# How do you own that many houses??



## feeding_the_fire (12 February 2007)

I don't really know much about property, however was wondering if someone in here could help! (Even though it's a Sharemarket forum lol)

Anyhow, I occasionally see things on TV like "I own 78 properties and started off in a caravan" type stories, like what's on A Current Affair tonight.

My question is.. How on earth is this done? Even assuming the lady bought cheap houses (say $250K), she'd be worth nearly $20 million! How do you do that on an average income?? Am I missing something here?? What are the risks, and what is the general principle behind it all???

Some enlightenment would be appreciated.

Cheers!


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## theasxgorilla (12 February 2007)

How do you think they do it?


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## ducati916 (12 February 2007)

Debt

jog on
d998


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## CanOz (12 February 2007)

I knew someone who has nearly 20 houses. They bought one, fixed it up and got it revalued, bought another, rented them all out and added to them when they had enough equity. The houses were commision homes that we in a once, poor area. The area's land became valuable and the proprties became more valuable. He got both good income and growth out of his assets. 

I plan to do the same in China soon.

Use the power of equity to accumulate assets that pay income and grow.

Cheers,


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## The Mint Man (12 February 2007)

If the income from the property exceeds the expenses then you can own as many as you like. This is called positive cash flow or positive geared property, depending on how you make money from the property. sometimes you will have a positive cash flow property after claiming depreciation against your income, others will be positive geared as the rent covers all expenses.

There are a ton of books on this subject out there, best to read a few different ones to get different views on how to invest like this.

hope this helps.

cheers


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## CanOz (12 February 2007)

ducati916 said:
			
		

> Debt
> 
> jog on
> d998




C'mon Duc, not just debt.


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## tech/a (12 February 2007)

*Actually "G" there is a way that those who have massive holdings do do it.*
It is well known but not well known to the general public. Yet it is normal people who do it. Ive not done it myself. But know a few who have. Its entirely legal. But wont work as well in flat or decreasing times.
Its meant to be a Win Win situation.

Its a bit involved to explain yet simple in principle.

*No one's got it yet.*
Its not debt---actually its mitigation of debt (partially).

Enough hints.

I'll let the thread run a bit to see if any others know.


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## theasxgorilla (12 February 2007)

tech/a said:
			
		

> I'll let the thread run a bit to see if any others know.




{biting my tongue, letting thread run}


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## The Mint Man (12 February 2007)

tech/a said:
			
		

> *Actually "G" there is a way that those who have massive holdings do do it.*
> It is well known but not well known to the general public. Yet it is normal people who do it. Ive not done it myself. But know a few who have. Its entirely legal. But wont work as well in flat or decreasing times.
> Its meant to be a Win Win situation.
> 
> ...




rent to buy or vendors finance?


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## ice (12 February 2007)

Worth noting that whenever you see something like that you're really looking at an example of survivorship bias. i.e you're seeing the one who succeeded not the 100's who didn't, because no-one is interested in their story.

ice


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## theasxgorilla (12 February 2007)

ice said:
			
		

> because no-one is interested in their story.




Unless they failed after paying $10,000 to a guru for _enlightenment_, then the ACA/Today Tonight crowd need to know.


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## tech/a (12 February 2007)

The Mint Man said:
			
		

> rent to buy or vendors finance?




Mints got it.

*WRAPS*


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## The Mint Man (12 February 2007)

tech/a said:
			
		

> Mints got it.
> 
> *WRAPS*




yes also known as wraps, 
which are also nice to eat for lunch!

cheers


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## theasxgorilla (12 February 2007)

tech/a said:
			
		

> *WRAPS*




I'm familar with this.

1. Find someone who is finance inhibited
2. Find a house, or let them find a house that they want to buy
3. Buy the house for them, but only IF you can negotiate the selling price down to levels that make the deal work
4. Sell the house to the finance inhibited "customer" for more than you paid ("customer" pays a premium to the market, obviously, but at least they get to "own" their own home, right?)
5. Provide finance to the "customer" and mark-up the interest rate a couple of percent over what you are paying the bank on your smaller mortgage

It's supposed to be WIN/WIN, but even for a free-market advokate like me, it's _disgustingly_ capitalistic.


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## imajica (12 February 2007)

just saw the promo on TV - how could those dense morons own so many houses? is it in rural tasmania?


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## nioka (12 February 2007)

theasxgorilla said:
			
		

> Provide finance to the "customer" and mark-up the interest rate a couple of percent over what you are paying the bank on your smaller mortgage
> 
> It's supposed to be WIN/WIN, but even for a free-market advokate like me, it's _disgustingly_ capitalistic.



That is exactly the way banks work. Lend out for more than the cost of borrowing. Why not do it with a home. Capitalistic yes. Disgusting ???????????


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## ice (12 February 2007)

One teensy drawback might be that this is hardly the ideal time to be a lender to the subprime sector of the market.


