Buying to renovate and then sell in a matter of months is quite a different ball game than a renovate and hold strategy. You’re not looking for growth areas necessarily – rather, properties you can sell quickly. You’re manufacturing your own value in the property and not waiting for Capital Growth to happen.

For this reason, I confidently say that almost anywhere is a good suburb to buy as long as you are sure about a few main factors:

1. Who is your target market?
2. What does your target market want?
3. How much does your target market earn?
4. There is not a saturation of property (like the one you’re renovating) on the market

Who is your target market? Before giving even one piece of advice to my clients about how to renovate their property, I like to know who their target market is. It’s important to really identify who these people are – and it’s not good enough to say ‘anyone’! The more specific you can be, the more you can tailor your renovation to suit them. A few of the real estate websites offer statistics about who lives in various suburbs, so check those out before beginning your renovation (or even better, work out whether the property you’re looking to purchase has the bones of a property suitable to your target audience) – before you buy it.

What does your target market want? Families will want a secure home with a bath possibly and reasonably low maintenance among other things. Professional couples will be looking for low maintenance, with good entertaining areas and something that will impress their peers. Retirees on the other hand, may want a smaller home but with extra storage for their lifetime of belongings, and a spare room for the children/grandchildren. Single mothers are a great target market because you can easily cater to their security wants by installing an alarm and security windows etc. Of course there are other things that your particular target market will want and it’s a good idea to figure this out before you start renovating.

What does your target market earn? Here’s a part of the ‘flipping’ strategy that is so often over-looked. Wouldn’t you like to know how much your potential buyer has to spend? There’s no point ending up with a property you need to sell for $600k to make a profit, if your target market can, on average, only afford $400k. The government statistics website www.stats.govt.nz/ is a place you can find out this information. If you know how much your target market earns, then you can quite easily figure out what they can afford in mortgage repayments – and therefore the total value of a property they would be likely to buy.

Now you know who your target market is, what type of dwelling they are generally looking to buy and how much they’ll be willing to spend, look around the market-place in your suburb and see what else is on offer. If there are 10 houses that already offer the things your target market wants at a price they are prepared to spend, then perhaps this is not the right deal to be making your fortune on. However, if there are none or only a few similar houses, then perhaps it is.

So there you have it – 4 quick things to consider when you are looking to buy and flip a property. You can generally buy anywhere as long as these things stack up. And make sure you get good advice on what changes to make to the property to maximise your return if you’ve not flipped property before.

This is a great start but renovating your investment property wisely is restricting and takes a lot of planning and self control. It’s not just about prettying up your property in the way that you might like it. And in fact this is exactly how you would go about over-capitalising on your renovation.

A smart property investor will make a plan right from the outset that purely focuses on how they will make a profit from their renovation.

If you think about planning your renovation enough in advance, you will even consider it before you decide on a particular property.

Renovating the right property could be the difference between making a profit and not. If you’re planning on a cosmetic renovation, then selecting a property that requires minimal ‘invisible’ work is essential. Invisible renovations include things like re-wiring a house, replacing a roof that you can’t see from the road, installing insulation or repairing general damage to the property. Cosmetic renovations that may or may not include small structural changes (for example building an interior wall to create a new room) have worked extremely well for me and the many many clients I have advised in the past. This is not the only way to renovate (you may choose to add a level or do even more structural work to your property) but it is a quick, low risk, reasonably low cost way to force value onto a property.

Choosing a property that you can perform minimal work on but that dramatically improves its appearance is of course, key. Some properties are just simply too expensive to renovate compared to the return you would earn. For the best returns on a cosmetic renovation, choose a property that is 15-35 years old and out of style/old fashioned (1970’s, 1980’s or 1990’s – and at a stretch 1960’s).

Kitchen – Before	Kitchen – After:

Bathroom – Before	Bathroom – After:

The next step is to work out the feasibility of renovating the property you’ve chosen. The best way to work out your potential profit is by asking real estate agents and scouring the internet to find out what other properties are selling for. Compare your property to others that are a similar style and size (number of bedrooms and land size) – especially those that have recently been renovated. If your property is currently worth $400,000 and other renovated properties are selling for $450,000, then you may not consider there is enough ‘fat’ in the project. However, if there are examples of properties that have sold for $480,000, you might consider this enough of a profit to pay you for your time, investment and risk.

