of you.. While you are alive you could be the discretionary trustee or a director of corporate trust. Primarily. You can also have a testamentary Bloodline™ trust. on the other hand. “A C-Corporation is another you. it is worth thinking about. then you do not want to do business as a private citizen. That is too risky. The poor and the middle class.From Virtually Zero to $3. I call anything with your name on it ‘a target for predators and lawyers’.’ they call it. It is not just an extension of you. the assets that are put into a testamentary state. so that upon your death. When you do business. but if you want to have a little bit of say as to what is going on after you have gone.com. Although it is not really relevant while you are alive. ‘Pride of ownership. They have SCorporations and C-Corporations in America whereas we only have companies.
your company at that point of signing the contract and entering into that agreement and settling on the property. What name do I put on the title? The name that you should put on the contract can vary from state to state.com. Whichever state you purchase in. Do not do it the other way around. the titles office only accepts the legal entity. New South Wales and Victoria are a little bit different to some of the other states. If you are putting something in to a company with a trust underneath it for instance.From Virtually Zero to $3. What we then need to do is to determine that in New South Wales. you will need to do a company unit that essentially says. Look to have your property protected through internal debt. you can actually put ABC Proprietor Pty Ltd as Trustee for the Wombat Trust on the contract. So for example the title on the deed will say ABC Pty Ltd for instance.5 Million in My First 18 Month in Real Estate you sell it. Think about why you are doing something first. just make sure that one way or another you identify the trustees that are buying www. is acting on behalf of the Wombat Trust not the Alpha Omega Trust or any other trust that you might have. you will have to pay stamp duty to do this but may be a worthwhile option. In other states. Once you have decided that the investment decision is right.knowledgesource. If it is acting on behalf of the Wombat Trust. it will not say ABC Pty Ltd as Trustee for the Wombat Trust. Do it because it is the right thing to do from an investment perspective first. not just because you want to save $2000 or $3000 tax. 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. in New South Wales. on that present day. and insurance and potentially through structures but only as last resort. ABC Pty Ltd entered into a contract on behalf of the Wombat Trust to buy XYZ Property. then decide how you are going to structure it for asset protection and make it the most tax efficient. With assets that you already have sometimes it is worth while transferring them into another structure. and it clearly identifies the trust from which you are acting.au/dymphna 36 . external debt.
com. It was owned by a separate company and trust. The company that was actually doing the construction did not own anything nor did they employ anybody. 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. you should have. is something you also might want to keep separate.knowledgesource. The equipment that it was using was owned by another structure and the people who drove those machines were employed by another structure still that hired its services to the operational company. So. What you are primarily doing is separating all of your properties from each other. Being market ready is so much more www. So it was the operational company that was sued and after a series of searches it was found that it was all too hard and didn’t progress any further. Having plant and equipment. What if I find a great deal and I do not have to structure yet? Well. all of your properties from your businesses and all of your endeavors from each other to reduce their exposure to risk.From Virtually Zero to $3. One of the most important things in property investing is being market ready.5 Million in My First 18 Month in Real Estate the property. it depends on what you want to do. they dug up some fiber optic cables which resulted in a lawsuit for $22 million! Fortunately the land was not owned by the same company and trust that did the construction. LLC’s predominantly. the ownership of which is an asset. The company had contractors and employees and in the process of the excavation. but also legal entities that are appropriate in the other countries such as America.au/dymphna 37 . but it is the company that is the legal entity. There was a construction case in Sydney a number of years ago where this construction company was digging on some land. 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.
If you are renting your www. for the depreciating value of the building or fixtures and fittings that might be inside that particular building. 1985. Tax There are a number of tax laws that you should know if you are going to be a property investor or in business. Although depreciation is fantastic you do need to be aware that when you sell the property. saving and lots of other things. To claim any depreciation on your tax return you will need a qualified quantity surveyor’s report. they reduced it to 2.From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate than just deciding that you are going to start investing. On July 18. structuring. It is the tax deduction on your properties.au/dymphna 38 . depreciation is a tax deduction for not spending any money. First of all. Home Offices Another tax deduction is if you are running a home office. getting your tax returns up to date. 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. When the law was first introduced. If you had a property that has had a major renovation since July 1985. If you have a separate office that is one-tenth of the size of the house that you live in then you can basically claim one-tenth of the electricity as well as the depreciation on the carpeting in that office. the computer. 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. 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. you will be able to claim some depreciation as a tax deduction regardless of whether you have spent any money or not. the filing cabinets. the rate you could claim was 4%.com. but in July of 1987. for instance if you are a teacher and you mark papers or prepare classes at home. even the brief case that is use to carry all of those kid’s papers to and from school.5% and that is where it has remained ever since.knowledgesource. desks. so much more than just being ready to invest. So if your building that you bought as an investment property was built after that date. the professional library. It is finances.
However. you cannot claim one-tenth of your interest bill. the tax deductions for that entity are suddenly now much broader. when you sell that property. it includes set amounts for accommodation. then regardless of how much money you actually pay for your accommodation. the amount will go on your employment summary (or group certificate) and you can claim www. it becomes your place of business rather than a home office even if it is the same one-tenth office size.5 Million in My First 18 Month in Real Estate home you could claim one-tenth of your rent but.From Virtually Zero to $3. A place of business is different in that it means that you can claim all the same things as a home office.com. but additionally. These are the sorts of things that you can claim for a home office. went to check on this site. all of your travel would be tax deductible. if you own the property. Let us say you are a property investor or you take it a step further and are a developer. 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. Travel Allowances If your employer agrees to pay you an allowance. will be subject to capital gains tax on the same percentage as what was claimed. if you own your property. lunch and dinner and an additional amount for incidentals (the tables can be downloaded from the Australian Tax Office website). However. one-tenth of the gain that you make on your own home. If the travel allowance is paid in accordance with what the tax officer has set down to be a reasonable rate for rural Queensland. So you have one structure that is subdividing. your business now is property. or building units. whatever.knowledgesource. if you are an IT consultant and you actually work or conduct your business from home. breakfast. which would normally have been exempt. But again. Travel Expenses Firstly. if you were an employee of that entity that owned this development and as an employee. if you visit the construction site to things. 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.au/dymphna 39 .
However.From Virtually Zero to $3. you are in effect selling a new property. you would not have had to pay any capital gains tax at all.au/dymphna 40 .com. 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. 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. so you claim it as a fully expanded amount in your tax return. 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. when you sell it. If you decide to sell it one day after the two years since great Aunt Bertha died you will have just made a fatal mistake. you contracted the builder to build house and then you decide to sell it after either living in it or renting it. That can be thousands of dollars unnecessarily. These are the types of things that you start to bring in to your reality. GST If you do a major renovation on a property and you substantially change the nature of your property. or directly after its completion? You have now. Therefore. What if you bought a house and land package.knowledgesource. You can do that for up to 21 days away. You need to be doing this stuff automatically. created a new property therefore it is subject to GST and you have to pay GST when you sell it irrelevant of whether you can charge the GST or not. it is now a new property and there is a GST charge on new property. So there are all of those types of things that you need to become aware of so that you are not ignorantly selling Aunt Bertha’s property two years and one day later and having to pay capital gains tax. It becomes part of the sale price which affects your profit. 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. because it is paying within the accorded limits.5 Million in My First 18 Month in Real Estate that entire amount on your taxable income without requiring any substantiation. Alternatively if www. It also applies to international travel and the rates are all set down depending on what country you are in etc.
You have to pay more in stamp duty because of the higher value when you bought it. if you needed security for instance and you had a business where you might need a guard dog to guard your property. 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. anything associated with that security would then be a tax deduction including dog food. A security measure needed for an opal miner to protect their opals is to protect from what they call ‘ratters’. vet bills etc. Looking at this. I had a lot of clients at Lightning Ridge. So one of the security measures that miners employ are not dogs. 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.au/dymphna 41 .From Virtually Zero to $3. He is the one that has to pay GST on it.com. but it is not the first sale. 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. www.5 Million in My First 18 Month in Real Estate you actually kept it and rented it for five years you would no longer have to pay GST on it because it is no longer a new property. So for an opal miner.knowledgesource. and this is not going to be a Chihuahua. If you bought the property as house and land package from the builder complete. but black snakes. Many years ago in my early years in my accountancy practice. you do not have to pay GST on the property because the builder was the first sale to you. Other deductions How can you claim a tax deduction for dog food? It is a funny question but it is a valid one.
It came in regardless of anything else that I did. whatever. That meant that following 12 months I then starting investing and in that 12 months that was the time www. that is your purpose for doing it. gaining experience. Cash cows give you lifestyle. what I am talking about is having a property that you do something to. learning. You are doing something to a piece of real estate to make it worth more. getting out there and doing as much as I possibly could to learn. there are only two kinds of property. income properties or what I call cash cows. Cash cows are there to produce an income stream for you. 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. When I was going through my early years. did not have to get out of bed for.From Virtually Zero to $3. You buy them to create income. as much as possibly could to try and cement in my head the strategy that was right for me. cash cows were the things that made the difference in my portfolio.000 a year positive cash flow in my pocket made an enormous difference to me. The other type of course is growth properties. it might be doing some hard yards on it or it might be building something. creating something. Now it might be as simple as shuffling paper.000 a year in my pocket made an enormous difference. You create that chunk of money in any economic climate.5 Million in My First 18 Month in Real Estate Income Properties What I would like to cover now is income. That $100 a week from that second property was $100 a week that I did not have to work for. In my initial 18 months of property investing.com. I call them chunk deals. The first property that put $2. Changing something. doing something. Then next one that put $5. There are ‘income properties’ or what I call ‘cash cows’ or there are ‘growth properties’.knowledgesource. This is called a chunk deal because what you do is you create a chunk of money. 6 months was of training.au/dymphna 42 . When I am talking about chunk deals. Cash cows are a property that produces more income than they cost you. Predominantly.
an extra $100 a week. If you are starting with any base at all it is going to be much easier for you. Put the $100 a week that you have created in your pocket or www. 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. They began with negative but have done exceptionally well. let us say. I needed income coming to me regardless of what else I did. what I am saying is it is hard work. it will make a huge difference on your lifestyle. Then you can choose what you want to do. When you get enough of those that you have got your basic needs covered. This is your first point that you can aim for. I have had lots of students that have gone through with me. that is $100 you do not have to work for.com.knowledgesource. Put your peg in the sand and say ‘this is my level of income that I am shooting for first’. 12 months worth of investing. then you have got lifestyle. Some of them started with less than nothing if you can have less than nothing. What I quickly realized was that what I wanted was income. I am not saying it is impossible. When you create that income.From Virtually Zero to $3. I just figured that if I could just get out there and accumulate enough of them then I would have my income replaced. 6 months worth of thinking and learning. 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. that started with nothing. How many people can honestly tell me that they are in that position.5 Million in My First 18 Month in Real Estate that it took to totally replace my accounting income. Because when you can do that. and say okay. Absolutely nothing. So that those little properties put $20 a week extra in my pocket or $100 extra in my pocket. You need to know this because that is your first peg in the sand.au/dymphna 43 . The income that I was working 40 to 60 hours a week for. Then you have got choices. this is what I am shooting for then when you get there and you see that you can achieve this and you see yourself accumulating that extra profit. very similar to myself. that they know how much income they need to cover their basic living expenses? Not many.
you could stop working and still live the lifestyle that you live. creating equity. the job does not exist anymore. you are still in a position of security because it does not affect your lifestyle. This gives you your freedom. If you hate doing what you are doing. what you are doing is you are tying yourself to an alternate income stream to support it. 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. You could go and work part time. It does not give you wealth.knowledgesource. Creating chunk deals. Or you might love doing what you are doing. This gives you lifestyle. a friend gets an illness. When you get to that point where you have got your basic needs covered.5 Million in My First 18 Month in Real Estate reduce a bit of debt meaning you have got more money available when you need it. if you only focus on cash cows. What you need to maintain your lifestyle as it is right now is passive income. That can be a secondary issue. You need a combination of the two. you get an illness. getting out there and manufacturing and making it happen. You have got your basic needs covered. your shooting point that you are going to go for. The Rule of Two www. If you only focus on growth deals. you could go in and work in a foreign mission. What gives you wealth are growth properties. You could choose to go and do anything you want. Creating that benchmark on the side means that if anything should ever happen. You could work full time on your real estate. Anything that you do on the side is a bonus. Mostly.com. I do not care how big your pocket is right now.au/dymphna 44 . you are going to run out of cash flow. not in the short term so it is that balancing act that you have to put into place. effectively. You are going to run out of the ability to continue to exist because if you only focus on growth deals. something happens. This should be your starting point. growth properties that continue to grow and expand and build into much bigger. you are going to run out of equity or the ability to continue to invest. That is what gives you wealth. the company goes broke.From Virtually Zero to $3. then life becomes a choice. greater portfolios the longer you have them. whatever. Neither can happen in isolation. growth properties do not cash flow. this gives you choices.
com. www.000 x 2 = Weekly Rent So if you buy at $200.From Virtually Zero to $3. if you have the purchase price and you divide it by 1. Purchase Price 1. When I talk about the Rule of Two I am talking about pre-tax. 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. Eg. Eg. $200.6 to 1.5 Million in My First 18 Month in Real Estate Let us have a look at some income deals. for not spending any money and being able to get a tax credit back on that.knowledgesource. But this is how it works. you take off three zeros and you are done).000 divided by 1.au/dymphna 45 . This is just the rule of thumb. The Rule of Two says this.You need to be getting $400 a week or more from that property to make it positively cash flowed. I have a rule called the ‘Rule of Two’ and if you have not heard of it. The final figure will vary depending on how much the rates are.000 property. There are a few things you can do to assist in working out this process. you have got $200. It will come in as a rule of about 1.000 x 2 1. The figure that you are left with has to be equal to or greater than the weekly rate for that property to be positively cash flowed.000 is $200 multiplied by two is $400. If you are buying a property that has a large degree of depreciation deductions against it and if you are in a structure that you can claim these tax deductions against any other income then that Rule of Two ceases to be a Rule of Two. you have got yourself a cash cow. it does not matter because I made it up.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. Then you multiply this figure by two.000 (for those of you who are mathematically challenged. 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.7 because it takes into account the depreciation of the tax deduction.
which one of you bought it? All the hands went down.000 (in this case 20% of the property) sitting around in cash. This is a rule of thumb only.000. I acknowledged the ones that rang up and were too slow.au/dymphna 46 . All returning $100 per week.com.000 of that will be secured on the property that you are buying and $40.000 Cash Positive $11. the $40. 10 out of the 75% that saw the ad. This is an ad that was in a newspaper a number of years ago when I was speaking up in central Queensland. $160. If you are taking your $200. My philosophy is that unless you have got $40. I did ring up about it but that was after lunch on a Saturday and they had already gone. you have no debts and you have got $40. 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. Urgent sale . I spoke to the group and I pulled out the paper and read the ad and I said who saw this ad? About 75% of the room put their hand up. it is still 100% borrowing.000. I said what happened to the rest of you why did you not ring up about it? It sounded too good to be true. I was speaking to an audience of 175 people on a Monday night.knowledgesource. Immediately you have now got a reference point to say I am in the money. But those that did not even try were giving up a pension. Too slow. I was one of them.400 Does this make the rule of two? Yes. you have paid off your house.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 $200.000 will be secured on your other property. On the Monday night. They could have been like me.$135. A www.From Virtually Zero to $3.000. you will be borrowing $200. I said who actually rang up about it? 10 people put up their hands.000 out of equity out of another property to go and buy this particular property. it does. Either way. 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 in savings. Fantastic. I have got a cash cow in my hands. you are still paying interest on 100%. we are talking about paying interest on $200.000.