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## theasxgorilla (12 February 2007)

nioka said:
			
		

> Why not do it with a home.




Because it doesn't add any VALUE.  You've created money for yourself through the alchemy of finance.  Fractional reserve banking is the same kind of _genius_.  Banks are not my favourite institutions...why should  I adore "wrappers"?


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## The Mint Man (12 February 2007)

theasxgorilla said:
			
		

> I'm familar with this.
> 
> 1. Find someone who is finance inhibited
> 2. Find a house, or let them find a house that they want to buy
> ...




Most cases I know of, the sell price is set at a fair level and then when customer wants to buy (be that 1 year or 10 down the track) then they can re finance and do so, in between paying an inflated interest rate to cover cost, as you said.
The other advantage (for the vendor) of this is that it is similar to commercial property in that the 'customer' pays all out-goings on the property just like you would if you bought the house with a loan from a conventional bank.

tech/a, theasxgorilla implied that to some this seems immoral. Im interested in your opinion on this. 
I understand both sides of this and can see where you both come from. 
tech/a, In your defence I will say that I have seen friends do this for each other in the past in order for one party to "own their own home". So this is truly a win win situation. _just so you know, my brother done this for a mate who couldn't get a loan, about a year or two later his mate was able to get the loan and buy it. My brother is no property guru, just doing a mate a favour!_
At the same time I know what you are saing theasxgorilla.

Cheers

_No fights please_


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## deftfear (12 February 2007)

I saw a similar story a while ago and the guy just bought cheap properties, mainly in rural areas and had them positively geared, so he was making money on the rent and didnt have to worry about interest payments. 

I think it's quite common that houses are positively geared in the country, you buy something for around $100,000 and can rent it out for $150-200 a week. Just rough figures of course, don't quote me on that.


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## tech/a (12 February 2007)

Mint.

I dont have the time to devote to a comprehensive reply just now.
But will tonight.

Just for the record.
In a bull property Market the Vendor is worse off
In a flat and or declining market the Purchasor is worse off.
Over many years BOTH win at different times.

It is a WIN/WIN but not at corresponding times.
An interesting topic one I'm happy to chat about.
ASX and I wont have a problem---he's of the same ilk!


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## The Mint Man (12 February 2007)

deftfear said:
			
		

> I saw a similar story a while ago and the guy just bought cheap properties, mainly in rural areas and had them positively geared, so he was making money on the rent and didnt have to worry about interest payments.
> 
> I think it's quite common that houses are positively geared in the country, you buy something for around $100,000 and can rent it out for $150-200 a week. Just rough figures of course, don't quote me on that.



Steve Mcknight would be the person you speak of. He recently sold all his propertys (hundreds of them to his partner) and is 'starting again'. But his strategies sound different, now he seems all doom and gloom at times and talks of buying bill boards and selling advertisment on them. His latest book sucks IMO, just going over what he has said before in his other two books, with only a couple of new ideas. But hey, what do you expect from a book that was written in such a short amount of time!!! he has a site www.propertyinvesting.com.au I think it is.
I am currently reading a series of books by Margaret Lomas, she has a different approach to property compared to Steve Mcknight but the end result is the same, making money. Margaret is more..for lack of a better word, straight down the line no crap, where as Steve can be more airy fairy at times, none the less, his stratergies can work.

cheers

Like I said in my first post, best to read a few different books.


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## mime (12 February 2007)

Likely they got in before the boom and leveraged.


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## Realist (12 February 2007)

I saw it on A Current Affair tonite!!

One lady owns 71 properties and holds seminars telling people how they can do it.

The ridiculous thing is she admitted to only having $2M in leverage. 

I suspect when the property downturn hits the rural areas and she owes taxes she'll have little left.

And even at the moment she could not even afford ONE property in a nice suburb of Sydney.    

Yet she tells everyone else how to do it!!  Why does she do this?  To make money for herself of course!!



She does know about positive gearing, and leverage though I'll give her that. Who doesn't?

As Warren Buffett said "If everyone entered a coin flipping competition, the eventual winner would run seminars and sell books on how to choose heads or tails"

She got lucky buying in at a great time, and she did a few smart things, but if you take her advice now it'll probably cost you money at the moment, because the very fact her properties have gone up so much makes them more likely to be overvalued now.

Leverage works both ways!!   Never forget that!

I'm not saying she was wrong, I'm just saying her advice is as useful as all the weight loss tips they have on that show.

Eat well and exercise, only buy a additional properties if you can positive gear it and it is not overvalued!!

There, you don't need to watch A Current Affair now!


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## Wysiwyg (12 February 2007)

I just watched that program and if a miner on 80k + can`t make it in life then he`s peeing it up against the wall.Like any investment if the  :arsch:  falls out then expect to suffer the consequences.


