Hi Matt,

Happy New Year for Wednesday!

I’m very pleased you enjoyed the tape… for $15 it’s a no-brainer, right?

Anyway, I thought that since you wrote such a nice comment I’d write some detailed feedback for you (even though it’s late!) []

You ask:

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Do you all see merit in purchasing a property, doing the basics of rehabbing it, forcing capital growth and then drawing on the equity to fund the 20% down deposits for wraps?

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The short answer is yes, I do see merit… lots of merit. However I can also see one minor ‘fly in the ointment’.

And that’s lenders in my experience usually want to wait about 6 months before doing a revaluation and then you’ll probably only get 80% of the increase at best. Then there’ll be some application fees and other costs too.

quote:

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Or, is it wiser to use the smallish money put aside to fund the wraps etc fisrt off and eat up most of the money after say 3-4 wraps?

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As you’d expect I also like option 2 as well []

So what I’d be asking is: How can I do both? Why not do one of each? That way you can test the market with real life experience and then make up your own mind.

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I tend to think more along the lines of the first. I guess what inspired me was an article in the latest Aust Property Investor Mag about student accomodation etc.

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Hmmm… how were you inspired? What did it say?

Well mate, my final comment is that whatever you do… do something! Don’t sit on the fence! Make it your New Year’s Resolution to have your first deal stiched up by 31 Jan 03.

I can see that you have already started looking for properties in line with what I said on the Fast Track tape. Excellent. Action creates momentum.

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Anyway, any feedback, positive insights etc would be most appreciated.

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Matthew, you have done the research and have taken some tentative action. If it’s meant to be then it’s up to you. I believe you can do it. Do you?

Warm regards,

Steve McKnight

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Hi Jason,

Great to hear from you. How are things going?

You raise a good point and something that is already ‘in the pipeline’, so to speak.

Hopefully I will have some good news in the later half of 2003.

Have a wonderful day.

Regards

Steve McKnight

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Hi,

A solicitor would normally draw them up on your behalf.

I’d imagine that it is just a standard Word document on their system that is tailored for your particulars… but nevertheless, it would be smart in the first instance to have a solicitor advise you as it will need to comply with the relevant Consumer Credit Code and other financing parameters.

Regards,

Steve McKnight

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Many people may read this post… but I wonder how many truly understand the importance of the subject matter.

Who is doing who the favour?

The landlord for providing the house? Or the tenant for paying the rent?

Your answer will reveal how far your property investing will go.

Regards,

Yoda [^]

a.k.a Steve McKnight

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Hi,

When rate shopping , a good link to check out re: interest rates is:

http://www.infochoice.com.au/banking/rates.asp?CategoryID=90

This and other useful links can be found in the Web Links area.

Regards,

Steve McKnight

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Hi,

I think that it is important to read widely on the topic of real estate.

In respect to OS forums, there are often hints of strategies being used that may (or may not!) be applicable to the Aussie market.

For example, it was at a direct marketing conference in Vancouver that one of the fellow participants pulled me aside to discuss property investing. He was using a basic form of wrap strategy (although he didn’t call it that).

I came back to Australia and discussed the strategy with my lawyer… he said it was just vendor finance and the only difference was that we were writing 25 year terms rather than the normal 3-5 years.

And thus was born our wrap empire.

It wasn’t until I attended a seminar run by John Burley that I discivered what I was already doing successfully was called a wrap in the United States (short for Wrap around mortgage)… I just thought it was vendor finance.

So, the strategy works around the world but has a different name.

If you are confused with the terminology, just post the words / phrases that you don’t know and we’ll build a glossary as part of the site.

Regards,

Steve McKnight

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Hi Wes,

OK, you’ve gone step one with the due diligence and collected some very useful information.

Now it’s time to leverage the data to your benefit.

The first thing I think you need to do is determine what are immediate essential repairs to make the place liveable for the average tenant looking for a neat and tidy home.

Clearly major structural repairs would fall into this category… but some of the monir stuff, like fencing, minor wood rot, wonky toilet etc. can all be fixed later.

What I’m trying to say is that you need to work out how much it will cost you to fix the major problems.

Then once I knew the cost I’d go back to the vendor and renogotiate based on the problems identified.

Alternatively, renegotiate the price so that the repairs are done before you buy (ie. built into the sales price) in which case you can end up borrowing say 80% of the renovation cost rather than funding it from your own pocket.

You have done well to isolate problems, it’s now time to work on solutions.

Building reports are essential, but they can also be alarmist if you are unsure of what it all means.

From what I read, all problems should be totally recified for well less that $5,000 (but be sure to get your own estimate!).

Bearing this in mind, do the numbers in the deal still stack up?

Regards,

Steve McKnight
–holidaying in Mackay–

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Hi,

I think that Paul makes a good point about r/e agents.

Most r/e agents business bread and butter is their rent-roll. However, it generally seems that they take their clients (landlords) for granted.

Personally I would not leave my assets in the hands of just anyone. I would certainly do my due diligence about quality of staff, cost etc.

Also, take the perspective of your tenant too. If you are OS and something urgent needs doing, then your tenant will not want to wait days while the agent contacts you.

I’d recommend that when you find an agent you like / trust… empower them to make decisions up to a maximum amount… say $500 for any single matter and then deduct it from the rent.

Finally, if the properties are +ve cashflow, I’d also consider paying 100% of the debt so that when you come back in 2 years, you come back to increased cashflow and less money owing.

Regards,

Steve McKnight

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Hi Adam,

I agree that the shipping component is expensive compared to the price of the product, but the reality is that it costs that much to send out the tape given out original production run.

I will investigate the possibility of an mp3 format in the new year.

Regards,

Steve McKnight

P.S. Even with the extra charge for P & H – $30 for a ninety minute tape is still a steal.

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Hi Dan,

I agree, things look grim.

But this is where the chase gets fun. I doubt that what was said to you is hard and fast policy… you just need to look for an angle to negotiate on.

Keep asking questions looking for the right angle that will get the answer you desire.

Otherwise, what I would do is redraw some equity from your other deals, or maybe a temporary overdraft… heck I’d even use my credit card to bring the LVR below the mortgage insurance threshold to save the $7,500.

Which lender are you using, because most of the big banks ‘self-insure’ meaning that you can avoid the monopoly problems.

Cheers,

Steve McKnight

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