400 index pension not only for life but for generations ahead would cost you in excess of half a million dollars. 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. When I say a direct cash cow. it would just be shuffling paper.everybody.knowledgesource. These are the ones that are harder to see.com. To buy an $11.au/dymphna 47 . it is like the one I just explained. So those people who did not even try were giving up a lump sum benefit of half a million dollars. They are going to be muddled in amongst everything else and maybe it is your own ignorance that stops you from identifying the opportunity. it puts money in your pocket.5 Million in My First 18 Month in Real Estate pension for life for as long as they wanted to own that property. Properties that they have driven past everyday for the www. For some of them. From the day you buy it. An index pension because it will continue to increase in value because the rents will ultimately go up from $11. That would be the equivalent to you investing that money and getting that as a pension for life through the generations but with index? It does not make sense to ignore an opportunity like this and the fact is that I reckon everybody in that room had the potential to buy that property .400. nothing more. There are two types of cash cows.400 pension.From Virtually Zero to $3. They do not fit the Rule of Two. I have seen literally hundreds of these deals go by under people’s noses. That is what a direct cash cow is. Why wouldn’t you be excited about an $11. There is the ‘direct cash cow’ and there is the ‘indirect cash cow’. Quite likely that will be the case.
Some idiot did. So that was a chunk deal. It was on a busy road and one day when he was driving past he saw a sign on it. it was a very old. He thought. Then about nine months later.knowledgesource. last one available and finally all sold. Let me describe this deal to you. you could not really call it a factory. 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. really ugly factory. www. But this time it had an architectural designed picture on the sign and what it might look like if you built something there. What he drove past everyday was an opportunity at a number of levels.au/dymphna 48 . five remaining. they are selling it again. It was more of an old shed. he knew it was a piece of rubbish. When he first started to drive past that property. It was sold again a week later. increased the value of the property immediately.From Virtually Zero to $3. Then some three months later. he thought. there were now beautiful new commercial buildings. Never identified that it was a potential indirect cash cow. A week or so went past and he saw a sold sign. he noticed that there was a sign on it again. but this is zoning to build a certain style.com. He thought it was interesting that anybody would want to buy what he thought was a piece of rubbish. Getting that through the council to say that you can build that particular building there.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. 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 had an opportunity to get in there and buy it initially and get what we call a DA on the property. The opportunity to buy it was there at any point in time but he never recognized this property as an indirect cash cow. after continuing to drive past this same building every day. that picture had now become a completed building with a for sale sign up again. The sign was up there and it said nine for sale and then eight remaining.
This could be anything and this is where the opportunity to make a cash cow is now. 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. 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.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. In this particular case. First of all. He went in and he produced nine commercial premises.From Virtually Zero to $3. This is a complicated structure and it is a little bit more advanced but this kind of deal could have been a little house. not only have you increased the value of the property but you have increased the rent and now it might be a cash cow. in some cases. I get a lot of that particularly from people who live in the city. The next person who came in had the opportunity to manufacture a cash cow. This is where I want you to start tuning yourself. Let us have a look at some of these characteristics. Some of you may not be comfortable with that. www. 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.com. 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. a direct cash cow could be in a regional area. but first there are characteristics that you are going to have to start to look for. in the indirect cash cow market. These are the hidden ones that you would not necessarily pick up on unless you tune yourself into them. It might be buying something that is really old and ugly and run down and making it beautiful and then renting it out and now because it is beautiful.knowledgesource. take the money that they made and pay down the debt that remained on the remaining premises that they decided to keep.au/dymphna 49 . If they did that. By doing this they could take their profit from those properties. 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. This kind of deal could be a subdivision.
What you have got to do when you look at any regional area. whether it be a mining area. I always manage my properties through a property manager and I manage my managers. a rural area or whatever. Rat bag tenants live in rural areas. This is pre-resource boom. you are not managing your manager efficiently.5 Million in My First 18 Month in Real Estate Take that a step further. You should be managing your management agency.com. The reason I say that is because when I see people who manage their own properties. I let the tenant get away with blue murder. Is the town or suburb sustainable? Is it reliant on any one particular industry and if anything should ever happen to that industry. what drives the wealth in the town? Where is it coming from and is it diverse enough and strong enough not to be totally reliant on any one thing in particular? I remember in my early days. I will not manage any of my properties. in my opinion. You can get a rat bag tenant anywhere.au/dymphna 50 . not your tenants. they are not managed as well as they could be. 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. typically. Regional areas generally do have a high yield.knowledgesource. Some more so than others. I think you have to be little economists because what you have to look at is what is going on at a micro economic level. that will be okay too. The issue is your management agency. what drives employment in the town. 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.From Virtually Zero to $3. when you go out of your own suburb. just down the road. Typically. particularly if the owner is a little bit soft like I am. The issue is not your tenant. It is also www. It is safe to do that because you will have good tenants there as well and that is nice and safe from an investment perspective. but they live right around the corner from you no matter where you live. If you have got a rat bag tenant. I actually gave up a property. that you are going to get a rat bag tenant. are we going to be in trouble? What drives the town. But they have this idea that just because you might buy in a rural area. those properties are under market rental. It is not a product of where that property is this can happen anywhere. Typically.
au/dymphna 51 . to pay the repayment on that property and the property was supported by one small to medium industry. I could not withstand that and I said no. a triplex. I could not sign the contract quick enough. In previous years. that property had a positive cash flow of $38. is where you have two or three shops in a row so you have more income coming in from the one purchase.000 and I could not afford if that property was not rented. You might be able to buy something that will you can turn into multiple income streams. Do you know how much difference that would have made to my life back then? Enormous. Houses that you can turn into multiple flats. I could not sign it quick enough now but back then it was too risky for me. The property is worth a whole lot more now.000 a year. 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. not to reduce the rent so that you get a tenant. Multiple income stream properties could be blocks of units and things in the residential market but it could also be in the commercial market. when the nickel price was not so high. probably a whole lot more income comes in from it. something that you can turn into a duplex or triplex or a fourplex etc. Something that you could put another www. I could not afford any lack of rent.knowledgesource. I always look at risk profile when I am making a decision. etc. That property was for sale for $320.5 Million in My First 18 Month in Real Estate pre-me being very financially strong. 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. Had that property come to me today. Upstairs / downstairs rented out separately. Strips of shops.com. strip of shops. That was the potential of this particular property. a fourplex or then you go to a six pack. the more likelihood that the property is going to be a positively cash flowed property. It is a case of board up your windows and wait till the nickel price comes up and the mine reopens. I am talking about a duplex. I had known that town. At the time. So that is where you have got to look to the fundamentals.From Virtually Zero to $3. The reason I refused to buy the property is because in my financial state at that point. You should to. I refused to buy the property.
One of my students bought a block of four units in a pretty sizeable regional town supported by number different industries. Think of what else you can do to create income streams. multiple income streams. Something that you could potentially strata title or subdivide or build some storage facilities or rent out the shed for parking.From Virtually Zero to $3. They put in a lounge and a TV and this room became this little social Mecca where everyone used to hang out. The students who predominantly rented these units invited all of their mates around. a pinball machine. What else can you do to make this thing positively cash flowed? You have got to start thinking outside the box. By renovating you will increase the value of a property.000 and each of the units was rented out for $100 a week. Always www.5 Million in My First 18 Month in Real Estate residence on. But this student did a bit more than that. a splash of paint. from those vending machines. then it could become a manufactured cash cow. The garage gets rented out for storage for $100 a month. In the beginning my reality of how I thought things should be hindered my wealth. hindered my success. a chocolate machine and one of those space invader machines.knowledgesource. It is not quite a cash cow but it is getting there. While she increased the yield on the property for the traditional rental model that she had. put in four washing machines. If my student shares the opportunity to renovate it and increase the rental on the property. In all she put in six slot machines. She then put a bit of a carpet down. a coke machine. So have a look at how you can maximize your income streams. It becomes a bit of a chunk deal on the side and then you may have something that is positively cash flowed. four dryers. hindered my progress. One on my properties in America gets rented out for storage. on average. It was a block of four for $230. As part of her renovation she took this little lean-to in the backyard and cleaned out all of the rubbish that was being stored in it. she cleared an extra $500 a week in coins! Do not think that you have to think inside the box.au/dymphna 52 .com. Most of you will be thinking in traditional mindsets.
what happens is the tenant normally pays for all of the outgoings. How secure is it.From Virtually Zero to $3. 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. They are allowing multiple income stream properties so that you get most people living around where the transport hub. They pay for the rates. Commercial generally has a higher yield on it than residential so the Rule of Two does not apply to commercial.knowledgesource. where they do what I call ‘infill housing’. is it transport. as the case may be.5 Million in My First 18 Month in Real Estate look for areas where there is a higher rental demand. I have got a new rule for you. It is called the Percentage Point Split. they pay for the body corporate. 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. what is happening from fundamental perspective? That affects your yield.com. they sometimes pay for the insurance. Remember how we talked about the Rule of Two. it is lifestyle. In commercial. 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. 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. If you are talking about commercial throw the Rule of Two out the window. Commercial Commercial is a little bit different. What makes people live in an area? Is it employment. and there is a high rental demand in mining areas at the moment. They pay for all that stuff. It does not apply.au/dymphna 53 . Whilst most of you may be just thinking mining areas. It affects your growth. The lease has been set up and they pay for the maintenance and everything else on the property. you are returning 10% on the commercial property and you are paying 8% www. So if you have a property that has got a 10% yield on it.
But. particularly if they are managing the property themselves. they are going to be properties that have been owned by the one owner for a long period of time. what is your Percentage Point Split? Two percent. he would have to pay current market rentals. Smith would not want to increase his rent because. this is now.000. For example: You have little Mr. The other thing that affects our cash cows in the commercial market is the business environment. they are going to go out of business. So. how much possible income have you got? $20. He is got a number of properties. Smith. He has been doing it for 20 years. if Derrick went somewhere else. Mr. He has hurt his arm.com.5 Million in My First 18 Month in Real Estate interest. You can improve the well being of your tenant even if they do not seem to know what they are doing. and have a more enduring positively cash flow property. he has been a good tenant and he looks after things and he does this and does that and whatever else. it is not their problem. They are going broke. you have got to think about your tenant. and he is got Derrick living in one of them and Derrick has hurt his arm.au/dymphna 54 . poor Derrick. So if the property was worth one million dollars. strengthen the position of your tenant. But.From Virtually Zero to $3. First let’s look at the residential market. you have got a vacant piece of real estate. Because. literally heaps of properties around at the moment that are under market rental. Now. Primarily. he manages his property. strengthen your ability and be able to keep the market rentals. If your tenant is losing money. He will keep his rental at a $100 a week which is what he has being paying for the last 10 years. it is your problem because you would not have that tenant for very long. typically. that is even worse. Under market rental Under market rental. There are. 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. www. Now. what happens is. You can help their business and thereby. or talking to somebody on the phone when you are talking about commercial. you have got to pay a lot of attention to the well being of your tenant. that is the rule that you should be thinking about when you are out in the field or on the internet. Derrick is out of work.knowledgesource.
Now. not only to find a property that she could pay $140 a week for. than Mona. Mona. They may have a www. she would wince at everything. fantastic. $80 a week.From Virtually Zero to $3. But Mona found it very difficult. go and do it.au/dymphna 55 . I want the choice to be able to give. if I am a charity. and that this was not fair at all etc. Now.000 a year that I was not getting from Mona. It was managed by an agency. Hang on a minute! I do not care what ‘situation’ she is in. In the same way as residential. Mona was paying a $140. if she goes somewhere else. nearly $4. Typically. No one in the agency was going to say ‘wait a minute. but Mona had it all over this agent. Dear old Mona..5 Million in My First 18 Month in Real Estate I had a property that I bought with exactly this situation. the current market rental at that time was about $220 a week. and she carried on for so long. but she eventually moved on. Mona had paid a $140 since she moved into the block some six or more odd years ago. So. there are opportunities in the commercial market with under market rentals. In the commercial market it is more apparent because their leases may often be longer. Some of the clauses may be increases to market rental or have a review periodically to make sure they come up to market rental. I absolutely support it. in this case. She started to pay the rental but would moan that she was going to leave. It was a block of five units on the Sunshine Coast. If you want to be charitable and you want to give money..knowledgesource. but a lot do not.000 a year to who I consider to be the most needy and to me Mona was not that person. I inherited one tenant. 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. 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. It was so appropriate. how come she is getting to pay $140 a week and everybody else is at the market rental?’ It was because she is in this ‘situation’. that she would find somewhere else. but choose where you put that money. but a property of similar ilk that she could pay $220 a week for. You are not a charity in that regard.com. her name was Mona. Mona moaned. So bring things up to micro financial if the rents are lower than they should be. So why would I let that situation continue? There were other more needy causes that I could choose to give my $4. has to pay $220 for that unit somewhere else.
au/dymphna 56 .000 and it was being rented for $20. Have a look for these opportunities. It is set on how much are you getting on the property. Leases and subleases Leases and subleases is where you have a great opportunity to look at the leases.000 a year at a 10% return. Let us say you had the opportunity to buy a piece of commercial real estate for $200. There are opportunities like that everywhere so look out for that in the commercial market. very quickly. when the lease comes. commercial prices are set by the yield. 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.$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.000 by doing nothing other than bring your rental up to market value and getting what the property is really worth. The cap rate in that area is x percentage therefore the value of that property is x. I will not go into this in a great detail because it is a little bit risky.com. Guess what the property is worth now? $300.000. But what happens if that property really should have been bringing in $30. unlike in the residential market where it is set by comparable sales analysis and things like that. you renegotiate the lease up to $30.000. Market rentals might have been going up at 6%. It is where you have an opportunity to take out a master lease and then sublease the same property out. There may be an opportunity to buy in because in the commercial market. You compound that over a number of years and what you are doing is being a charity all over again.From Virtually Zero to $3.knowledgesource. It is a factor of yield. a factor of your rent. www. It is risky in that you are signing a contract where you will be liable for that lease and therefore responsible for it. That is how the price is set.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. Have a look for when leases come up and how much the difference between current market rental on the leasing market and what they are being charged right now.000 . You just made $100.