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## tech/a (12 February 2007)

Realist.

There is a huge difference between you and her.

*Shes doing it * your knocking it. You really dont understand supply and demand.
She is about 65% geared---thats very acceptable.

If I was her Id be getting gearing below 50%---there is a time to gear high and a time to be lower---that time is now.

*WRAPS*

This is a WIN/WIN,Vendor/Purchaser arrangement,not recognised in some states.

*Generally* Its targeted at those people who are high income very low capital rich.Couples who have great income together but havent saved anything and dont wish to wait or waste money renting.

The Vendor finds a buyer who fits this catagory,does the maths and sets a price for a property that they will initially rent from the vendor but eventually buy from the vendor.
The deal can be setup in a number of ways but is often setup something like this.

Joint income $100,000 a year. Can afford $36, 000/ year in re payments.
Home value $400,000 agreed purchase value (Commonly agreed upon say 5 year average price increase in the area---lets say 8%) To be purchased in 3 yrs.$503,000.
Interest rate agreed upon is normally 2-2.5% more than market which the vendor would normally take as interest only.
Default on payments even once means the vendor can remove himself from the contract and keep all rent payments and evict the prospective purchaser.

The purchaser must be able to satisfy lending criteria to a lender within 3 yrs.
*Some* Vendors offer up to 50% of the interest addon over the market rate as an incentive to satisfy all criteria. In the above case thats around $15,000 in the period of the 3 yrs.

In the end the Vendor has a guarenteed buyer at a guarenteed price and a tennet who looks after the property and often renovates---as it will be theirs at a future date.

*So by now* there will be the likes of Realist and Stop who are scratching their heads and saying ---those purchasers have to be nuts.

Well in a flat or negative market I agree,but I know of at least 10 cases because a client of ours had over 10 properties who set things up pretty lose to the above.In the 3 yrs the AVERAGE over those years was 19% growth.
*The Purchaser made way more in increased equity in the 3 yrs than the vendor.*
After 12 mths they could see the benifit and were the perfect tennents----the Vendor made sure they were shown the statistics.

Not for everyone but you'd be suprised how many line up to see if they will be accepted by the vendor---vendors can be very choosy. Cashflow is ALWAYS positive and banks loan on increased equity on valuation every year---less in some cases.

There you go.
Capitalist Property Mogles!!


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## wayneL (12 February 2007)

tech/a said:
			
		

> *WRAPS*
> 
> This is a WIN/WIN,Vendor/Purchaser arrangement,not recognised in some states.



I had an extended email exchange with Jenman over wraps (it is well known he is against them on ethical grounds)

It pains me to say he scored a few hits on an ethical basis, as there is a risk to the wrappee that they may lose all equity in the case of the wrapper going bankrupt... and it has happened.

I eventually had to agree with him.


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## tech/a (12 February 2007)

Wayne thats very true.
Never thought of that,vendor could definately go belly up and it may not have anything to do with housing---Broken marriage,Business,Gambler.

I didnt like them being a greedy landlord I didnt like the idea of giving away up to 50% of my equity.

Those with large property holdings can and should be selling---capitalising equity and placing it in either freehold or enough to positively gear their holdings at 10% interest.

Basically negating risk.


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## theasxgorilla (12 February 2007)

tech/a said:
			
		

> Those with large property holdings can and should be selling---capitalising equity and placing it in either freehold or enough to positively gear their holdings at 10% interest.




Do you think rates will go to 10%...or are you suggesting that it is prudent at this stage of market cycle to reduce gearing, regardless?


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## Realist (12 February 2007)

tech/a said:
			
		

> Realist.
> 
> There is a huge difference between you and her.
> 
> *Shes doing it * your knocking it. You really dont understand supply and demand.





Uggghhh.   

Sydney property prices have dropped for over 3 years now.

The ASX is soaring, and as you know with our bet I'm doing okay.

Thank Christ I didn't buy property is all I can say.



I am a fan of Ben Graham's theories on leverage, I'll never be the richest man in the world by not taking risks, not that I want to be anyway. 

But the most important factor is I'll never lose the shirt off my back. No matter what happens.

Greed is a deadly sin!


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## Smurf1976 (12 February 2007)

I'm not opposed to it on moral grounds but I do think both sides need to understand the risks involved. No doubt there are many who fail to understand these risks and that's not a good situation for either side to be in.

Given that we're living in an era of incredibly loose credit, if the bank says no then that's a pretty loud alarm bell ringing as far as I'm concerned when it comes to any sort of financial dealings with that individual. 

Credit has been so easy to get that I've been offered a credit card with a limit double what the bank thinks I earn in a year. And I've been offered enough mortgage debt to take fully 75% of my after tax income in interest alone. Anyone who is actually knocked back for a mortgage would thus seem to be a rather large risk. And they are precisely the people the wrappers are likely to be dealing with.