When doing your numbers, an essential thing to know, of course, is how much your renovation is going to cost. The area the property is located in, the type of property it is and what you are planning to do with it (sell, hold short or long term, rent out etc…) will all go to deciding how much you should spend on it. When advising my clients about what exactly to do to their property to improve it most effectively, for the least cost, I typically work to a budget of 5-7% (of the property’s pre-renovation value). Using this strategy, on a property currently worth $400,000 the specifications I give them would be based on spending around $20,000 on the renovation. It’s very easy to spend over this amount, but believe me it is completely possible to stay within your prescribed budget – and avoid over-capitalising – when you have the right plan in place.

Once you know the cost of the property, the cost of the renovation and the probable end value of the property (re-valuation or sale price) then you should be able to make an accurate assessment about whether to go ahead with the deal or not.

I don’t believe that it is vital to know exactly what you are going to do to a property to know what it is going to cost to renovate. In fact, I tend to work in reverse as long as the property has good bones. I usually work out the renovation budget depending on location, property type and size etc… and then allocate my budget from there. Distribute your money around the whole property so that overall it is improved. It’s great to renovate the kitchen and bathroom but if you do nothing to the rest of the house (especially the exterior) then it could be money wasted.

Identify the worst parts of the property (not the areas, but the actual components within each area – such as kitchen bench-top and/or handles and/or splash-back and/or floors etc…). Then renovate just the components that need it. You do not need to use the ‘gut and replace’ method of renovating. You can select just a few key components to change – and done in the right way this will dramatically improve your property for minimal cost.

From the outset, keep a tight record of what you are going to do to the property. Your intention of course will be to stay within a particular cost parameter. However it can get tricky to stay on track once the day-to-day reality of the renovation kicks in. ‘Just’ $50 here and $20 there and another $60 here adds up before you know it. If you do not keep tabs on the variations that will inevitably occur you are likely to run over budget and risk over-capitalising. For this reason record keeping is vital. A simple spreadsheet will suffice – preferably on your computer so you can update it as necessary. Record on it what you are going to do (the exact specifications – product, colour, style name, dimensions etc…), who is going to do it and how much it is going to cost you. You should also keep tabs on when you expect things to be done since time over-runs equal cost over-runs usually. For example if your renovation takes two weeks longer than expected, then you’ll have two weeks of mortgage repayments you hadn’t budgeted on and that could be another $1,000 or more out of your profit.

Most of all, remember that as an investor, your renovation is a numbers game – and if the numbers don’t stack up then put your feet up and save yourself the hassle.

This UK based program follows 2 teams of budding property dealers who get given a rather lovely £300k to get started and have one year to make as much profit as they can out of doing up and reselling property. All under the watchful Gary McCausland – who has been doing this for years and runs his own successful property empire.

While one of the teams (The women) are doing really well, and have so far made over £60k profit, and churn out one good deal after another – it is just sheer agony to watch the blokes lose money on deal after deal.

I have made my family promise to shoot me if I start behaving in such a tosser-ish way as these two. I’m all for investing in property – I have three already and plan on buying many more, but for crying out loud – there is a hell of a lot of work to do. These guys seem to think it’s all about saying you want to make money and that’s it. And while I am the first to admit that I think one of the joys of the property business is sitting around drinking vast amounts of coffee – I also understand that this does not let you off the hours upon hours of trawling websites, dealing with agents, viewing anything from sheds to palaces, and getting to grips with making offers. And maybe getting your hands dirty with some hard labour now and then. One of the guys seems to stop at the coffee bit! The other one seems to dream a lot and talk about how it’s all a matter of getting this bit or that bit right – he just doesn’t seem to do much of it.

Something that does annoy me with the program, is that although the presenter does swoop in to offer his opinion – he doesn’t seem to be actually mentoring the teams, rather just telling them what they should do once they have bought the place. With the girls that works out OK, as they tend to do their homework before they buy. The guys team however just keep buying lemons, and they need to be taught how to spot one! What is worse –is that when the presenter does tell them what they should do with the property they just bought – the blokes completely ignore him, and the girls tend to at least listen and do as he suggests most of the time.