Are you are going to get much growth out of it? Probably not. whoop? Probably not. The only way I will go into a wrap deal is with somebody else who wants to do the work.500 a year into my pocket year after year after year. This property puts about $15. 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.000 a year into your pocket. My personal bias is that I want to own a property. This is not really a strategy that I personally use. so does it really matter if it is in whoop. It was in a mining town and that it was the ugliest thing you could possibly imagine. The rents go up and you end up paying more than you would have if you just rented the property in the first place. So the only way I will use this strategy is with somebody else. They are ugly units but they are in an area that is a good.knowledgesource. The income on the property is $57. I am not tough enough to do it. It has 0 vacancies. Is this cash cow? It is.5 Million in My First 18 Month in Real Estate Lease options Rent demise and lease options are your typical wrap deals. I have nothing against this strategy.000 to $20. I once bought a property and it probably looked worst than this.From Virtually Zero to $3. absolutely works.com. strong. Zero Vacancy A block of six units at $430.000 Currently returning $57. solid little town.au/dymphna 57 .500 per year. it is just not for me.500 a year.000. Did that property ever go www. It was a block of five units but that property put $27. Example 1: Block of 6x2 Bedroom Units $430. They come under the three different forms primarily and they each have right ways and wrong ways of doing them. Does it matter? Absolutely not. I do not want to be leasing it up to somebody else. It has been supported predominantly by rural industry but they are always going to be rented.
knowledgesource.000 for it.5 Million in My First 18 Month in Real Estate up in value? Not a lot.From Virtually Zero to $3.au/dymphna 58 . www. It could have bought properties that would have quadrupled in value with the same money but did I care. I paid $250.com. I bought this property for cash flow.
From Virtually Zero to $3.000 Rent (p/wk): $110-$120 p/wk per unit. Only 3 blocks away from Central Queensland University and set on 4834 m2 allotment in a quality residential location this modern 11 year old 4 unit blocks consisting of 20 rooms comes complete with a recreation room. representing an 18% gross return (gross not net).00% gross returns. Example 3: Price: $950. 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. 20 UNIT ACCOMMODATION VILLIAGE KAWANA Features: A/C. 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. The figures are based on a 25% vacancy rate and $180 a week. Games room. This property returns $945 plus per week.000 purchase price and there are some left from $265. www.000 so the yields would be even higher.knowledgesource. Laundry. secure fencing and a car-park for car accommodation.5 Million in My First 18 Month in Real Estate Example 2: $945 plus per week represents 18. This investor’s reality returns $110-$120 p/wk per unit.000. 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). Its purchase price was $290. Over Christmas it has100% occupancy.com.au/dymphna 59 . This is based on a $290. covered entertainment-BBQ area.
I will tell you some more stories because many buyers will say to me ‘but you are an accountant.000 www. That is a lot of rubbish.000 $ 10.000 $112. a personal loan. Is that a cash cow? Yes it is. 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.From Virtually Zero to $3. Someone without the kind of programming that I had will find it a lot easier. All of those things made it harder for me because I had to desensitize myself to what was normal and acceptable.000 $ 2. Case Study: Linda & Nick before they met Dymphna I met a lady Linda through one of my coaching programs. 20 units priced at $950.5 Million in My First 18 Month in Real Estate This one here. is in a university campus 20 unit accommodation village. you are different’. in total $186.000 worth of debt.000 $ 7. This is what they did. they were minus $186. a home loan.knowledgesource.au/dymphna 60 . you are an economist. Her situation was that she and her husband had credit card debts.000.000 $ 5. That would be almost $300. So sometimes you have to take the longer view. How much money would we need to buy this property? How much equity will we have to have? 30% at least.com. So they were in 0. But this property puts in excess of $20.000 $ 5.500 $ 30. Credit cards • Bank of Qld Visa • Commonwealth Visa • ANZ Visa • Myer Card • AGC C/Card • American Express Personal Loan Home Loan $ 15.000 that you would need to look at in equity from somewhere else to be able to buy this property.000 a year in its owner’s pocket.000 all rented between $110 and $120 a week. 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.
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
000 for removal and set up and $8.5 Million in My First 18 Month in Real Estate off their old debts and getting rid of what they had previously accumulated.000 renovation the total cost of the house was $82. www.com.000 profit.000 that they could have made if they had had a little more experience but it was still a great result.000 for hook up.000 for the removal house and another $37. Their next purchase was a property in a little town in Queensland. So they made $67. which in my opinion they paid too much for.500. It was rented for $180 a week and revalued on completion at $150. I believe that there was probably an additional $20.500.From Virtually Zero to $3.knowledgesource.000 to $30.000. The purchase was a residential block for $2. Then they bought a removal house. it was $25.au/dymphna 64 . 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.
1 ½ bath for $60 000 delivered and stumped Small Reno $ 10.000 was renovated into a five bedroom boarding house. thank you very much.000. It was revalued post renovation for $250. They completed a small renovation for $10. It is very important that these things are investigated thoroughly.000 for the renovations on this one.000 and had the house revalued $175.000 A similar one for $155. They purchased some land for $3. You must be very aware of the fire ratings. Reno costs $ 15.000 Profit $ 102.000 Renovated & turned into 5 brm boarding house. They moved a three bedroom house for $60. It is much harder to get insurances and make sure you get all of the correct licensing in place.040 per www. delivered on stumps.knowledgesource. So they did a similar deal in the same town.000. Revalue (post reno) for $250. So they spent $15.com.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.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. have fire alarms installed and all other fire requirements that are necessary. Deal 5: Price $155.000 and that is $102.5 Million in My First 18 Month in Real Estate Deal 4: House block – Same small town Asking price $ 3.000 profit on that property.000 with a rental return of $27.000 Profit $ 80. Boarding houses can come with complications.From Virtually Zero to $3.000 They bought it! Move a 3 bedroom.au/dymphna 65 .000 Revalue $ 175.
www.000 as well as positive cash flow. It now had an additional value of $80.com.From Virtually Zero to $3.knowledgesource.au/dymphna 66 .5 Million in My First 18 Month in Real Estate annum.
Purchase price was $155. total cost of $164. Lots of hiccups with this house. They agreed to buy a house under market value for $125. 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 Rent $200 /w Immediate Profit $35.000.000 $220.000.au/dymphna 67 . They put in a new kitchen for $7.000.com. They made an immediate profit of $35. a profit $56.500 $ 1. Deal 7: Purchase Price New Kitchen Legals Total Cost Re Valuation Profit $ 15.000 and revalued it immediately at $220. www.000 Another joint venture. Lender Cancelled Settlement. Just in time a friend came to the rescue and they did settle and it was immediately revalued at $160.000. 000 $ 7. Begged & borrowed – settled with cash. Approached bank to finance within hours of settling.500 a few extras. They could not get the finance by the settlement date as the bank backed out and did not approve their loan.5 Million in My First 18 Month in Real Estate Deal 6: Agreed to buy house (under market value) $125.000 Another joint venture.000. it was a great deal but they had a lot of hiccups. Had unconditional approval from non conforming lender . they still could not do one on their own.knowledgesource.500 $164.From Virtually Zero to $3. Between signing contract and bank valuation another house 4 doors down sold for $160.hours before an extremely delayed settlement.000 with the rent at $200 a week.000 $ 56.000.
Like them.au/dymphna 68 . but it is not going to be easy. They could do the work and make it happen. They did not have any money.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. you can make it happen and you can make it happen surprisingly quickly.com.From Virtually Zero to $3. It works for them because they could do the work.knowledgesource. www.
New everything except bath tub & Toilet. This was their first own deal.000 Next they bought a three bedroom and one bathroom house on a large corner block. Deal 9: Bought a 1 bedroom house for Agent estimated real value at Tenant in place for Profit $63 000 $75 000 $125 / week.knowledgesource. $12. They spent $22. Joint Venture Summary Property Profit JV 1 $ 78. They did this all that in 12 months. 1 Bathroom House on large corner block Asking Price $ 67.500 and renovated over 3 ½ months and then rented it at the end for $220. Painted everything! Reno Cost approx: $ 22.000 JV 3 $ 67. It was revalued at $130.000 Desperately needed renovating.000 The second place they bought on their own was a one bedroom house for $63.5 Million in My First 18 Month in Real Estate Deal 8: 3 Bedroom.000 $ 48 $ 80 $ 49 $ 61 $270 Cash Flow / wk / wk / wk / wk / wk www.000 so they put a tenant in place for $125 as it already had a profit of $12.000 JV 2 $ 80. It is not a lot but it means that there is a future. The agent estimated the real value to be about $75. The asking price was $67.com.000.000 JV 5 $ 80.500 JV 4 $102.000 Paid $ 65.au/dymphna 69 . They paid $65.From Virtually Zero to $3.000.000 Renovation took 3 ½ mths.000.000. Rented for $220 / week Re-valued House $130.000. It desperately needed a renovation.
She asked them to give her six months to try and get the development approval for them.500 $578 / wk Now. she went to her friend’s parents and told them that she had put together a feasibility study as part of her program and that she had been doing a lot of extra training and that she was learning how to do what the developers actually wanted to do on that land.000 $-42 / wk JV 8 $ 47. it would be worth much more. I said if she was prepared to stick her neck out and make that happen. they are the JV’s and obviously. 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. She said that she could do that work for them and that if she managed to obtain development approval on that land. 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. How to actually submit the paperwork with all the councils.com. Anyway. 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.000 $ 82 / wk Own 1 $ 47.000 $ 82 / wk Own 2 $ 12 000 $ 20 / wk Total $557.au/dymphna 70 . She said that they wanted subdivide themselves but didn’t know how to go about it so she thought that she could maybe do it for them. They had been offering them as much as $1. to let me know.5 Million in My First 18 Month in Real Estate JV 6 $ 35.2 million to buy the property to develop it. Another one of my students did a no money down deal as well.800 $ 11 / wk JV 7 $ 56. that has to be shared but basically. to speak to me throughout the process and she ran into any difficulties.From Virtually Zero to $3. The parents agreed and as part of the agreement she did it together with www.knowledgesource. I was talking about growth strategies at one of my workshop events spoke about how to actually do a development approval. 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.
any extra money that was made over the $1.au/dymphna 71 .2 million that they were being offered for their property. She and her best friend now had $100. Part of the deal also was that any profit. She got them to sign a few forms that she put through to council but unfortunately she was a bit optimistic with the six month time frame and could not get it done in that time. But her share would be split with the daughter.000 out of the deal .5 Million in My First 18 Month in Real Estate her friend.knowledgesource.000 to start their own property portfolio to buy their very first homes. that she could create by doing that development would be split 50/50. her friend so their daughter was getting a quota and learning the process.000 went to the parents and the remaining $200.com. any increase in the value. Would that not be a really good kick start to get into your first property at the age of 19? www.From Virtually Zero to $3. It took her nine months to do. That meant that she got $100. their daughter and through this process she would learn how to do this also.000. but she increased the value of the property by $400.$200.000 got split between her and her best friend.
000 spend is not too bad but is it going to cost 30% equity because it is commercial. The passive income on this particular property was just over $7.025 Another story starting with no money.000.800 income coming in.au/dymphna 72 .5%) Mgt Fees ( @ 8%) Passive Income $175.025 passive income for a $175. In this instance they used applied knowledge to make it happen.com. www. In this case the tenants paid the rates but they did not pay the insurance and there was no body corporate. it does not have to be with millions of dollars. If you are paying 8% at the bank. New South Wales for $175.000 is $6790.000 $ 20.88%. NSW Commercial Office $175.800 $ $ $ 0 650 $ 13.88% of $175. This was a little commercial property in Reginald.88%. Upstairs was actually residential but it was all under a commercial lease and rented together.5 Million in My First 18 Month in Real Estate Example: Reginal. the percentage point split is 3. $7.125 0 $ 7.88% 2 Bedroom Unit Upstairs + Commercial Shop downstairs Analysis: Purchase Income Rates Insurance Interest ($175. 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. There was $20. Everything was done through their solicitors. When you start with commercial properties.From Virtually Zero to $3.knowledgesource. 3. ROI or Return on Investment of 11.000 that was rented for $400 a email@example.com Current Rental $400/wk ROI 11.
000 or not. How do you compare two deals like that? The answer is in the calculation of an opportunity cost analysis.000 into this deal as opposed to www. opportunity cost ROI.com.500 is required plus approximately 5 % in estimated costs to cover other bits and pieces involved in the purchasing of the property. It is 12%. to be able buy this property.000 which is the passive income that we have got coming in for the opportunity cost of investing $58.5 Million in My First 18 Month in Real Estate Let us look at those figures.000 that I am choosing to put into this deal that I could be putting somewhere else. In this case.au/dymphna 73 .000 but the next deal might require $200.000 to get into this deal so that is $58. In this particular case we have got $52.knowledgesource. it would depend on whether the owner is actually registered for GST as to whether that is plus GST. Your real return on investment is infinite because the entire amount was borrowed but what is important is your opportunity cost ROI. It is $20. So $52. 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. How do I get 12%? $7.000 worth of equity? Is this deal good enough? This deal might require $58. This is where your opportunity cost analysis starts to come in. How much return am I getting for the opportunity cost of investing in this deal versus this deal or what else could I be doing with my $58.From Virtually Zero to $3.000 so in this instance you would not have to be registered for GST so it would not come into it.000. To work out the passive income on this property the ROI we are actually working out is based on paying interest on 100% of the mortgage.000) that is going to be required in equity or money from somewhere else.500 (30% of $175. This is a calculation that gives you the ability to be able to compare one investment with another. It is going to cost $58.000 worth of income but you do not have to be registered in the commercial market for GST and collect GST and pay GST etc. unless your income from your commercial property exceeds $75.