As I said, I'm not opposed to it but with the overall state of the market I wouldn't personally choose to do it rght at the moment. As for the argument that it produces no real wealth, agreed but then neither does speculation in shares, bonds, commodities or forex.


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## tech/a (12 February 2007)

theasxgorilla said:
			
		

> Do you think rates will go to 10%...or are you suggesting that it is prudent at this stage of market cycle to reduce gearing, regardless?





At this stage just prudent.
While the returns are less than spectacular cut back on gearing.



> And they are precisely the people the wrappers are likely to be dealing with.




Take a 2 income career driven couple who have chosen to travel.No equity but plenty of servicability.
OR
Take a Self Employed entrepeneur who has a successful business which he has been ploughing profit back into and not into a home no equity plenty of servicability.

The Vendor *CHOOSES his BUYER * carefully---he doesnt want them to fail!

I really cant understand why the majority of posters on this thread think the majority of investors in larger amounts of property are that stupid that they would place themselves at risk of ruin? These people are in the minority.(Those that place themselves at risk of ruin)

Most multiple property investors actually have a good understanding of what they are doing,particularly risk mitigation. It seems it's those who dont invest in any substantial amount of property that are most afraid of the RISK that these people MUST BE taking???!!

Infact Id be suprised if they were at the same risk of ruin as those who dont invest in property.---even remotely close.


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## Sultan of Swing (12 February 2007)

A topic close to my heart.

As far as wraps go, I know dozens of property investors and none I know of have ever done a wrap or are remotely interested in being involved in wraps. Personally, I think they’re risky for all parties.

For anyone that has owned their own home for a while and built up some equity, the easy way to get started is to draw down some equity in the form of a Line Of Credit (LOC) and use it as a deposit. There are plenty of properties in good areas, be it rural or on the outskirts of Melbourne, Brisbane, the Gold Coast etc, for around the $160 - $300k. Rents will be in the $200 – $350 pw returning $10 – $15k per year. 

With an Interest Only (IO) loan, after all deductions including depreciation and depending on what your marginal tax rate is, the short fall may be as low as $10 or $20 pw. 

As far as the lady on ACA, she has $6 mil worth of property with equity of $2 mil leaving her debt of $4 mil. With IO loans at 7.5%, that’s interest of $300k pa. Assuming she’s getting an average rent of $200 pw per property allowing for a 2% vacancy rate (each property empty for 2 weeks per year), that’s $710k in rent pa, leaving a positive cash flow of $410k. Take $2k per property for rates, insurance, management fees and maintenance etc and  she still has $270k or so left over.

If she buys no more, in another 7 – 10 years, history shows that they SHOULD double as should the rents. $12 mil of property with $4 mil or debt giving $8 mil in equity. Assuming interest stays at 7.5% or so, interest will still be $300k pa with rents doubling to $1.42 mil, leaving cashflow of $1.12 mil per year. 

It’s not rocket science, just a matter of learning to live with good debt and not over leveraging. Financial institutions don’t lend up to 95%, (85% without mortgage insurance), because real estate is a bad or risky investment. Property investors don’t start out with 71 properties, they buy one at a time, (to start with anyway).  They also fix there interest rates for as long as they can.

Books I’d recommend are ‘More Wealth Through Property Investment’ by Jan Somers (or any book by her for that matter) and ‘10 Million Dollar Property Portfolio in 10 Years’ by Peter Spann. Peter is also big on shares. Both authors are Australian and very realistic. 

Cheers

Disclaimer: Please do your own research!


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## tech/a (13 February 2007)

Good explaination S


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## ducati916 (13 February 2007)

*tech/a*

So which one of the outlined strategies does not involve debt?

jog on
d998


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## tech/a (13 February 2007)

Your classification of debt and mine are vastly different.

Debt which works for you is in my veiw good.
Ask anyone who runs a successful business whatever that may be and they will all have good debt.

Using other peoples money to leverage your return wether in conventional business/Property/Trading or even certain collectables is good business.

Bad debt such as credit card debt which generally doesnt assist in capital appreciation should have no place in your finances.

If I or anyone can liquidate asset and be nett positive then your not in my veiw in debt. Your in business.

But you knew that anyway ducster!


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## nioka (13 February 2007)

Anyone who studies management will be taught the four Ms, Management, materials, machinery and money. All important in the overall scheme of things. Most people participating in this forum are wanting to invest and make M O N E Y. They want a return for investing and will invest in the market that gives the best return. Some will invest in property.
 Of course there are those who will invest in travel and having a good time. They most likely will end up renters. When the return on property falls the money comes out of the market and goes elsewhere then there is a shortage of rental properties and the cycle starts again. Not rocket science.
 How do you own that many houses?, you do it in the same way as shares. You take RISK.