I’m pretty sure either of the two property mentors I have had, Trev and Steve, would have taken me aside and told me to stop being such a plonker before I actually paid money over for a property that was no good. (Steve has a more colourful turn of phrase – but gets the message across!). I thought it was especially important to get help from a mentor as I was a migrant and I needed help to really understand how the property market works over here. It is very different from the UK way of doing things, and when you are buying to invest rather than buying a house to live in it is even more vitally important to understand exactly what you will be dealing with. While there is certainly money to be made in property – if nothing else the guys team show that it is all to easy to lose a lot of money if you don’t understand what you are doing.

I dread to think what kind of mess we would be in if we had tried to go it alone and buy investment properties. As it is, one of ours isn’t doing too well, though the other two turned out to be really good buys. I read today on Property Talk that everyone buys a lemon from time to time, so it’s nice to know I got mine out the way early. Funnily enough, while there are people out there who will abuse the position of being a mentor, and persuade investors to art with cash for any deal, both Trev and Steve have actually advised me against buying many properties because they either knew something I didn’t, or just through sheer experience could tell me what was a bum deal. I actually listen when they tell me this!

Hopefully it won’t be too long before I can buy my next Investment Property.

To be a successful investor we need to be 3 things

1. Positive
2. Responsible
3. Proactive.

If you think of the opposites to all the above and if you fall into any of those categories then you may have to start asking yourself a very important question – “Do I have the right mindset and approach to be an investor? Having said that I remember when my wife and I were just getting started and at social events I would be like a rooster in the hen house who just found something wonderful to eat. Id be crowing about how wonderful property investing was and telling everyone that they should get into it but was amazed of the negativity of some people as they would tell you every reason in the world why you shouldn’t get into property. (How many of you have had that experience eh)?

To make matters worse when beginning investors start out they may go to a conference or event of some kind and get heaps of great information then come home and get advice from their family and friends who are of course experts in the field…..well offer you so much advice about why you shouldn’t get into investing you’d think they were.

So how do we get started then? The majority of people don’t take this path till later in life when they have built enough equity in their family home. So what happens if I don’t have a home with heaps of equity you ask and you just want to get started now? Well of course this will depend on your current financial position but to get started you of course have to make a deposit for your property and it doesn’t really matter what stage of our lives we are at, we could all use some extra cash and one of the ways my wife and I did that was to investigate some of the many hundreds of ways to make money that a guy called Jamie Macintyre speaks about. In fact after we ordered his free $99 DVD (click here for a copy) – (oh and ask them for the free e-book too) – and later attended a conference, we actually bought this internet business.

There are many, many different ways to make money once you start educating yourself about how to do it. So wether you make money from your job, supplement your income and speed up the process using some of the different strategies mentioned in the free DVD or e-book or you already have a heap of equity in your current home to start out, you are going to need a deposit. Before the global financial crisis money was very easy to get hold of but things may have been tightened up a little bit since then but don’t despair, you just need to keep looking until you find the right lender.

So let’s say you want to go out and buy your first investment property for about $300,000 so you will need between 10-20% deposit – 30k to 60k. The next question I get asked is “what about all that debt and how can you afford it”? Well to start with its good debt or an asset….not a liability. In other words you are buying something that you know will go up in value over time provided you buy wisely and do your research and of course educate yourself about property investing. Don’t just go and buy the first thing you see or buy it because its close you where you live and you can drive past and admire it every day. Also don’t think that you will be a millionaire overnight because you will need to be committed to buying and holding your properties for as long as you can. You must buy in the right location, with the right amount of land content and at the right time of the building cycle (more about this later).

The main thing to remember is that you will not be paying your investment loan off completely out of your own pocket. You have three sources of income when buying investment properties in Australia (and other countries) and they are;

1. Rent
2. Tax deductions
3. Depreciation

We will start to break these down into more detail in future posts but remember before you start, it’s important that you seek proper financial advice from those who specialise in this area as everyone will have different circumstances. I am not a financial advisor and certainly don’t profess to know everything about property investing but I would love to share my knowledge, my experiences, my mistakes and journey with anyone who wants to learn and take or continue this journey for themselves……to be continued.