5% yield. So you need to think where else could I place that money and get about 19.5%.000.au/dymphna 74 .000. Since I have no money to invest.5% is going to pay the interest on the money where I borrowed the $58.5 Million in My First 18 Month in Real Estate another deal. gives you roughly 12%. I am actually getting a 19.com. I need to ask myself if I could a 12% yield somewhere else because really if I am paying 7. my real yield on this property is actually 12% plus 7. I am actually investing money through borrowing the lot. But 7.5% return.000 divided by $58. So it is 12% return investment.knowledgesource.5%.From Virtually Zero to $3. www. So $7. 12% after paying interest on my money.
5 Million in My First 18 Month in Real Estate Analysis Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $175.400 The place you could get more return would be in another property deal.000.com. UNIQUE INVESTMENT OPPORTUNITY Sale by Negotiation $300.000 $ 7.500 $ 5. . You are not going to get it anywhere else but I am biased.$30.au/dymphna 75 . I saw an ad to sell their sign business and this little piece of land for $300. So they went to the council that owned it and actually negotiated to buy the land free hold. There was a particular property that was one of those properties that I drove past for 10 years on the way to work.050 Positioned at the entrance to a thriving retail/commercial estate. They sold enough signage so that in a few years’ time.knowledgesource. In some instances.900 $ 58. This particular property is a handkerchief sized piece of real estate on the corner of an industrial estate. www. 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. 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.a. Then what they did is they erected signs and went about and started selling signage to the local businesses. This is a rock solid investment that will continue to perform.025 Infinite?? 12% $ 52.000 plus GST promising a 10% return on your money.00 + GST MAROOCHYDORE Unique investment opportunity on a dedicated signage site located on the Sunshine Coast yielding 10% nett p.From Virtually Zero to $3. This little handkerchief piece of real estate used to be just a hedge.
000.com. $300. I know and he said I can get more out of this. Or that somebody that I trust implicitly has not seen. not gross.From Virtually Zero to $3. Which now makes that property worth $400. Passive. There it is: $30. Now.000 purchase price and it cost you 7.000 return. You would get 2.5% or 8% let us say to pay the interest on your $300. She is a New Zealander and this property was actually in New www. 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.000 purchase This is the same amount of money as what it would cost to buy a four bedroom apartment in a university complex.knowledgesource. $10. The property in the neighbouring suburb will go up more than the retirement village property but I have a bit of bias to this style of investment. your property is going to be trashed and you will have to replace everything. Only in five years time.au/dymphna 76 . Buying sight unseen Always do you due diligence. It is an opportunity that everybody including me drove past and missed and it is a cash cow in a high growth area.000 worth of income. I am going to sell signage on the other side particularly the front ones and he actually erected one on the other side. People driving the other way can see those signs. The person who bought this business.5% or 3% roughly on your $300. This is a perfect example.000 income coming in.5 Million in My First 18 Month in Real Estate If you were offered a deal that had 10% return on your money. on something that was totally hands free and you did not really have to do very much with it at all. 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.$510 a week return on a $250.000 .000 a year so it is now $40. There is nothing on the backs of those signs. the interesting thing with this one is that it is a business model. I am not a great believer in buying a property that I have not seen. He was able to increase the income on this property by a third. There was a lady in one of my mentoring programs who bought a property. would you be interested? Yes.
000.5 Million in My First 18 Month in Real Estate Zealand. The vendor however said that this was not a problem and that he would provide the finance – at a 10% interest rate. There had been little fire that burned out the street so naturally she wanted to get out of the contract. That is the only reason she got out of that contract so worse case scenario. 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.From Virtually Zero to $3. a property is for sale for $550. She wasn’t overly concerned because she thought she could easily get out of the contract due to the finance clause. Unfortunately her contract only said ‘subject to finance’ . It was a block of four units that she could buy for $176.com. She had to legally accept his offer of the finance. In the contract she made sure she had a pest. It did not so she had no out. Advertisement Block of 4 x 2 x 2 Price $550. building and finance clause in there. if in doubt.000 Brisbane: 105km (direct line) “Perfect Investment” Both sets are excellently maintained with one block www. try crying! Example: Here are some other scenarios. 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. 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. it was now burnt out.knowledgesource. It had positive cash flow and sounded fantastic.000 and the rent on it was really good. A typical example is 100 km out of Brisbane. Previously I mentioned under market rentals and things like that.it should have said ‘subject to finance sufficient to complete to buyer’s satisfaction’. 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.au/dymphna 77 .
but because it is eight units it is considered a commercial deal. 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. 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.320 a week. 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%. It does not sound like a lot but when we look at that. Unit blocks of this caliber rarely come on the market so act quickly. However in this instance they did actually only put in 20% which means they have obtained finance as a residential property.5 Million in My First 18 Month in Real Estate undergoing a refurbishment in the last five years. www.com.knowledgesource. There is a total return of $1150 per week potential to increase rents to $1320 per week. Fully tenanted and showing excellent returns and located in a top class east side location.150 a week and could probably be increased to $1.From Virtually Zero to $3. 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. Under six units is normally considered residential depending on which bank you are dealing with but complexes above six. first of all.au/dymphna 78 .
366 Infinite?? 7.000 $ 59.320 so that is $170 a week extra. Taking out the costs such as the interest rate.9% real return on the property.knowledgesource.000 $ 17.366 as passive income. We are going to have to put in 20% plus our costs that we will round off at 5%. you need to work out what the opportunity cost ROI is.000 $ 9.250 $ 4. $9366 divided by $127.150 which is the equity that you have put in from somewhere else.com. This is pretty good but the property was under market rental. The fact that you are paying 7.From Virtually Zero to $3.000.au/dymphna 79 . Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $ 550.000 with the income just under $60.366 Passive Income This property was $550.500 $ 900 $ 41.784 $ 9. is the passive income. Remember that we have $1.5 Million in My First 18 Month in Real Estate Analysis Purchase Income Rates Insurance Interest ($550.5% somewhere else means you are going to get a return of around about 14.5%) Mgt Fees ( @ 8%) $550.4% $ 110. firstname.lastname@example.org $127.150 into this deal as opposed to using that equity somewhere else comes in at 7. The opportunity costs of putting $127.800 $ 3.150 First of all.150 a week as the current rent and it could $1. Our opportunity cost ROI. rates and management fees leaves $9.
5% interest you would be actually paying on the deal it makes the return on that property in excess of 20% return.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. weatherboard home in need of a bit of T.499 Infinite?? 13. Set to the front of an approximately 825m2 block with two road frontage. a duplex.com. Advertisement: 438 Creswick Road.knowledgesource. Why would I be interested in this ad if it was among thousands I have seen on realestate.76% $110.000 What a ripper! This two bedroom with study. Be quick.B.com or any of the others that are out www.com or domain.5 Million in My First 18 Month in Real Estate Analysis reworked Purchase Passive Income ROI Opportunity Cost ROI Deposit Required Costs @ 5% $550.150 $127. Ballarat Central Two Road Frontage Close to Lake and CBD $125. Maximum return Look for maximum return on your property where ever possible. more cash cows. All these things create more income.C is located in a prominent central location within walking distance of Lake Wendouree and the C. 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.000 $ 17. or by adding extra dwellings.76% return. whether it be a parking facility.D.From Virtually Zero to $3. Consider putting in storage facilities and things like that.L. to maximize the income from any one property.au/dymphna 80 .000 $ 17. If you add the 7.
I might go and build some storage facilities on the land. Helen was my hairdresser. I can increase the value of the property and I can increase my yield on the property. a Fireman PPR value Mortgage Equity Survival Mode! I would like to mention Helen and Ian. She earned $18 an hour when she came to one of my mentoring programs. It means that I can fix it up and compound my return.com.From Virtually Zero to $3.knowledgesource.000. I can build another residence on the back. depending on the council. This was a multiple use property.au/dymphna 81 . That also gets my attention. Married 3 Kids Financial Position when they started with Dymphna Helen working 6 days as hairdresser and a Ian. 800 square meter block. Case study: Ian & Helen Age 40’ish. I would probably fit four storage units on the back would probably return more than putting something on it because it is not going to cost as much. Because this property has a two lane frontage. the thing that needs to be checked is whether I can actually get across to both sides of the property where I can access the properties.000 and this $590. that means it is probably bigger depending on the council requirements in that area. That is actually what happened with this block. Needs TLC (Tender loving care) – that means it is a renovators delight. By fixing it up.000 www. $18 an hour and that was their financial position at that point in time. The total equity at that point in time was $210. Assuming I can.000 $210.5 Million in My First 18 Month in Real Estate there? ‘Two road frontage’ absolutely peaks my attention. It may or may not.000 property that they owned with a mortgage of $380.000 $380. They had a $590. Alternatively. assuming that is fitting in with the council guidelines of an 825 square meter block.
They fixed a few things up and brought the estimated market value up to $240. It was listed for $228. Deal 2: Block of 4.000 if they would fix it rather than the vendor.au/dymphna 82 .000. In their own words they were in survival mode. market value $240.000.000 They bought an $110. 2 titles List Price Purchase Price Immediate Costs Rented at Estimated value $228. Deal 1: Purchase Price $110. Currently rented $ 230/wk Est. post negotiation. in a regional area and rented it for $230 a week. 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. That was why he was selling.000.com.5 Million in My First 18 Month in Real Estate was where they started with me.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.knowledgesource. www.000 $138.000!!! $ 55. they were in their 40’s. doesn’t need repairs. but they purchased it for $138.000 Good condition. good part of town.000 $ 660/wk $550. The vendor walked away from the problem because he did not want to do it. 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.From Virtually Zero to $3. They had signed a contract at $228.000 Then they bought an ugly block of four units that was on two titles.000 property in good condition.
000 Then they bought a block of land off the plan stage.000 $120. one of an eight stage development which they sold within an eight month timeframe for $120.5 Million in My First 18 Month in Real Estate The property was rented at $660 a week.au/dymphna 83 .000.knowledgesource.From Virtually Zero to $3.000 as well as being positively cash flowed. Deal 3: Land New residential subdivision Sold for Time Frame 8 mths $83.000 and with the problem fixed it was now worth $550. They revalued the property after a few renovations and other bits and pieces and the retaining wall which cost $55. www.com.
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
She bought two caravans. She fixed them up and rented them out. The rental on them was $440 a week. The improvements cost her $3. one for $4.000 + $6.000 for the other. Natasha who was 19 at the time and in party mode when I first met her but prepared to give anything and go.000 $3.Party Mode Cash cows come in many different shapes and sizes.From Virtually Zero to $3. A girl I know.5 Million in My First 18 Month in Real Estate Insurance & other ROI $ 900 26. Purchases Improvements Rental Income Park costs Passive income $13.com.000 and $6.000 $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.au/dymphna 87 .520/yr $4. www.knowledgesource.9% Case Study: Natasha – age 19 .000 but she could not borrow to buy them so had to have the savings help from her father.
000 $ 160/wk She then went on to buy a property in her hometown for $62. Hughenden – Cash Cow Purchase Rental Income Current value $ 35. think outside the box constantly! Equity down. reduce your debt for a higher yield.com. make it. improve for a higher yield. It was a cash cow from the beginning.000 and the rental of the property was $160 a week.000.000 which she did herself with the help of her father. The value immediately after buying it was $40. create more income streams.5 Million in My First 18 Month in Real Estate Ravenshoe – Reno Purchase Reno cost Current value Will rent for $ 62. The current value is $130.000 so although it was not much under market value it gave her a bit of a boost. Characteristics of a manufactured cash cow • • • • • • • • Under Market Rentals Improve for Higher Yield . build it.From Virtually Zero to $3.knowledgesource.000 $130.000 $ 15. The renovation cost her $15. obviously. Creative management.500 $ 100/wk $ 40.500 and was rented for $100 a week.au/dymphna 88 . It cost $35.000 Then she did a similar kind of deal but the next property did not really need much of a renovation. that is the slow method but basically if you are putting money in. it is going to be positively cash flowed and by www.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. think laterally.
That is not what you want when you are looking for a commercial property.000 for the house.From Virtually Zero to $3.000 Converted to 7 individually rented rooms after garage Conversion Costs and some additional plumbing $15. it is your problem.300 passive income per year. you have got to chase it. 3 Bathrooms. so he decided to throw in a car. She took out the lease with the ability to be able to sublease out the other rooms. which may cost www.300/Yr This was cheaper than putting her into housing at the university and he has an asset that is increasing in value. It was a large house and he converted the garages into two more bedrooms. You have got to start to recognize those kinds of deals.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. after renting out the other rooms a $12. He looked at the prices of sending his daughter to university and he found that they were exorbitant. train & shops Purchase Price $265. She gets $12.000 Rented to Uni Students at Positive cash flow $100/room $12. Plenty for the daughter to be able to have some spending money while at university. Large 5 Br house. previously I mentioned when a business not making any money. A new entrance.au/dymphna 89 . close to Uni. Remember. He paid $265. She then subleased all the other rooms for $100 a week. Is it on a busy road? Look at the entrance. This is an example of a business that was not making very much money. a commercial lease.com. 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. So he decided to buy a property near the university.knowledgesource. This property here was a property that a gentleman on the Sunshine Coast owned. He did a lease with his daughter. They don’t. How do you get the real estate to ring you with that kind of deal. His daughter was going to university in Brisbane. DLUG. So that property produced.000 a year to live on while she is at university and it did not cost him anything. Look at what it is needing. Living area upstairs and down.
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. But the difference between her and the kid that would www. a repaint and some signage will mean that the property is worth more. That property could be in a growth area that is positively cash flowed.5 Million in My First 18 Month in Real Estate $25. That is what she wanted to do. She agreed. He would put in the money required to do the project but she was going to be the one to do the project. she used the money from the sale of the eleven to pay down the debt.com. the building and the DA through the council as well as the town planners and everybody else along the way. from the day she was really little. Of the five that she kept. 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. It will increase the business. where you have a property where you might build eight units and you might sell six and keep two. he is a very successful developer. she agreed.From Virtually Zero to $3. She wanted to go to university and she wanted to be a teacher. it was her thing. It will increase the profitability of the tenant in there. He wanted to teach how how to do this. She had negotiated to buy a block of land that they could build 16 townhouses on which they did. It will increase the rents. Equity down deals This is where I was talking about paying down debt earlier. Instead. He loves you to pieces because of what has happened to his business and this is where caring for your commercial tenants really starts to come into play. They got it through council and built the townhouses and then she sold eleven of those townhouses and kept five.000. Right or wrong. Another mate of mine. not completely but mostly down on the remaining five. Again.knowledgesource. She took what we call a gap year before she went to university. She went to university next year and became a teacher. You use the profit that you make on the other six to pay down the debt on the remaining two and keep them. he was going to do this project together.au/dymphna 90 . The project began and she negotiated on the land. She negotiated with the architects. She wanted to be a teacher so he said to her. He has been doing this for years and years and his daughter did not want to have anything to do with this business.