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## ducati916 (13 February 2007)

tech/a said:
			
		

> Your classification of debt and mine are vastly different.
> 
> Debt which works for you is in my veiw good.
> Ask anyone who runs a successful business whatever that may be and they will all have good debt.
> ...




Indeed.
But what we are actually talking about is the cost of capital, and a hurdle rate.

jog on
d998


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## Bronte (13 February 2007)

*How do you own that many houses?*

One sensible way is to:
Find a mentor to show you how he/she did it.


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## The Mint Man (13 February 2007)

where do you find one of these and how do you go about asking them to be your mentor?

cheers


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## Realist (13 February 2007)

Bronte said:
			
		

> *How do you own that many houses?*
> 
> One sensible way is to:
> Find a mentor to show you how he/she did it.




Yep, find someone who bought a few houses before the property boom.

Do what they did.

Then lose the shirt off your back as houses ease back to fair value. 

I'll say it again. Warren Buffet believes that if everyone in America entered a coin toss competition, the eventual winner would write books and hold seminars coaching others how to choose either heads or tails.

And as we all know, they just got lucky.

To have someone with $2M in equity running seminars is laughable after such a strong property boom.  As I said that lady on tv can sell all her 71 houses now and probably could not even afford to live in a nice suburb of Sydney.

Ridiculous.


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## Realist (13 February 2007)

Perth investors be warned...

From the SMH today. 

http://blogs.smh.com.au/lifestyle/r...s/2007/02/negative_gearing_is_it_worth_3.html




> The facts are this: in the 2004-05 tax year, rental investors claimed $3.9 billion in losses, a 50 per cent increase on the previous year. Back in 2001-02, taxpayers were subsiding property investors to the tune of only $600 million. Now that investing in property is an unprofitable business, taxpayers are subsidising the losses to a far greater extent than policymakers probably imagined.






> There are no simple answers, but is negative gearing a tax break or tax avoidance?
> 
> Does it really keep rental properties affordable, or does it allow investors to bid up property prices so that younger, less wealthy property-aspirants can't get a toehold in the market?


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## Bronte (13 February 2007)

The Mint Man said:
			
		

> where do you find one of these and how do you go about asking them to be your mentor?




On Foxtel at the moment "Untold Wealth" John Fitzgerald QLD
"Investment Club" Kevin Young QLD & WA
"Investors Club" WA
"Somerset Financial Services" Jan Somers QLD
"Destiny Financial Solutions" Margaret Lomas WA
"Property Wealth / Millionaire" Craig Turnbull WA
"Real Estate Riches" Dolf de Roos NZ 
"Rich Dad Poor Dad" Robert T. Kiyosaki USA

There are many many more...
Finding someone local to yourself is preferable.


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## The Mint Man (13 February 2007)

Bronte said:
			
		

> On Foxtel at the moment "Untold Wealth" John Fitzgerald
> "Investment Club" Kevin Young QLD & WA
> "Investors Club" WA
> "Destiny Financial Solutions" Margaret Lomas WA
> ...



I think Margaret Lomas lives local to me (central Coast NSW) thats where she started Destiny Financial Solutions I believe.


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## Bronte (13 February 2007)

A great place to start.
She is a very nice lady.


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## tech/a (13 February 2007)

Realist said:
			
		

> Yep, find someone who bought a few houses before the property boom.
> 
> Do what they did.
> 
> ...




Seriously you really are the only joke here.

You have yourself completely convinced that there couldnt possibly be any property developers or investors who can make a good $$ in anytime other than the recient boom. Profits are being made before during and now after.
Your the perfect example of doing the samething day in and day out expecting a *different* result

If theyre not Buffet,maybe Gates,or Branson---theyre not worth listening to.

*BUT YOU ARE!!!*



> As I said that lady on tv can sell all her 71 houses now and probably could not even afford to live in a nice suburb of Sydney.




Says he who couldnt afford one of her houses.

Whats this with Sydney.

Over populated,Over inflated,Self opinionated,Narrow minded,Cess pit of Wanna be's.


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## Bronte (14 February 2007)

Bronte said:
			
		

> On Foxtel at the moment "Untold Wealth" John Fitzgerald QLD
> "Investment Club" Kevin Young QLD & WA
> "Investors Club" WA
> "Somerset Financial Services" Jan Somers QLD
> ...




We are....what you might call "Course Junkies"


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## hangseng (7 April 2007)

tech/a said:


> Mints got it.
> 
> *WRAPS*




Do not confuse Rent With Option to Buy (RWOB) with WRAPS or Vendor finance.

3 totally different concepts, often confused by those who don't actually understand RWOB.

WRAPS I wouldn't touch with a barge pole and handled poorly can financially ruin both parties. Also illegal in WA and some other states I believe without a finance license. Vendor finance I like, but not for me.

What do I do? RWOB, negative gearing and straight positive cashflow rental where I can.

