Hi,

I’m currently in Mackay, an area where properties that meet the 11 sec. solution are as rare as hen’s teeth.

Or so I’m told, except that there in yesterday’s paper is the following ad:

quote:

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“Investors possible over 9% return”
This neat and tidy 3 bedroom home could easily be rented for $155 p/w which if purchased for $89,000 gives over a 9% return very hard to beat around town on residential property.

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OK – it’s outside of the 11 sec. solution, but only just. Perhaps this is the sort of property that would warrant further investigation to see if the numbers stack up?

This post gives you a good insight into the way that I find the majority of my deals… reading papers and scanning the net.

Of course, these options are available to us all.

Bye,

Steve McKnight

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Yep, I agree with Terry.

I wonder… what happens if there is a capital loss?

And seriously, what is the target market for a tenant that will pay 75% above market rate (that is $700 for a property with a market rent of $400 per week)?

Like most things that come from the NII, it might seem attractive on paper, but what is presented is usually based on the best case scenario and simplified beyond belief.

The devil is in the detail, which I suspect is yet to be properly fleshed out by real life deals done at arms length and on a replicable basis.

I’m happy to be proved wrong though.

Bye,

Steve McKnight

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Hi,

My advice in this respect is that there is no ‘right’ journal as such as it is for your benefit more than it is for mine.

Note what you feel is necessary to flesh out the ideas and experiences you’ve had.

The journey is far more important than the outcome.

Warm regards,

Steve McKnight

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Hi Craig,

Thanks for your post and welcome to the community!

It might seem like a small question, but it requires a 2-day seminar to provide you with a proper answer.

Might I suggest that the place to start is not “what to buy?”, but rather “what profit outcome do I hope to achieve?”

Furthermore, think through the issue and ascertain when you hope to be financially free from the need to work and then consider whether property can help you achieve this goal.

Your profit outcome choices are either capital gains and/or positive cashflow. Your choice will then determine what kind of property you need to focus on.

As for areas, well, as recent APIM graduates know… good deals exist in all areas when you know what to look for, which is solving the problems of vendor’s and tenants.

Good luck and keep posting!

Regards,

Steve McKnight

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Hi,

Hmmm – I see red warning lights flashing here.

A common trick is to try and sell overpriced property to off-shore investors who don’t know he market.

For you, used to London prices and with a favourable pound:dollar exchange rate, the prices might seem cheap.

However, that is not to suggest that you will be paying too much for the property!

I wonder, who do you think is paying for the seminar, flights to London etc? It will be the overseas buyer.

If you decide to go ahead, then I would suggest that you have an Austrlian do the negotiating for you here in Oz. Perhaps consider using an independent buyer’s advocate to act on your behalf.

Cheers,

Steve McKnight

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Hi,

I’m not a big fan of these as I view it like neapolitan icecream – it has a little bit of everything but not enough of anything.

A hybrid trust incorporates a mixture between fixed entitlements (like a unit trust) and discretionary entitlements (like a family trust).

I’m yet to hear a good argument for why a hybrid trust is needed, when a unit or a family trust seems to be a cleaner and better option.

I’ll talk about unit (fixed entitlement) trusts in the next newsletter.

For those interested in detailed structuring information, I draw your attention to the recently released Wealth Guardian product.

Regards,

Steve McKnight

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Hmmm….

Good questions, but out of my specific area of expertise.

However, I seem to remember something about owner builders haveing to provide a 10-year guarantee???

My neighbour is a owner:builder, I’ll see if I can remember to ask him.

Can anyone else shed any light on the matter?

Steve McKnight

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Hi,

Thanks for making your post.

I want to make sure I understand… you have an existing property and you are planning to use (redraw/refinance) the equity in this to fund your land acquisition. The application of that equity will be via a LOC (line of credit).

If you do this then you will be able to pay cash for the land (if you need to settle) which will prevent you from having to set up separate finance in advance.

I imagine that if you do need to settle then you will refinance your land as a stand alone loan to free up your redraw (LOC) for other investments?

As a comment – it sounds fine, expect perhaps that you will need to pay establishment and other charges to claw back the equity in your existing property. Some lenders charge a facility fee whether or not you use the LOC – check this out.

I would advise that you should further develop your plan b (ie. make a plan c) just in case you cannot sell the land and you need to fund the -ve cashflow for up to six months+.

Check your affordability , together with how much you could borrow if you needed to establish separate finance. Eg, most lenders will place restictions on how much they lend for vacant land.

Finally, and above all, it’s critical that you have some kind of bigger plan for why you are pursuing this strategy.

Cheers,

Steve McKnight

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Hi,

You know… as I walked out of the venue last night – dog tired and almost hoarse – I didn’t think that I’d be functioning all that well today.

Yet, I was up at 7:30 and off for a morning walk, came home and I actually feel very refreshed.

And why not? I spent an amazing weekend with so many like-minded people who all shared a common goal.

I had an awesome time. Thank you all for attending… enjoy those key rings and let them be a constant reminder of what’s needed to be a success in real estate!

Have a wonderful day… take action now (right now) or else risk being a tyre-kicker!

Cheers,

Steve McKnight

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Hi,

The purpose of the article was to show how inflation needs to be considered when it comes to evaluating your property returns.

It’s not so much of an issue at the moment when inflation is at historical lows, but there is an potential issue with the handling of the taxing of the capital gain.

For example, no longer can you index your cost base, instead you just get a 50% discount. This might mean that in the long-term you pay tax on your inflation adjusted price rather than the real gain.

Your point about borrowing money to increase the return is well made. The example was not to show that profit cannot be made… just that profit is eroded by inflation.

Bye,

Steve McKnight

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