She went into teaching with a pension of $50.knowledgesource.5 Million in My First 18 Month in Real Estate have gone straight out of university and gone into teaching is that she went into teaching with a passive income of $50.000. She is doing it because she loves it. Se loves being a teacher teaching lower primary school children. not because she has to. She has got that covered. Is that not something that you think you would like to strive for? That is what cash cows can do for you. She has that bench mark that I spoke about in the beginning.From Virtually Zero to $3. 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.com. That is why you have got to be balancing this portfolio.au/dymphna 91 . www. But she went on and she became a teacher and I spoke to her father probably the end of the last year and he said. She had done it.000 that she could live on. So now. She has her basic needs more than covered. She has got that done and dusted. she can do what she loves because she wants to do it. She did not have to worry about her income anymore.
It may be an estate.000 and the rental on the property is $360 a week. a divorce settlement. You are looking for a mortgage in your possession. Then there was a triplex. Illness.au/dymphna 92 . you are looking for a deal. Victoria Block of 4 units Rental Income Manufactured Growth of and increased rents to Profit Positive cash flow $160.155 www. The rent is $120 each. a moving. This is their principle place of residence. you are looking for a deal. They paid $120. She did it because she wanted to motivate her lazy sons. passive income $100 week just to give you an indication of how things can start to add up. Everybody’s trigger is different.5 Million in My First 18 Month in Real Estate Discount buying • • • • • • Mortgagee in Possession Deceased Estates Forced Sales – Divorce.knowledgesource.000. Old Age. Financial Pressure Rates Defaults Public and Perpetual Trustee Ill-informed Seller or Agent When you are buying. Gwyneth did one of my programs. The current value of that property is now about $180. an illness. not for her.000. The units rented for $340 a week. Moving. They bought a property in 2000 for $8. The current value is $240. Since they joined a coaching program they have bought as a result of that program a duplex for $90.000.com.000 $ 340/wk $ 90.From Virtually Zero to $3.000. Judy and Greg are a couple that are in my Platinum Program.000. an ill informed seller or an agent. You are not just looking for an average kind of property. You are looking for a rates defaulter a public or perpetual trustee kind of property. an old age. Heywood.000 $ 440/wk $ 90.000 $ 8. 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. a financial pressure. a default mortgage. which produces $170 a week passive income. The current value of the property is about $250. or for her lifestyle or any of those things.
They will continue to do what they do. If you use it for lifestyle. 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. it is completely gone. it could have been positively cash flowed and it would have continued to grow. you might make a great profit and you sold it and you paid tax on it but guess what.knowledgesource. The profit on the deal was $90. and they think wow I did so well. they sell it. It would have continued to exponentially increase their wealth. not trading. It worked. You accumulate because those properties will continue to grow. it is now gone. Her two lazy sons are now full time real estate investors. not trading.5 Million in My First 18 Month in Real Estate She manufactured growth by making those two lazy sons go down and renovate them. My motto and I want you to remember this is: Real wealth comes from accumulation. but it is accumulation that gives you real wealth. www. But they have got to do it again next year because they sold it. They will continue to earn income.00. If you were trading. you have to sell but it should be the minority. If I kept it. If you want to create real wealth. you are trading. 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. But they sold it and they made a great deal and that is great.com. If you are selling properties. Sometimes.000.au/dymphna 93 .000 which produced her a passive income of $8. etc. They see the money. you are creating income which you pay tax on.From Virtually Zero to $3. you do not sell. not the majority.
you have to have your house in order. you wanted to go places. do your own thing and you suddenly become conscious of the fact that you do not know how to drive. That is when you actually get behind the wheel and start 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. in this instance it may have been your grandmother’s house. as in your personal mindset towards money and wealth. but as far as driving was concerned. 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.5 Million in My First 18 Month in Real Estate Finance You need to be mindful of your internal language. in this instance.com.knowledgesource. you have to have your financial plan. Even at this age you knew that this machine would take you places. I believe that all of us are hypnotized to work for money. you develop a sense of independence.au/dymphna 94 .From Virtually Zero to $3. because you did not know how to drive. Just think of your first parallel park. Then you begin to get really excited about the possibility of driving. is where you reach a break through. you have to have your finance in order. yet you understood the concept of where the car would take you. you will get excited. you were unconscious and incompetent about driving. you have to have your accounts. in order. Once you wake up you will get depressed. My purpose is not just to wake you up. 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. driving. Then when you reach 15 or 16 years of age. It is impossible for you to become rich if your internal language will not allow you. but to empower you. It is a deep hypnosis that we need to wake up from. 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. 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.. When you become conscious of something.
Let me give an example of how deeply hypnotized people are.000. Take a percentage of each dollar that you earn and make it www. because of the education we have.com.5 Million in My First 18 Month in Real Estate competent until you reach a point where you are on automatic pilot. we are unconsciously incompetent. but what would be a much better thing to instill in people is to go and get a good education. Think about this from an investment perspective. get that money to work for you. Most of us drive from work to home every day and don’t even know remember the process it is so automatic. 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. so that you can get that fabulous job and from the moment you start to get money coming in.000 on it and they have about $150. Imagine that you are at an investment seminar where you can talk about money and it is acceptable to do so. In Australia the belief is that if you get a good education you will get a great job.au/dymphna 95 . 50% of the people would probably say that they did not know because we are unconscious and incompetent when it comes to superannuation at that point in time. but in Australia. the kids help to look after them in retirement. owing $200. Imagine that started asking people how their superannuation was doing.knowledgesource. the average client would be 46 years of age with a house that is worth $600. we all know that money makes money and we all know that investment opportunities are all around us but the truth is. But 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 family only has two kids and it doesn’t quite work in the same way. But then we grow up and we forget about it.000 in superannuation.From Virtually Zero to $3. the conversations we did or didn’t have at school or with our parents. In third world countries they have lots of kids. 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. When I had my accountancy practice.
the market place for investment is exactly the same as the market place for food. some shares and perhaps some insurance. that you pay yourself first. When a child graduates from university one of the first things they do after they get their first job is buy a car usually by borrowing $25. but the truth is that five years later.From Virtually Zero to $3. then you can switch from working for money to making your money work for you. They start life in debt and end up working for money. they are going to recommend a managed fund.000 from the bank. Make an agreement with yourself that you are going to pay yourself a certain amount of money and you will put this amount of money to work for you. Everybody is trying to sell you their fish! www. The truth is.knowledgesource. but taking those away I would like to propose that regardless of the bills that you have. You need to send your money into the market place so it will bring a return and get this. 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.au/dymphna 96 . The person dealing with shares is going to tell you the only thing worth investing in. the person in real estate is going to tell you that property is the investment vehicle for you. they will have paid $40. to pay for the debt on the car. Then you will have what we call the petrol for driving the engine.5 Million in My First 18 Month in Real Estate bring you an additional return.000 . Having done that.000. There are certain bills that are nonnegotiable such as your mortgage or car repayments etc. If you are stuck in the middle of a mass of bills you are in the treadmill and it is difficult get out of it. the next problem that you will face is what to do with the money that you have put aside. is shares. The whole point here is to pay yourself first. The whole idea of having money work for you.com.000 for that car and it will now be worth only $13. your wealth creation engine. Send it to the market place to work for you. Let us say you ask how you get your money to work for you? The secret to becoming poor is spend more than what you earn. You will find a similar situation when you go into the market place looking for real estate. If you go to a financial planner. you should buy some eggs? It would never happen.$15. you have to have the money in the first place.
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.com. The milk was put it through a system that cools the milk. first one.au/dymphna 97 . A few days ago. a farmer had to milk his cows.$32 billion. but at least you will have your money working for you. then open a business that works with that because then you have that motivation.knowledgesource. gets taken to the stores and cafés that use it to make your lattes. you need to understand a little bit of everything. Capitalism is going on. because we have two incomes. we put the smallest deposit on the biggest possible house. Then at 46 years of age. What happened? Capitalism did. 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. Imagine how many people get employed because of mobile phones. What you need to get is a balanced diet. cleans it and puts it in a truck where it gets taken to a facility that puts it into bottles. We spend it on gadgets and overseas trips. If you are passionate about hair. The solution is capitalism! You live in the land of opportunity. we usually go and spend it. www.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. after working for 26 years. We live in an age where anything is possible so the most important thing is to find out what you are passionate about. Mobile phones. 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. or whatever.From Virtually Zero to $3. or food. you can command that money to go and work for you and diversify that money into more risk or less risk. you find yourself looking at higher risk investments so that you can retire as soon as you can because your superannuation is not enough. today . It means that there is so much money going around that surely if you put your hand up some money ought to stick. The problem in today’s society is that the minute we save some money. From there it is refrigerated and with another truck. 20 years ago .worthless.
we fought for freedom.000 in taxes and the only thing you truly meant to do was to borrow $100. This is because in the beginning you will have paid mostly the interest upon the interest. Although you have borrowed $100. $241. so the principal does not go down.knowledgesource.5 Million in My First 18 Month in Real Estate The truth is. If you have a car key in your pocket and you can choose to have a hot water bath or shower at any time. there are tons of books on the subject. the freedom to go into business. they put books in front of me.From Virtually Zero to $3. it is the Great Canadian.5%. If you want to know anything about investing in property. the teachers expected me to do an exam so I did. to buy your house and we all think that is fantastic because it is the Great Australian Dream to own our own home. when I got my degree in economics. This is everybody you know.000 and pay $130. you will find that you will have paid the bank back.com. The reality of capitalism is all around us. www. My parents expected me to go to school. to own land and the freedom to do as we please. your family. this is everybody that ever borrowed money. I realized that every single thing I had ever read was because somebody forced me. That is why they went to fight. it is something that we also need to take part in. and I read was because it was expected. That is why it is possible for you to read information such as what you are reading now. Nothing that I read was because I actually wanted to read it. I began reading the things that I wanted to read on all sorts of subjects. Then the government comes along and gives you $7.000. This is what personal debt does to you.000.000 from the bank.000. for you to pay back that money you will have had to earn $371. they went to war for the freedom of ownership.000. English. in actual fact over that 25 year lifespan of the loan at 8. What sounds even scarier is. then you are in the top 6% of people alive in terms of wealth. Capitalism is not something that we just need to understand. Our forefathers did not go to war for the freedom of speech. 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.au/dymphna 98 . American. so I went. Debt Let’s say you have borrowed $100. If you really think about it. your coworkers. The moment that realization came to me.
I would suggest that you always have a debt elimination process in place. There are a lot of books out there saying there is good debt and bad debt as far as I am concerned. he is going to remember your call and he might spend three minutes more on you. they go to a bank ask to for money and the bank tells you what your monthly repayment and you can afford that so the deal is done. then buy their own home.000 but think about the return on the money from the government’s perspective as far as investments are concerned. let their chain reaction buy the house that they are going to live in. debt is debt.000 in tax. you are accumulating capital but in the background you have a debt elimination process that is quietly working away reducing your debt. it is if you are not investing. but you only ever pay for the house after you have paid tax.000 multiply all those numbers previously mentioned times three. The government gave you $7. you are totally emotionally driven. he is going ask who you are and when it comes to your file.000 each.knowledgesource.com. Is it a dream or a nightmare? When you go and buy a house. Why do I want you to do that? Because your accountant is stressed and overworked. just to manage to pay your $300. when they buy a house. There is the perception that renting is a waste of money. If a young couple came to see me. The distinction is that there is debt that is non tax-deductible and tax-deductible. I would say they should build a chain reaction first and once the chain reaction is up and running. saying that they are worth $70.000. It is because most people.au/dymphna 99 . The debt that is taxdeductible does not hurt as much. 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”. So you have to gross over $1 million which means paying $400.5 Million in My First 18 Month in Real Estate the Great Human Dream for that matter. there is not enough time to do what needs to be done. But the average Australian within seven years of purchasing that house will upgrade and then you wonder why you are in the financial situation that you are in when you come to my office at age 46 wanting to retire. you bought a house. That’s three minutes for free www. you only see the total sum later. If you call your accountant and say “I love you”. The government has changed the rules which means even more work.From Virtually Zero to $3. So knowing that the average mortgage is $300.000 mortgage. In other words. They invest in you $7.