RWOB can do wonders for both parties, can create positive cashflow done properly, creates a (refundable) deposit for the option purchaser and shared (future) wealth for both parties. I can assure both parties love this concept. Note: this is not providing finance as is done with WRAPS and you must be willing to forego some of the potential capital gain as the investor. This is not a get rich quick scheme but it is an amicable win win situation. 

I am doing this after perfecting the concept on paper first for over 3 months and having had it peered reviewed both legally and financially. I am about to finalise one of them with a young couple who were refused finance due to some bad previous decisions they had made. They said have now paid their dues, left this behind them and will be buying this home very shortly (with bank finance). Whereas they would have had no hope for at least another 3 years at which time property would have moved upward again and as they said they were caught outside the cycle unable to get back in. I gave them the leg up they needed and ended up with the best tenants you could have asked for and a guaranteed sale of the home at a nice profit.

The concept is simple...don't get too greedy, be willing to share the captial gain with the purchaser and calculate everything up front to lock in profit. Most of all you must have a binding legal agreement and choose the option purchasers carefully. If you are after huge profits in a short time frame....do something else.

RWOB will be the most utilised concept in years to come and has been used in the USA successfully for decades.

Slow and steady wins the race.


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## Stan 101 (7 April 2007)

In 2002 one could still own a house on over 700m2 land less than 40km from the Brisbane cbd for 46k. I did and sold on the first upswing that made it worthwhile to me. If people were to have held those properties, their equity would be sky high right now.
To me wraps are not on an even playing field, but I do see their adavntages to people who otherwise couldn't get finance. 
I have a different methodology, that is definately flawed. I get in early, make a nice profit and then on sell then go find the next one. I pay more tax than I ever need to. But I give someone else the bite of the cherry.
I may be a fool, but to my reasoning partially exonerates me from my love / hate pf capitalist views. And I suppose I'm really just a gambler in a sense, just not the standard way.

The person who mentioned China will have a field day if they have a strong resolve... That would be fun to be a part of. Please start a new thread if you decide to go ahead with it. I'll add my experiences with other asian markets I've bought in..

cheers,


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## Kimosabi (7 April 2007)

I'm not touching Property until sanity returns to the market, I suspect this will occur when +10% Interest Rates rear it's ugly head.

And on another point, who says owning your own house is the Australian Dream.  With current housing prices and many people up to their necks in debt, owning property could quite easily become the Australian Nightmare.

The thing that sickens me most is that feeling that if you don't buy now, your going to miss out, so people wind up buying into an over priced market, which continues the prices going up cycle.

At some point they will run out of people to lend money to, and then the **** will really hit the fan.


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## Flying Fish (8 April 2007)

What is
RWOB


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## wayneL (8 April 2007)

Flying Fish said:


> What is
> RWOB




*R*ent *W*ith *O*ption to *B*uy

AKA Lease Option


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## tech/a (8 April 2007)

> The thing that sickens me most is that feeling that if you don't buy now, your going to miss out, so people wind up buying into an over priced market, which continues the prices going up cycle.




And this wont change regardless of what we "expect".
In the long term the will be no better time than now!

In 1963 my father placed an offer on a 46 square home at $29,000.
The builders stood firm for $30,000. So he missed out.
The last time I saw that home sell in 1992 was $580,000.

Ive bought a lot of property both Domestic,Commercial and Industrial.
That $1,000 that my father refused to pay has made his son a great deal of money.

In almost every case negotiation/timing/gearing all were not at "Bargain point." But Ive gone with the deal.

In 78 housing was sooo expensive $30,000 for a first home buyers home.
In 82 interest was 18%---Yes I paid it--yes it cost me 3 properties.
But I held 2.
One an acre Industrial block I had paid $30,000---sold it in 95 for $420k.
The other I still hold.Was it expensive then---you bet---now??--what do you think.

Point Im making is when you get started it WILL HURT.In 10-15 yrs time it will be a feeling of achievements and security.

*Dont be Paralysed by FEAR.*


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## Flying Fish (8 April 2007)

Anyone tried this? By a grotty unit for a song. live with your druggy noisy neighbours etc. Use this as incentive to spend almost no time at home, but rather work a second job. Pay the dump off in a year. Still live in it buy a second property rent that out. Tenents and you contirubute towards repayments. In about five years house is paid off even at inflated house prices rates etc. Then have two properties house and grotty unit. From there the options are limitless, still live in grotty unit and go for second house using money from teneants of house one + new tenenst in house two to pay off the second house mortgage, also contribute own income to second house repayments.... the mind boggles


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## Kimosabi (8 April 2007)

tech/a said:


> And this wont change regardless of what we "expect".
> In the long term the will be no better time than now!
> 
> In 1963 my father placed an offer on a 46 square home at $29,000.
> ...