All the very best Anthony Shaw

PS – feel free to join our Facebook group here and add me as a friend.

image by hamed

By January 2003 I had listened to every one of JB’s tape sets and taking all of my various lunch mentor’s advice to heart I trudged off and met each of the advisors they suggested. When I had completed this, I phoned an individual who was playing aggressively in the market at the time and met him for lunch. This was great for me as it reaffirmed to me that my passion was in the game of RE and finance. In meeting this individual it also gave me a living example of what I had long considered to be a key to success. Dream VERY BIG, start small, break it into small steps and try and SYSTEMITIZE the whole thing so that it can grow itself. It also got me severely amped to get back into the game.

-NOTE: This individual turned out to be a fraud and a clown but I learnt a bunch -

Three weeks later other circumstances resulted in me and my girlfriend deciding to can our attempted business venture. While we were heavily out of pocket to the tune of $38,000 I was relieved and decided that it was past time to get back into my game.

It was now February 2003 and three months earlier I had successfully refinanced all of my Invercargill Properties, paying back all my credit cards. I decided to take stock of my situation and bought out my mother’s 10 percent stake in my little business. To do this, I paid her back her original $3000, plus a little over $15,000, which was her equity value of 10% at the time. Suffice to say, she was reasonably happy with her investment.

If you will recall less than one year previously I was over $60,000 in debt.

Looking at it, I had gone from minus $62,000 in debt, to eight houses, a net worth of over $120,000 (180K turn around) and by helping someone else make some money, now had access to some hard investor money. I decided it was time to start playing the game properly.

Total over being a policeman and deciding to own the South Auckland market I started looking for agents and kicked it up a new gear from the beginning of March 2003. I took all of my annual leave and I made about 350 WRITTEN offers in that month, of which I think only about 150 were presented as I wanted them to be. By the time I got my act together and started to figure out what I needed half of March was gone. It didn’t matter too much as in the next week I had eight offers accepted. These ranged from 67-80% of RV, all in the Auckland region, in a rising market. So basically while my strategy has changed over time the deals were and continue to be out there.

I got finance for all eight but three were sold out from under me by a vendor while on contract, one after we had gone unconditional. This was a lesson in itself but I won’t relate it now. Suffice to say neither I nor the RE company who had the sole agency with them, will deal with the vendors again.

I settled on the other five houses at the end of the month of March. My target was ten on contract so I was a little disappointed, but not too badly.

Having used up all my annual leave I quit the police to pursue property full time on the 2nd of April 2003. Three days later, I attended Keith Cunningham’s Business School for Entrepreneurs (then called the Keith Cunningham Mentoring Program). Without a doubt, this program is the best thing I have done – it completely changed my life and I am eternally grateful for attending. I also sometimes shudder and wonder “what would have been” if I had not attended. If you seriously want to achieve spectacular things in your life, then you owe it to yourself to go. Here is the first email I sent my Keith group, the first weekend after session one on this course:

“One week ago I was reborn.

The catalyst – a weekend in a room full of loving, inspiring and supportive people, and an hour in the cauldron with Keith J Cunningham.

Wow! What a feeling. Thank you Group Six. Thank you Keith Cunningham. And thank you Sandi Cunningham and Rita Davis.

I have been wandering around the last week, completely satisfied in just getting to know myself again.

What a feeling!

I love this feeling. So I decided to share it. By midday Monday I had persuaded my older sister Liana that Keith’s program was something that she needed to do. She had spent the weekend watching the light in Mae and my eyes grow and grow. I took care of the costs and Keith and Rita squeezed her in for Sydney Group 7.

Wow! Thank you Keith and Rita for your generosity of spirit and support in this.

I spoke to Liana today and WOW WOW WOW! I have already got my money’s worth from paying for three people to attend this program. BEST money I have ever spent.

I spent half an hour crying in happiness with my big ‘sis. She is a different person. What a feeling!

Thank you Keith Cunningham! And thank you Group Six!

My thanks and love to you all,

Chris ASHENDEN”

And here is my second email, around the same time:

“My only formal goal for the 120 days that Keith gave me is to write a list of 50 ‘Things I could have done’ for a failed business venture in the past, with no blame, no justification.