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. by the time you go to see your accountant. There is nothing wrong with the accounting profession. Moreover. In that new job. the money is already gone but if you look at taxation strategically you can work towards getting some of that money back. the more they give their accountant the flexibility and ability to tax plan for them. 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. it is every person’s right as a citizen. yet so many people view getting a little money back as merely being lucky. it’s leased. who told you he was making $150. Accounting is a game of perception.5 Million in My First 18 Month in Real Estate and maybe where they pick up just another detail that saves you some tax. not his either. and then tax time comes along and because it is the law.000 of it in your pocket because the $100. you do your taxes. only makes $90.000 a year.From Virtually Zero to $3. 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. Tax planning is not the privilege of a select few.knowledgesource. 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. However.com. but essentially it is too late. 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. The truth is. Most accountants are a www. Australia is a tax haven. It has nothing to do with luck and if they have to pay more. All year you barely think about tax. you cannot expect them to get the greatest possible tax deduction.000 is the gross figure and what you are being paid is only the net figure. that hot guy that were dating. you may have been promised $100. it is because they didn’t put enough in.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.au/dymphna 100 .000 but you only end up with $70. Part of the problem is that most people do not know how much tax they are actually paying.
if the accountant spends extra time strategizing and charges you $12.500 – that’s saving of $3.au/dymphna 101 . so it is fair to say that if they spend more time strategizing your assessments. Or in the instance of a company where paying $6.000 and are therefore $18.000 in tax. you will start to become more competent. Every bank will try to collateralize everything you have. That $18.000 tax payable.000 to your accountant may result in $32. It is dependent on the time that they spend working on your tax assessments. I knew I was going to be a multimillionaire.000 ahead. 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. you may now only pay $22.600 because the accountant was able to spend more time on your return.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. Unify against debt.200 to your accountant but your tax has been reduced to $7. Most people know that you can pull equity out of your own home and go on a holiday or buy a car. now you may pay $1. Where previously as an individual you may have paid $300 to your accountant and paid $12.000 instead of paying the $30. When you start to become conscious of the effects that these things can have on you.000 can then go straight in to your mortgage to reduce your personal debt.000 in taxes. In other words they try to link any loans with existing assets and take control of everything you own. Tax laws change all the time and this can make a huge difference as well. Please understand the power of emotional drive. Why? Because I can.com.From Virtually Zero to $3. What I am saying is pull the equity of your own home and go and buy another house. The banks lend me money and they can’t wait to give me more. but it will also save you money in tax. it is a capitalist society. At the moment that you decide to do this most of us who go back to the same bank we always use because we feel a sense of loyalty. 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. 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.knowledgesource. www. then it may well cost you more money.
use it to pay down your personal debt. The reason for this is because if you default on your loans. The moment the second bank realizes that you have a loan with another bank they are going to put offer you a professional package where they take . The less tax you pay the more you will drive your debt down. they will cross-securitize the two loans and it becomes your risk. but because they are exposed to more risk.knowledgesource. 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. So if someone is paying you rent park the money as long as you can. You put in 20% and they lend you 80% and they take control of everything because they lend money for a return.25% off the interest rate and offer you more money. Imagine if you could pay your house off now and all of your financial intelligence then can focus on your investment property. Get rid of it ASAP. If a bank does not allow you to separate the loans. My own house is protected. Now that you can concentrate on one property you will pick up speed in paying that one www.com. If you have any personal debt this is the debt that you are going to target first. they sell money. walk away and do not do business with that bank. The less tax you pay the more you drive your debt down.From Virtually Zero to $3. The more you invest the less tax you pay. The less debt you have the more you invest… and it goes on when you become unconsciously competent. So if you have any investment shares or property that has dividends or income.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 $100.000 is used as security by that bank to ensure that you are not going to run away with the money they lend you. You 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. 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.000 of the equity from your house.au/dymphna 102 . So overall the more that you invest the less tax you will pay. In actual fact they do not lend money. they could come after you and your house. The $100. The less debt you have the more you invest.
Drive capital. save $200.5 Million in My First 18 Month in Real Estate off.com.au/dymphna 103 . www.From Virtually Zero to $3. with which to buy number three. you now have the income of the first property and the second property. you are a building a chain reaction. Make a decision. if you can only save $20 a week. no matter what your age is. save $20 a week.knowledgesource. What you are doing driving capital. However big or small. If you can save $200 a week. it will build a chain reaction. 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.
That ‘x’ factor means that at the end of the day. Which answer is right for you will depend on where you are at in your cycle of investing and your cycles go round and round all the time. It will www.au/dymphna 104 . That ‘x’ factor may be shuffling some paper or it might be time. you have earned yourself a chunk of money. It has got to say volumes about this whole process. Think about that. that might be the right strategy for you or you can do all of that and not sell it.From Virtually Zero to $3. It is basically. It might be building something or creating something.com.knowledgesource. It might be changing the appearance of something. 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. That chunk of money is important because you have got a number of opportunities which you can do with that chunk of money.5 Million in My First 18 Month in Real Estate Growth I want to explain growth deals and about where the market is at right now and I want to explain how I believe you can maximize your opportunity over the next two to three years. Or you can do all of that and put it into another investment property. 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. That has got to say volumes about property. It might be renovations. 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. the purchase price. It might be changing the nature (use or zoning) of something. You could revalue the property. draw the equity out and go and do another investment property or go on your merry way doing other style of investments. plus an ‘x’ factor.
com. you are actually going to still be in a mutual position or a positive position in whether your current serviceability can actually withstand that. Whether by drawing the equity out. It all comes down to your ability to be able to work out your circumstances.knowledgesource. www. what is right.au/dymphna 105 . It is not that hard.5 Million in My First 18 Month in Real Estate depend on whether you really need all of the money or if drawing the equity out is going to be sufficient. But that is the stuff that all comes down to a mathematical equation.From Virtually Zero to $3.
If you get a 10% growth on this property. how long is it going to take for this property to double in value? 7. then at that ratio it will be a positive cash flow property. you can work out if it may be in the future. So if that property increases by 10% per annum that is what happened in the past and that is what the real estate agent is telling you is going to happen in the future.com.knowledgesource. blah. telling you that the property is in such a good area and that it has increased by 10% and blah.6789%. while it is not positively cash flowed now. with those kind of ratios.000. If you divide that number by 72 then it will give you the number of years it will take to double in value.2 years. if it is going to increase by 8%. It gives you an indication.2 years for that property to double in value. 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. Because if you are out in the field and you are looking at a particular property and at the moment.000 and you know that the current rent on this property is $300 a week. you are just going to sit on it.2 years What you do is you take 10 and divide it into 72 and you get 7. if that property doubled in value.5 Million in My First 18 Month in Real Estate The Rule of 72 There is a rule called the Rule of 72. as to how long it is going take before that property would start to become positively cash flowed www. Not only is this really useful to work out how much your properties are expected to grow over varying periods of time. This is really handy.2 years. what do you think the rent would be on that kind of ratio? Probably about $600 a week.From Virtually Zero to $3. 10% ÷ 72 = 7. or by 14% or by 22. For instance. If you are looking at a property and you have got this real estate agent jabbering in your ear.. It is a really handy tool to use while out in the field. it will take 7.. It does not matter what figure you pick. it is worth $250. the thing you remember is 10%.au/dymphna 106 . 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.. so if that property doubled in value and you were getting $600 a week and you bought it today for $250. it is really useful to work out.
From Virtually Zero to $3.5 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.au/dymphna 107 .com.knowledgesource. www.
From Virtually Zero to $3.5 Million in My First 18 Month in Real Estate
Ratio between yield and growth as a factor of how long it takes for a property to double in value 72 Yield 10% $ 250,000 Years 7.2 yrs $ 500,000
So we have the Rule of 72, we have got years on one end and we have got yield on the other end. If it is in a 10% yield area, it will take 7.2 years for that property to double in value. So if to start with our property is $250,000, it will take 7.2 years for that property to be worth $500,000. That is even handier when you start relating it back to how much rent it is getting now compared to how much rent it could potentially get then. All of this is giving you the tools to help you make better and quicker decisions. The Rule of 72, the Percentage Point Split, the Rule of Two, are all useful tools. They are really quick rules of thumb that when you are out in the field or you are talking to somebody on the phone or you have got a deal on the table, that you can really quickly make an assessment as to what the parameters are going to be.
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.
com. it is for no apparent reason that this suburb is lower than that suburb in median prices. a suburb starts to go up in value. I was watching a particular suburb in Melbourne late last year. For some reason. Transport. this is really apparent when you look at one suburb. You have got a lag effect. Population. Let us look at properties in lag growth areas. Have a look for that strategy. Let us have a look at areas that are going to give you potentially a better than the average return on your investment. it happens everywhere. 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. There were these two suburbs what were going berserk. sometimes. This is not hard to do. one could come down slightly and generally what happens is the other comes up to meet it or at least get a lot closer.From Virtually Zero to $3. rapidly increasing in value. the suburb beside it does not. in Perth and Brisbane. Building Trends Adverse public perception Media attention Do Your Due Diligence Look for Emerging Economies – Do your own Micro Economic Analysis Prime Location – water. views. next to another. It happens in Sydney and it happens in Melbourne. www. What do you think is going to happen over time? Possibly. Infrastructure. Have a look for that when that happens and look for areas where that is in existence. But for whatever reason. Have a look at the dynamics of what is going on side by side.knowledgesource. let us look at transition zones.au/dymphna 111 . Employment.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.
it makes sense. But this target little area did because of what had happened. The great thing about property is that it actually reacts slowly.knowledgesource. With what happened in Melbourne with the property market you would have had a window of about three to six months to capitalize on what was as clear as the day as to what was going to happen. this little micro economy. get those blinkers off and start to have a look around. micro economics start to become very important. There was a lag there of about three to six months.what is your life going to be like? It can only be as good as you allow it to be. 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. I love getting out there and looking at property and doing a subdivision or building that commercial property on the river that has got a restaurant above it. When you look at growth. if you have your blinkers on and all you do is get up and listen to the crap on the radio.au/dymphna 112 . if you did not know that was in existence then of course you won’t be able to take advantage of these opportunities. if you did not know that this was something you should be looking for. or television. it is not rocket science but if you are not alert to it. open your eyes. I am never more energized than when I am talking about real estate and making real estate deals or doing stuff. Think about what you are you exposing yourself to? Feed your brain. But if you did not look.From Virtually Zero to $3. For me that is so much fun. When you are looking at property. The fact is when you look at the broader picture you will see that is not happening everywhere. Property works slowly and you can be a really slow thinker and still make a lot of money in the property market. you have got to look at the fundamentals of the economy around it to give you an accurate picture of what could potentially happen and to enable you to best predict what is going to happen because you can capitalize on that. you go to work do your things and you come home still listening to the crap on the radio . the whole of Melbourne did not go up by 30 or 40%. When you think about it. www.com. 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.5 Million in My First 18 Month in Real Estate But the one in the middle did not.
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. You have got to recognize that opportunity as a lag. but the $300.000 but the house across the road was still $350.From Virtually Zero to $3. You become more of a receptor. Prices then start to increase around the surrounding CBD and www. Ask yourself how much television you watch. while directly opposite.com.5 Million in My First 18 Month in Real Estate Do a home study course. The house across the road started to move as well but you could still buy one for $350. Jump on top of the pebble in the pond effect. one side of the street. look at your motivations and listen to what you are thinking.000 and across the road. normally prime kind of properties vary dramatically to what is on the other side of the street. admittedly. Melbourne. you have got the $1. The canal front property moved to $800.000 . a canal. There is money to be made in that. I have seen properties. a view it may be a million dollar property.$900. When they first started to move.000 property is in a very good area. the house across the road moved up and came up to $500. still too much of a lag.000.5 million. It may have nothing to do with real estate. downtown Sydney. What happens is you get a ripple effect. it does not matter where it is. The house across the road then moves up to about $650/ $850/ $950. Brisbane. Desperate Housewives is not going to further your financial stability. It changes. but watch how you start react to people.5 million property. you could buy a canal front property for $650.000 and the canal front property went up to $1.000. it is not on a golf course. If there is a golf course. Just watch the change in your attitude and your performance even in your daily work. just try putting the CDs on in your car and listening to them instead of the crap on the radio.au/dymphna 113 . you change. 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. Eventually.000. without these features you have only a $300.000 property.knowledgesource. Prices start to increase and start to go out from the center. It does not have a view. it does not even have to be a suburb. Lag effects Lag effects can happen in a street.
for places to spend their money at shops. When you have an economic event. Fundamental analysis This is my favorite topic. If you live in Coffs Harbor or Port Macquarie and you see Sydney going berserk it is only a matter of time until Gosford. where they can send their kids to school. For example. The Richest Man in Babylon. If you have a population increase as in the population in a suburb is increasing or the population in a state is increasing or the population in an area is increasing. What is actually happening? People are moving into that area.knowledgesource. to buy.com. 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. for infrastructure. It creates a little epicenter all on its own. 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. They are creating more demand for houses to rent. you will see it happening all around you and you can take advantage of it. George S. There will be a lag. where they can go to hospital when they get sick. population. Eventually it gets there.au/dymphna 114 . one of my favourite books.that is how it works. that just allows you to be a slow thinker and get in on it. If you open your eyes to that effect. how you can make money out of that situation. where they can continue their learning through higher learning education places. talks about the ancient Babylonians and its camel traders and merchants. But that is okay.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. It ripples out from a lot of different areas. The pebble in the pond effect .From Virtually Zero to $3. Newcastle and Coffs Harbor follow suit. What you look at here is the core economic factors that have an impact. Clason who wrote the book was actually a guy who mapped the original map of North www. but the core fundamental issues behind it are just amazing. Sometimes it goes up and down the coast where you look at it from the CBD area and you will see it happening.
You have got a model to create money because it is quite likely that what happened in the other instance may happen again. when he was doing this. I think he died about 1958. www.knowledgesource. you have an event that is an explosion. That is what he did for a living but his passion was writing about fundamental economic issues.5 Million in My First 18 Month in Real Estate America. You need to be taking part of that. They can trade with other economies and that brings an influx of funds back into that community and more money starts circulating. they spend more and the people they spend more with are richer accordingly. when you look at the lessons behind it. That book. He wrote about them in a biblical kind of way so people would read them and he published them paying for them himself. He lived in the early 1900’s.From Virtually Zero to $3. 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. Somebody eventually collected all of these papers together and compiled them into a book called the Richest Man of Babylon and printed it. You need to be recognizing in the early stages that this is taking place and jump on the bandwagon. schools and hospitals. They have more to do and they can put it back into their business with which to create more camels and silks and other things to trade. When you have something like that. these were the conditions and these were the types of businesses that went in. is amazing. the types of houses that went in. that one dollar building an incredible amount of wealth. having money come in. Start to recognize that something similar happened last year in such and such place and when that happened. One of the lessons talks about the effect of a dollar and the circulation of a dollar. people coming in with demand for infrastructure and demand for property.au/dymphna 115 . That is the core of economics. When you start opening your eyes and actually watching it and seeing it happen around you. rental. you cannot be anything but excited about it because there is a huge opportunity there. 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. How when you can make one person richer by a dollar. By recognizing the similarity it allows you to potentially duplicate what happened somewhere else. you have an activity.com. housing.
being able to take advantage of what was happening in this town. What do you think that meant for me? Excitement! It was like gold. I buy property all over the place. what are they doing. This first program that came on was amazing.au/dymphna 116 . 800 channels. do you think I would have ever made any money on that? No. Money was going to be spent by the governments. I remember sitting in a hotel room on a Sunday morning clicking through my television’s. roads and transport and the hub as well as a lot of other things had to be changed to accommodate this.com. I found this little local channel that was talking about what was happening in the local area and I thought this might be handy. but if I had not been tuned to the fact that I wanted to watch this program. I was not looking for Desperate Housewives either. www. rebates would be given to encourage more housing in this area and this was all on television.5 Million in My First 18 Month in Real Estate Money follows money. A number of years ago when I was in the US. like a lump of gold just got dropped into my lap.knowledgesource. Where is private industry going. The program talked about this multinational company coming to a particular suburb in Phoenix. Where is the money going? Where is it being spent? Governments.From Virtually Zero to $3. welfare centers or other kind of centers. This also meant single housing would be encouraged to be changed into multiple dwellings. where are they spending money? I buy property in the US. The flow on effect was that it was going to effect people’s wages. 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. where are they spending money and what impact is that going to have? What social infrastructures are they putting into place and what impact does that have on the property market? Where are they setting up new call centers. So you should follow the money. 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.
au/dymphna 117 . Charge them a market rental for providing them for the service. people from Sydney came up and said this is pretty good. They did a big spraying exercise and whatever else and there really has never been a problem since. www. Take advantage of that. For example. The boom came. the amount of money that can be made is phenomenal. all the areas around it were going up in value and this place is still at least $100. When people are moving into a particular state or area.5 Million in My First 18 Month in Real Estate Open yourself up to those kinds of premises of what is happening. When you start opening your eyes to this. But what happened. building trends. Private industry.000 below market value. Adverse public perception This is where you look at what is happening in the short term. you do not want to buy there. They tend to live in certain areas. People are moving into southeast Queensland but they tend to be coming from the rest of Australia. Consequently. where are they coming from and what kind of housing needs are they going to need or want. About that time. give it to them. you get eaten by sand flies that carry you alive. People moving into Victoria or maybe moving from overseas.From Virtually Zero to $3. 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. where are they spending money? Governments. They have a different set of attitudes and they have a different set of requirements. look at the movement across the country. Follow the money. Employment. Provide it.knowledgesource. But all the locals started saying. on the Sunshine Coast there is a particular place that about 15 years ago used to have a big problem with sand flies. they are mainly a migrant population who want a certain style of property. the house prices in that area remained low for a very long time. we will have some of this. the local council took some action and got rid of that problem.com.