I'm not paralysed by fear, I'll be buying property when housing affordability comes back to reality.

Effectively, buying through the dips.


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## tech/a (8 April 2007)

*Really!*

Just post up here when that dip arrives. When its "The right time to buy a house".

*Guarentee *there will be another reason *NOT* to buy.
High interest rates, Possible recession/depression. Inflation too high. Combination of them all.


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## Kimosabi (8 April 2007)

tech/a said:


> *Really!*
> 
> Just post up here when that dip arrives. When its "The right time to buy a house".
> 
> ...




Buggar, you just worked out my BUY signal.

In the meantime, I'm busily squirreling away cash during the boom...


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## tech/a (8 April 2007)

*Hahaha.*

Well I hope you do.
But will be harder to do then than it is to do now.

For most its never Cheap enough or the right time.


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## robots (8 April 2007)

Kimosabi said:


> In the meantime, I'm busily squirreling away cash during the boom...




hello,

at least your getting one thing right kimosabi, but you could be doing both by the sounds of it, with one "investment" capital gains free

thankyou

robots


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## nizar (8 April 2007)

tech/a said:


> And this wont change regardless of what we "expect".
> In the long term the will be no better time than now!
> 
> In 1963 my father placed an offer on a 46 square home at $29,000.
> ...




Great post.
The best in this thread hands down.

Property is never cheap, and is never a bargain. But fortune favours the brave.

You only live once - so LIVE - dont just SURVIVE.

Basically there are risks to starting any business, be it trading, property development, or any other business. But its those willing to take those risks that make it big.

You can choose not take such risks, and have an average job, average salary, and have an average life (or in my opinion, half a life).
Its those types of people that in their 50s or 60s look back on life and think, what wouldve happened if tried that idea i had? Imagine if id bought that property or stock instead of just "not taking the risk". If only... IF ONLY...

But those that take (calculated) risks are the ones that succeed and if they dont well at least they wont have any regrets, and they wouldve lived a much more exciting, life, to the fullest. A full life.


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## Kimosabi (8 April 2007)

robots said:


> hello,
> 
> at least your getting one thing right kimosabi, but you could be doing both by the sounds of it, with one "investment" capital gains free
> 
> ...




I'm not buying any property while Housing Affordability is so low, and I think this will get a whole lot worse, because interest rates are going to keep going up on top of over-priced property prices...


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## nizar (8 April 2007)

Kimosabi said:


> I'm not buying any property while Housing Affordability is so low




And tech couldve just said "I'm not buying any property while interest rates are 18%". But he didnt. He still bought. And subsequently made a killing.


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## Kimosabi (8 April 2007)

nizar said:


> And tech couldve just said "I'm not buying any property while interest rates are 18%". But he didnt. He still bought. And subsequently made a killing.




I think Tech/A got caught out by 18% interest rates...


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## Julia (8 April 2007)

Kimosabi said:


> I think Tech/A got caught out by 18% interest rates...




Don't take 18% interest rates as a factor on their own.  

At the time I was paying this, plus 22% for second mortgage on an investment property, inflation was so high that capital gains on the properties was huge, as were rents, so despite the high interest rates, the actual investment return was way, way greater than it is at present.


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## wayneL (8 April 2007)

Folks, many a property guru state that the profit in property is when you buy it.

In other words, you want to buy at, or less than the intrinsic value of the property. This is no different to any asset including shares.

Looking at shares, you can get away with buying over value if there is momentum in the market because you can readily sell at any point you think said momentum has ended. If you hold at this point it could be ruinous (if you bought over value). However the person who bought the shares at value (before the momentum)may hold through the ensuing bear market, comfortable with the knowledge that they bought at the right price.

This is no different to property. Those who bought at value several years ago can sit there with smug expressions, knowing they are safe. However those who buy todays over value are not in the same position. People have got away with it till now because of momentum in the market.

But when the momentum stops and reverses, there is not enough liquidity to make a quick exit. Those who are overleveraged with crash and burn. And anyone who doubts that momentum will stop are delusional. The only question is how long, if it reverses and by how much.

The fact that "most" people will be relatively unaffected won't help prices a jot, because never forget prices are set at the margins where the desperadoes are.

Those who implore folks to "jump in" to the market now (unless it is a truly stunning opportunity) should be severely beaten about the head and neck (figuratively speaking). You are not allowed to say the same thing about shares because of ASIC regs., and for very good reason.

Anecdotes of the past are nonsense in the current context and valuation. 

NB These comments relate to residential property investment, not development. They could also apply to first time buyers. They do not apply to folks who could comfortably ride out a downturn.


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## robots (8 April 2007)

hello,

more babble, but the last eighteen have indicated you cant really comment on value and be taken seriously can you

things are forever changing and what lies around the corner who knows 

goodluck

thankyou

robots


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## wayneL (8 April 2007)

robots said:


> hello,
> 
> more babble, but the last eighteen have indicated you cant really comment on value and be taken seriously can you
> 
> ...