They did not know about the sand fly problem that used to be there. 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. Exactly the same thing happened in Auckland where there used to be sewage plant. Yes. They need to extend the runway so it was the airport authority that was doing it. I was in a small town in Kentucky in America. Take advantage of them if you can. Public perception is something that never lasts. They do not know the public perception. But always do your own due diligence. As a foreigner I do not have any preconceived ideas about any particular town over there and neither do you. I want to know everything about everything from everybody. I asked a few more questions. Do not believe what you are told just because she was a nice looking girl that told you at that time.From Virtually Zero to $3. Same thing. the lady behind me in the queue was talking about how her sister-in-law sold their property to this big time person who came into town who was buying up all of this land. They 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. It happened to be closed down 10 years ago. Filter through what you are being told and form your own opinions and be responsible for your own opinions. Have a look at the fundamentals. So they needed to have larger planes be able to fly into this town which was why the airport needed to be extended. They will probably ruin it like they always do. Always back up what you are being told. I talk to the lady behind me at the K-Mart line. www. Get information from everybody. Media attention could be good or bad depending on what is happening.5 Million in My First 18 Month in Real Estate People from Victoria came up as well. So when I am in an environment like that. Ask everybody. the prices eventually go up. The worst thing you can do is not have an opinion. The prices went up. I talk to the real estate agents. I do not know what they are going to do with it. Watch the media attention and watch the markets and how they react. Talk to people. I talk to everybody. there is a conglomerate buying up a lot of land at the end of the runway.com. Look for emerging economies. do your own microanalysis. I talk to the waitress. There is always a window of opportunity but you will always have an evening out of the market.knowledgesource.au/dymphna 118 . public perception and an influx of outside funds. I am like this big sponge.
You started to see buildings being transformed. what is the ideal property that you should look for? The oldest dog box you could possibly find because it will have a natural increase from everybody else’s effort plus you have got the opportunity to get in there and do some work and exponentially increase its value yourself.000. they could be better areas to focus on. but not a huge amount. You have got people that are starting to take pride in their property. you have still got a 15% return on your money . how much are you getting as an increase? $150. All of that indicates an area in transition so in that area. neutrally geared with the seller financing. these are properties that will always sell first. So depending on how liquid you want your assets. 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. Never.au/dymphna 119 . When you are looking at prime locations like water. proximity to amenities. This is an area that is improving. It is proportionate to the dollar that you have got to put in to actually make it happen as well. Things were starting to happen. they are improving their property.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.com. I got into the deal without any money down. built.000. they are rebuilding. They are fixing their gutters. it would probably be worthwhile. I thought if I could buy property in the market today understanding that there is going to be a growth some time in the next two years. and it did not cost me much to get or to hold on to it. or renovated. It was a little bit positive. they have landscaping. 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.knowledgesource. views. They are not run down. They will always be in higher demand. They have already made their money and you are the piggy in the middle who has paid it. those kinds of things.$15. so it was mutually or positively geared. That is what I did. When you see rising renovations and constructions in an area. what you are normally finding is an area that is in transition. But if you bought another place that only cost you $100. more people will come in and the general socioeconomics of this town was going to go up. If you are getting a 15% return on a million dollar property. You start to see movement in the market and that gives you an opportunity to take advantage of that. That means no money down.From Virtually Zero to $3.000. ever buy in a stage eight of an eight stage development. I bought a block of four.
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. These are the kind of circumstances where sometimes negative gearing is the right thing to do.au/dymphna 120 . it is going to be at least neutrally geared if not positively geared by the end of that five year period. When you are in that situation. If you are putting in a 20% deposit and claiming depreciation along the way. you start to have a look at.com. what you are doing is riding on the back of their bucks or their dollar because they will force the market. Such areas. you would have made $250. www.5 Million in My First 18 Month in Real Estate that has got big pockets with big bucks to spend on advertising and marketing.000 Mortgage $256. you have got to work it into your overall strategy.000 and would you be pretty happy with yourself.000 Married. But it has not cost you a lot to do that.knowledgesource. Case Study: Suzanne Position pre Dymphna two day conference June 2004 PPR value $320. 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. You cannot go wrong.From Virtually Zero to $3. If you are putting in 20% deposit into something which is coming out of savings and other bits and pieces to be able to accumulate and you are buying in an area that has a 10% growth or better.000. 10% is what you predict a particular area to do and you are putting in your 20% or your 10%.000 and after seven years it goes to $500. They will make that market increase because of their advertising and effort in the marketing of the whole process. If you look for areas that have got a 10% growth strategy. You are just riding the wave with them. 2 children aged 3 & 6 yrs Employed as a disabilities carer Husband employed as a postman. However. If you bought something at $250.
2 bathroom per house Purchase $170.au/dymphna 121 . she bought for $270. Victoria. The cost of the project was $185.knowledgesource.000 $645. It was three units in Ballarat and she basically renovated and strata titled them.5 Million in My First 18 Month in Real Estate Suzanne is from Melbourne. Came with plans and permits to build 2 more units on the block.000 $185. Deal 2: Laverton Joint venture deal Two house – 4 bed. three and six. Deal 1: Price Cost of project End value Profit Time $270. 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.000 $190.com.000 8 months Chunk deal process: Block of 3 units in Ballarat.000 in eight months which was how long it took her to do that.From Virtually Zero to $3. She worked as a disabled carer and her husband was a postman. She was married with two children.000. She started with her principal place of residence of $320.000 and it had a mortgage of $256. which gave her a profit of $190.000 and the end value when she finished doing things to it was $645.000. That is a pretty modest start.000 for both Rental income $400 per week total Positive Cash flow $140 per week www.000. This is what Suzanne did in 18 months.
both with four bedrooms. was $140 a week because of the way she structured the loan. It was two houses. two bathrooms per house.5 Million in My First 18 Month in Real Estate This property in Laverton was a joint venture deal. the purchase price of $170.From Virtually Zero to $3.com. The rental was $400 a week and the positive cash flow in this one just as it sat.000.knowledgesource. www. just for buying it.au/dymphna 122 .
000 End Value $435. Deal 5: www.000.000 Time 6 months Profit $120.00 profit. The current value.000 Four dwellings on ½ an acre in Newborough.000 $335.000.000 $ 1. She renovated each house.com.000. Deal 4: Kalgoorlie 23 units complex Purchase price Current value Rental per week Positive cash flow Est. Cost of project $ 70. subdivided them and then put them under separate titles. at the end of the 18 months was $335.000. I spoke to recently and she said the rental on that now is $2. Rental on the property was $1.au/dymphna 123 . This property is now worth over $1 million. it was a 23 unit complex purchased for $295.625 p/week $ 1.625 per week. Victoria. washing machine income $295.100 per week.000 The next deal cost $245.000.knowledgesource. It was four dwellings on half an acre in Victoria.149 p/week + $ 50 p/week This deal was in Kalgoorlie.000 after just six months time which resulted in a $120.5 Million in My First 18 Month in Real Estate Deal 3: Price $245. The end value was $435.150 a week plus she had a little extra income through installing coin operated washing machines from which she gets an extra $50 a week.From Virtually Zero to $3. Additionally she had passive income at the end of the 18 months that was $1. The cost of the project was $70. Plan: Renovate each house and subdivide so that each house is on a separate title.
au/dymphna 124 .000 a year! Will that make a difference in your life? Particularly. in a very small town in Western Australia but in a town that had good strong rental.com. The purchase price of this property was $210. Queensland. The current value at the end of the 18 months was $55.000 $70. remembering that Suzanne lives in Victoria.000 profit. Purchased for $42. www. Qld Residential block of land Purchase price Sold Time Profit $42. Rental was $90 per week and probably is still at $90 per week which meant that it had a positive cash flow $23 a week. Deal 7: Purchase price Current Value Rental Positive cash flow $210.000.000 it was sold for $70. It was purchased for $27.000 The Suzanne did a little land deal out in Blackwater.000 $310. Deal 6: Purchase price Current Value Rental Positive Cash Flow $27. when you add up the income on these this deals.000.000 with the market value at the end of the 18 months at $310.From Virtually Zero to $3. The rental was $510 a week which resulted in a positive cash flow $210 per week which is $10.000 $55.000 $ 90 p/week $ 23 p/week This next deal was in Western Australia.5 Million in My First 18 Month in Real Estate Blackwater.000 in five months resulting in a $28.000 5 months $28.000.000 $ 510 p/week $ 210 p/week The next deal was also in WA.knowledgesource. she is investing all over Australia.
now that she is in that position. no. 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.000+ p/year $150.000+ a year! This amounts to such an enormous difference to your lifestyle. This is what you can do in such a short period of time.885+ p/week $180. Her husband is doing his bit as well. you will eventually run out of equity. if you just focus on income. 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.000. She is working part time as disabled carer and she is trying to fit this in around everything else that she does. Suzanne’s portfolio so far: Total income Total gross income Total net income $ 2. working as a postman.6 billion a year industry. but it can be done. This is the life. This is the difference that you can make and you only have to do it once. every time you do it. it can be done and look.5 Million in My First 18 Month in Real Estate collectively including growth Suzanne has created a net income of $150. Yes. How much Desperate Housewives do you think she watches? None . She was earning a total passive income of $2885 a week which had a growth income of about $190. Because. Because she paid a PA to look manage things and everything else it amounts to a net figure of about $150.au/dymphna 125 . do you think she will ever have to do that again. In fact. www. do you think her journey was hard? Probably. your everything. your paradigm.From Virtually Zero to $3.com.knowledgesource.000+ p/year Now this was the tally.000 a year Now. she has got two small kids. I ran out of equity quite early in the piece so had to manufacture some growth to create additional equity so I could move forward. Renovations and rehabilitations The renovation industry is $3.and that is what it takes. It gets easier and easier and easier.
000 and that also went on my credit card. but that time.500 $ 6. The renovation costs $6.000. It was looking after itself so I did not really need to do that.000 $280.000 renovating it and sold it a year later for $290. on my credit card and that was my deposit to buy this property. I needed the equity. No! I sold it! Why would I be so stupid to sell the property that is now worth over $450. I did not need to sell it and pay tax on it to get it. I got misled.500 $51. So believe it or not I put $3.000.From Virtually Zero to $3. Now.000 profit. If I needed the money.000 To create equity I bought a property for $135. who is still one of my good friends..com.000 $ 1. 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.knowledgesource. It was totally run down. it would have been the right decision.000. I actually did not need the money. It was totally dilapidated so I spent $45.000 13 days $82. but I bought it for $30. talked me into it.000 for nearly $100. That was pretty good I thought at the time.5 Million in My First 18 Month in Real Estate Renovation 1 Purchased Renovations Sold $135. Renovation 2 Purchase price Purchase Costs Renovation Renovation time Sold Profit Time frame $ 30.000 had I kept it? I was too shy. My darling real estate agent..au/dymphna 126 . I can borrow equity and use it. www.000 3 months I bought another property.000 $ 45.
Again.000 renovation and I rented it out for $445 per week. learning this time and not selling it but through revaluation allowing access $34. understandably. the average person could not have done that in 13 days and it was not me either. The renovation cost $10.000 rebate for repairs) Renovation Costs $ 10. “Opportunities just usually disguised hard work so most people do not recognize them. 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.000 The next renovation was a property purchased for $59.com.000 (after $4.000 in equity – tax free because it wasn’t sold.000.000 profit at $82. I made the mistake of selling! Renovation 3 Purchase price $ 59.000 Cash back in pocket for next deal $ 34.knowledgesource.au/dymphna 127 .000 Rented $ 145 p/week Revalued $105. my darling husband and my brother went off and did this.5 Million in My First 18 Month in Real Estate The renovation time took 13 days. After three months it was sold for $51.500. Now.” 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.From Virtually Zero to $3.
au/dymphna 128 . www. Risk was very important to her. She did not want a lot of debts. 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. She was 53 when she started with me and she had a very distinct plan. She was prepared to go into debt to make money to reduce debt and that was her philosophy that we have worked together on that that might happen. it was a bit bigger so now she given up work because she absolutely love the game and the third game was doing chunk deals. give you accelerated growth.knowledgesource. After two years she has $5 million worth of property with $3 million worth of pure equity. Since then she has put a new peg in the sand. manufacturing growth and making a chunk of money like the one I am about to explain. I go into a lot of detail in all of these and a whole lot more as part my courses but it is too much to cover here.From Virtually Zero to $3. Case Study: Wanda Wanda has been part of a number of my courses. Now.com. we stuck to that philosophy.
so I was not the one saying.From Virtually Zero to $3. for the rest of her life and with no debt. I was too slow of getting back to him. That is the strategy that she did creating a chunk of money.000 each Profit $430. her superannuation that she planned live on when she retired and she was paying down the debt on these properties very quickly. A car park came available on its own for $20. because I was not available. So guess what? He picked up the phone to ring somebody else.000 that she now had in her hand to pay down debt on one of her co-properties. giving her $130.000. She found a medical suite not far away from the car park and she bought for $150. This next deal that was sent to me by one of my buyer’s agents in New Zealand.5 Million in My First 18 Month in Real Estate She wanted to pay down the debt on a number of properties that she wanted to own long term. she sold the medical suite and the car park together as a unit for $300.com. the properties that she wanted to keep in the long term. This particular buyer focused on a certain type of property which I like.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. This is just one of the possibilities. She worked full time over two years where she did most of this at night. yes put a contract on it. paying it down on debt on the coproperties. Then she went shopping to try and find an office that she could marry up with it.000 Time Span 3 months www. But this was the deal: Deal: Waikato University’s doorstep! Purchase price $1. You cannot normally borrow on a car park so she bought it and paid cash. This was her safety net.au/dymphna 129 .knowledgesource. She was not prepared to look at anything else.000. Within three months.000. 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. She recognized where the area was that she liked to invest in and would not go outside of this area.