Argumentum ad hominen. 

Robots, you can't be taken seriously when you consistently play the man not the ball.

No analysis
No figures
No reason
No logic

It would be appreciated if you could offer up some of the above in support of your views, otherwise it is just ramping.

I can be taken seriously because I act, or don't act based upon on my valuations. I have a view and I invest to it.


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## BSD (8 April 2007)

Good post Wayne. 

People who bought properties and held them for 20 years in my neck of the woods, probably didnt realise they had lost money for the first 10 years. 

Unlike investments in the stockmarket, you dont get reminded of your failure every minute and because you need a place to live, don't sell out. 

Property has so many cheerleaders because so many mugs made so much easy money. 

"I bought my first home in 1970 for $20K and I sold it for $400k" Blah blah blah

The entire holding period it paid no income, generated costs (rates, bills and depreciation) and the interest rate expense to buy such an asset fell by 60%over the time of holding. 

A Ford GT HO Falcon went from $8K to $850K in the same time - should we all be buying cars based on such homespun logic?

Residential property has been a great asset class in recent history (due to interest rates falling from 18% to 6%), but what about going forward with rising interest rates?

I know my variable rates are now 200bps higher than when I locked 50% of my mortgage in at 6%. That is a 30% increase in interest expense. I know where I live, property was completely stagnant for 10 years during the 90s. 

CBA shares are now 20 times their starting price and still pay gross yields of 7% - why dont we have CBA share buying seminars?

Mugs cant handle mark-to-market


One point brought up by some bulls I must argue with, is the point that property has always been expensive. This is BS

Seven years ago in the middle of my CBD you could buy riverfront apartments with views and a 6%+ gross yield and interest rates were 100bps lower than now.

This was 10 years after any residential property had actually moved in value and everyone thought property was a waste of time. 

I remember commercial and office property syndicates at the same time paying 10%+ yields 

Compare those yields to the 3% gross yields similar residences trade at now and the 7% yields being fetched by office or the maniac 6% yields on retail and anyone who is a rational investor can see the massive overvaluation. 

Worst of all - consider the 6.25% available RISK FREE lending to the RBA for 90 Days and the fact the spread property investments now have in relationship to this 'litmus test of risk' has never been skinnier (let alone a discount)

Fear hasnt held me back from buying more property - being a rational investor with a memory longer than 3 years has.


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## robots (8 April 2007)

hello,

all my posts never once have I said "go and buy property", I have consistently said the market is solid and never once forecast the direction

yet others are constantly saying things are going to fall over or stagnate, and neither has happened and thats why I post what I do

so call it what you like

thankyou

robots


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## wayneL (8 April 2007)

I reckon the sun is coming up tomorrow morning too. But that hasn't happened yet.

By your logic, it never will.


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## Kimosabi (8 April 2007)

wayneL said:


> I reckon the sun is coming up tomorrow morning too. But that hasn't happened yet.
> 
> By your logic, it never will.




This is an important point, just as we can be certain the sun will come up tomorrow morning, we can be certain that every boom will bust.


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## robots (8 April 2007)

hello,

just what do I write in my posts?

do I refute a bust is going to occur? do I say things are going to boom?

no, just write as it is

keep up the spin wayne

thankyou

robots


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## Kimosabi (8 April 2007)

> *Debt-hit families sink further*
> 
> By Anthony Black
> April 08, 2007 12:00am
> ...




Robots, this is how you post something that actually means something.


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## Sultan of Swing (10 April 2007)

*It all depends on what you read.....*

Todays news.com.au

http://www.news.com.au/business/story/0,23636,21533340-31037,00.html

Some say the downturn is over. From what I've seen, there's a huge shortage of affordable rentals in a lot of parts of Australia including my own area. That has meant that property owners are increasing rents and cashing in which also means rental returns are again becoming attractive.



> April 10, 2007 04:01pm
> 
> Investors returning to property - data
> 
> ...


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## jammin (10 April 2007)

Thanks for those articles Sultan and Kimosabi. The existence of these apparently differing viewpoints simply highlights the enormity of the housing market and what is constantly happening at either extreme of the market. You will never find an article in a paper shouting headlines of "VAST MAJORITY OF HOMEOWNERS PAID THEIR MORTGAGE THIS MONTH". 
Though I would like to see TT/ACA attack this story in their usual style....with a reporter, foot jammed in the door, yelling sanctimoneusly at the mortage payer "How can you afford to pay your outrageuous, immoral mortgage repayments each month? How can you sleep at night? How can you look at yourself in the mirror?
But seriously, a story concerned with increasing defaults, repressents the actual situation of the whole housing market, as effectivly as a story screaming about the increased values of waterfront properties.


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