They were all three bedroom units but they were at random market rental. Buying growth While in the US. no renovation nor anything individually for $205.000 to $300. Growth Pick: www. His business boomed.62 million was the purchase price of 10 units. That is good money. he would normally get rid of all the old stuff.5 Million in My First 18 Month in Real Estate $1.000 each.com. sometimes 12 months for anywhere from $150. He is a butcher but what he does can be applied to a whole realm of businesses. That is not bad work for three months and he did it part time on the side while doing whatever else he did. Karen had a particular interest in Florida and these are some of the properties that she had picked. 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.knowledgesource. You can apply the same to a business.From Virtually Zero to $3. He would buy a business for like $20. He had a particular philosophy as to how a butchery business should run. He had a particular way of presenting his meats.000 without taking any money out of his own pocket.au/dymphna 130 . He sold all of them on simultaneous settlements within the three months and put into his pocket $430. As a butcher he would go in and buy a butcher business that was losing money. The buyer that bought this negotiated a three month contract on it and then went about selling off those properties. big signs. Then he cleaned it up. What the buyer did was negotiate a long contract.000 for the stock and typically would then sell it in three to six months. nice bright colors. were currently rented at $250 a week. They should have been rented the $300 a week. The builder who owned these units was building another property in the area and he needed an unconditional contract to enable the bank to give him bridging finance to be able to continue his project. Number one.000. all that kind of stuff and he hired young butchers that were very good at cutting meat and were good at selling. but that were already Strata titled so they were already broken down onto individual titles.
knowledgesource.000 and her calculated estimated growth was 20-30% based on the fact that this property was across the road.4%.5 Million in My First 18 Month in Real Estate Price Rental ROI $265. The rental on the property was $14.com. we had to define some deals so that she did not have to actually do anything or break one single nail with. So when she entered the property market.000 $ 14.From Virtually Zero to $3.000.400 / year 5.400 a year which has a return investment of 5.au/dymphna 131 . Case study: Kemorine Kemorine is a model. She would do anything not to break her fingernail. www. Why do you think she would be interested in this property? Because across the road was a beautiful house that was worth $950.4% The purchase price on this one was $265.
she made over $200.000 $460.000 $ 750 p/week $ 10.com.000 Current rental $ 600 p/week Current value of 2 bedroom units in this condition Strata Titling Profit $ 95.000.000 profit.000 FOR SALE AND REMOVAL www. Each property went up.000 She bought another one very similar which was a block of five units at same deal and $110. The two deals took a total of three months and she had a positive cash flow on the property at the end.knowledgesource.000 Strata titling costs $ 10.000 $110.From Virtually Zero to $3. Deal 2: 5x2 bedroom units Purchase price Rental Income Strata cost Value post strata titling Profit $340. Advertisement: Myrtleford House $10. A couple of years ago I led a few groups in Victoria.000 Kemorine bought a property which was $275. So just by shuffling paper and signing of few documents she made a profit of $95.au/dymphna 132 .000.000 to do the strata title. The block of units was already renovated beautifully and they were rented out for $600 a week. So I started to have a look and found a house in Myrtleford. without too much challenges.000 by merely only signing her name. She paid the consultant $10. One lady present said that there were no deals to be had in Victoria and that you would not be able to find anything in Victoria. She paid a consultant to strata title the units so she did not have to do anything herself.5 Million in My First 18 Month in Real Estate Deal 1: Purchase price $275.
000 it was aluminum clad with two bedrooms.com. 1 bathroom and a laundry. no settlement. that sounds fair.000 for mine. Deal 1: www. GREAT BARGAIN. two bedroom house.knowledgesource. Case study: Julie. 1 large and 2 small bedrooms.000 for landscaping. One I found that would have been similar at the time was $140.From Virtually Zero to $3. it was not really flash but wasn’t too bad either.000 to connect it to all of the facilities etc. no property.000 to move it onto the block.5 Million in My First 18 Month in Real Estate Easily transported.000. no debts. floor boards throughout. It would be another $10. because I did not know. heating and I could make mine fairly similar. It was a two bedroom house that was quite pretty with timber floors.000.000 so with land and removal costs which would be about $10. but a good job. Look for these deals. this weatherboard dwelling with tin and aluminum cladding consists of kitchen / lounge / dining in an open plan living area. Okay. even if I could only get $120. So I am now up to $85. First of all I have to find out how to go about it. a low maintenance. Now I needed to find out what houses in Myrtleford were selling for. Now.000 making it $75.00 reduced from $150. nothing very much different from the other property. and then maybe another $10. 39 divorced with 1 child Before starting with me Julie had no savings. 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.000.au/dymphna 133 .000. There was another one for $138.000 it would cost up to about $65. I could still make $45. Look for the opportunity all the time. Land in Myrtleford sold at the time for about $40. At $10. aluminum clad.000.
It needed $100. Manufactured Growth example: Purchase price $340.000 Rented for $ 300 p/week Renovation costs $ 1. Case study: Rob & Kylie Purchase Price $295. but was $230.000 and she did make some money on it.5 Million in My First 18 Month in Real Estate Port Hedland $230.000 spent on it to make really nice but it would then be valued at $950.000 and on a deal like that you will end up being able to finance that through a thing called ‘Hide money’ which we really do not have here in Australia but it is a private money fund that lends on this kind of stuff all the time.000 Intention to subdivide and build a duplex on site. It was pretty ugly and run down. when I visited her and I walked around the property. she managed to increase the value of the property by $50.000 Renovation $100.000 End value $950. Upon questioning her about this. she said nobody ever paints the back of the house in Port Hedland but. She renovated it doing most of the work herself so it only cost her $1200 so it looks good now.knowledgesource.com.au/dymphna 134 .000 and it rent for $300 a week. She also has some room at the back of the property to put a duplex and to subdivide it. But the thing is.200 + hard work Across the road from the beach and Spoilt Bank Yacht Club Current estimated value $350.000 Partly finished renovations – currently unlivable Paid $320. It required major renovation. Julie bought a property in the town where she lived which was in Western Australia in Port Hedland.000 www.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 had only painted the front of the house.From Virtually Zero to $3.
000 $ 75. They put it on an extended settlement.knowledgesource.au/dymphna 135 . It was one of those opportunities that you would have driven past everyday and missed. John bought a development block that had on it a little old house that needed renovating for $367.From Virtually Zero to $3.000.000 to build. He also built a duplex out the back that cost $190.000 6 weeks Kylie is in my Platinum Program and her and Rob did a renovation on a $295. The original Pizza Hut roof is still underneath the new built up façade which was created to alter the look and make it appealing for a new commercial tenant which turned out to be a very good commercial tenant.000 house which cost $20. On completion the duplex and the house was rented and the whole block was revalued in excess of $750. and in the contract phase they built up the façade. Tenant wants to stay.000 back in their pocket in the way of equity after it was revalued at $390.000 Current rental on existing house $ 220 p/week Medium density development block on Ballina Island. Just after settlement the building was revalued with the new tenant in place www.300. I drove past it.000. 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.000. renovation and new tenant Valuation $1. Case Study: John Ballina Development $367.com.000 Another example is an old Pizza Hut building. It put $75.000. Example: Old Pizza Hut Building Sold $ 680. long contract.000 New façade.5 Million in My First 18 Month in Real Estate Renovation costs Revaluation Profit Time $ 20.000 $390.
before the deal when it was ugly. sharing the knowledge. Negotiation skills One of the things that my course can teach you are techniques of actually how to negotiate. Have a finance clause in there. Doing this. www. You cannot help somebody unless you are successful yourself. If you do not ask. a building inspection clause. it changes your circumstances making your life better. So please open your eyes to this kind of possibility as you drive past. You cannot lend somebody a hand to get to pull them up unless you are in a position of strength yourself. Those savings alone will enable you to buy properties saving in the long term way more than the $3.knowledgesource. passing it on to other people. 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’. Sharing Knowledge Sharon and Andrew started with me a number of years ago and they have done numerous courses with me.au/dymphna 136 .5 Million in My First 18 Month in Real Estate for $1. Think about that. that ripple effect.3 million.com. opportunities are when you see the block with the for sale sign. These guys have impacted an amazing amount of young people in their town by their success. Remember that flexibility is always on your side. 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. Do something with it. 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. changes your life. You will never know if a vendor is going to say ‘yes’. Find other plan.From Virtually Zero to $3. you have already got a ‘no’. Good negotiation skills will allow you to purchase property at much lower prices than you might otherwise. look for some opportunities. So if I can help you to get in that position of strength you can pass it on like pebble in the pond. 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. That is what gives me the biggest thrill.000 you will be paying to be part of my program and work with me for a year.
This is a financial model that I put together to support my lifestyle decision. he grates the road. He looks after the garden. where they are heading and what they actually want. I am a country girl. I know from experience and I know from my friends.5 Million in My First 18 Month in Real Estate My reason for doing all of this is my kids and my husband Brian. www. and if you do not expose yourself to the things that you really want. the only thing he doesn’t do at the moment is milk a cow which I am trying to convince him to do. private use for the business model. Or.600 lettuces a week.knowledgesource. I love it. maybe you like boats. 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. So spend some time doing that stuff. whatever that is. Or. to the realities that are there. I produce 2. which produces sufficient income to pay for full time farm manager to be there plus a part time assistant. travel. 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. Think about what you are going to achieve. We live on a beautiful property that I have cased out on the Sunshine Coast. he grows my organic vegetables. That gives me the flexibility to go away. 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.From Virtually Zero to $3. completely surrounded by rainforest. Your possibilities shift.au/dymphna 137 . he mows the lawn. I have set up a profit center on my property where I live. you do not spend time actually thinking about what you want. maybe you like airplanes. I do not know. some of them we consider exceptionally wealthy. You cannot achieve it. maybe you like crystals. do whatever I want and farm is maintained.com. You have got to open yourselves up to the possibilities. From there I run a commercial farm that I can take advantage of for tax purposes and everything else. As you move forward you will be able to do exactly the same. He hates milking cows he tells me. but when you start to think in business models and you start to think from profit centers you will paradigm shift. he does the landscaping. maybe you like stamp collections. a major ingredient for their success has been an awful lot of money spent on education. But I have set it up in such a way that I got a profit center operating. because if you do not know you cannot have it. I grow hydroponic lettuces. and every single one of them will tell a major component.
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.com. She saw little baby girls being killed at birth. but it is always consistently going on. continually learning and growing and experiencing. So I worked with her for about a year to give her a financially stable situation so that she could go to China and she could setup orphanages and that is exactly what she did. I ran into her a couple of years after that when she had two orphanages and she told me that she had saved literally hundreds and hundreds of little girls lives. and so amazing for me to have been a little part of making it happen. so special. expanding. I would love to have you as part of that relationship for many. She saw first hand some of the tragedies that happened. It never stops. She also saw the results of a policy in China called ‘one baby policy’. she was also smart enough to recognize that she could not do very much. that is how you continue to get ahead. and this affected her so profoundly. and she was in the process of negotiating with Western Societies to be able to adopt some of these children into the Western Societies. Because. little baby girls were not favored as much as little baby boys. But. This sort of thing is so rewarding. I feel satisfaction for all those www.knowledgesource. She wanted to change the lives or the potential lives of those little baby girls. how people lived. She just came back from China and she was very emotional about her trip to China. I had a lady come to me in my accountancy practice. she actually went back where her family came from. and she was of Chinese descent. she could make much of a difference unless she was financially secure herself. and what their reality and paradigms were.au/dymphna 138 . many years to come.From Virtually Zero to $3. because she did not go on the trails and the tourist tracks. That is how you continue to increase your wealth and have more success.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. Do you think it could possibly be that I could potentially teach you a little bit more? Those of you who would like to come on that journey with me. I would love to have you part of the team. I would love to be able to make that difference in your life so that you can pass it on. She needed to be in a position of relative strength to be able to achieve that. so deeply that she wanted to make a difference. Many years ago.
What are you going to do to pass it on? Somebody very. I want you to think about what difference you are going to make. They now own a factory. that woman and her husband made. no money. They set up this craft business with the wool industry and they exported to other countries and suddenly they have got this little industry. That is so special. her aunt. They created businesses.5 Million in My First 18 Month in Real Estate little baby girls that she helped in some way that I might have had a little part in there. it was crumbling under itself.knowledgesource. www. 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. the lady down the street. The farmers did not have the money to buy the bread so the grocers did not have the money to pay the supplies. It changed to an attitude of hope. She was a farmer’s wife.com. I saw the difference that. You have a responsibility to yourself to achieve that ‘peg in the sand’ and responsibility to yourself and the others around you to pass it on. The town had lost hope.” I say the same thing to you here now. Wherever you are at right now.From Virtually Zero to $3. I helped her initially and then her husband joined in as well. They realized that it did not have to be this way. The difference that you are going to make when you are in a financial secured position. The whole town was dying. Together. She taught the country women’s association. That town’s attitude changed. 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. The town had lost hope. not able to even send their kids to the off the land or to private schools or anything else. 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.au/dymphna 139 . 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. She taught her sister. That is amazingly special to me. I am privileged to have been able to see the effects of my work. they started to change their financial position by creating passive income. They employed the kids so they now have a future too. communally. She went on to teach the same skills to other people in her little country town. I had the privilege to be able to help that one lady in that one society.
and to be part of that relationship for many.com. www.knowledgesource.au/dymphna 140 .From Virtually Zero to $3. many years to come.5 Million in My First 18 Month in Real Estate I hope I have been able to pass some of that on today. I hope I will see most of you come with me in that journey and make that difference to be part of the process. I cannot wait to see your journey and the outcomes of what happens.
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