I will do this by May 10th, two days after I get home from boot camp.

For support I want to receive everyone’s progress emails. I will tell you where I am at every week. I will also ask for specific support when I can see I need it. If you can see I need it, then please give it!

Adding a goal of my own, I guess my 120 day plan of ACTION comes down to three things:

1) Be me
2) List of 50 things I was responsible for in this failure, no laying blame or justifying.
3) Make a million dollars

See you next week.

Chris Ashenden”

Some people seriously don’t like wishy washy stuff like I just posted in those emails. They want hard numbers and real info. Some tangible goodies. They want to know the financial power of that course, and what they really want to know is “Did I make a million dollars in 120 days after sending this email?”

The answer: No, I did not. It took me a further three and a half months to do it.

Read Part 1 of Chris’s story here …

Where my family and I live the life of our dreams, and I work when I feel like it because I am loving what I am doing and not working because I have to work. I have 180 properties under my belt and counting. I hope I can help inspire some of you to take some action in your own lives to get yourselves ahead to a place you would like to be.

The story picks up here………….

From as early as I can remember I used to day dream, infact I didn’t do very well at school because of it, I was thinking of what I would do after school or what I would like in my life. I guess I have had a pretty strong drive really as I used to get a lot of those things into my life I had dreamed about and as time went on I started to think that this might be more than coincidence that these things I used to dream about were suddenly coming into my life. so I experimented a bit and as I called it then wished for things, I now realize I was wishing in a very positive way, infact I actually believed I already had these things in my life so of course in due course I would get them.

Now to skip ahead here to 1998 we owned our home and had a successful business which we were both working full time in, we had also managed to get financing to build the building our business was in, this was financed 100% by the bank, we had purchased the section with some shares we sold, had done quite well on the share market I used to think it was luck but I realized I was developing that intuition or inner voice and I was guided by that to a large extent, I always had a feeling my passion was property, I had always been drawn to it, not in a way most women are, I don’t care what the house looks like as long as I can make some money out of it so I am not into really prettying them up, infact if they will rent as is I just leave them normally just doing what needs doing as ongoing maintenance. I also have everything managed so once I have bought the property I just pass it onto someone else to manage. They organise anything that needs doing.

In 1998 I saw this course advertised it mentioned improve your memory, loose weight without dieting, stop smoking(not that I smoked) and other things but at the time most important to me is it advertised ,non religious and not hypnotising. ( I might add there I had major hang ups about both religion and hypnotism) so I went along. The course was called alpha global, they later changed the name, it was run by an Australian he now does it as part of another seminar which involves business and investment options too, one of these years I will get to it, dates have never worked in with us and the only time they did they changed the date on us. Still I am hopeful I will get there someday. Besides my story will make an interesting talk, this was the course that turned my life around. Many people have times in their lives where their whole world changed, this was the first really big one for me. I had certainly had others I realize now because some of the negative stuff that happened as a kid helped give me the courage and determination I have now and this course helped cement it in for me. It made me realize I was bringing the good luck into my life I currently had, (yes sure I had barriers to get through like we all do but I was pretty determined nothing was going to stop me) I also realized those things I used to dream about when I was younger and older as I never stopped dreaming I had bought into my life by concentrating on. Now some of you are switching off by now I am sure but I ask you to bare with me and open your mind to what MIGHT BE for you if you dare to dream.

I used to be an angry, impatient person before I went to this course, so I also learned at it to relax and not be angry. This was HUGE for me as I really had no idea before how to do that, I was quite tense all the time (not a good feeling) It is strange really but once you really develop belief and trust in yourself things start to happen, you can just be talking about something you desire and it will happen as you speak or you will put your hand on a book and get exactly the answer you need to a question you have on your mind from it. this happens to me all the time now so I am just grateful for the experience, I thank myself all the time (now I know some of you think I’m nuts but that’s ok I can live with that, I was told at that course your mind likes to be thanked so I do it, also thank the universe or god as I know somehow I am getting other help) I think we all have to be a bit mad to get ahead in this life. there are many other books you can get and cds to help you deal with things in life and I have read a number of books now and listen to cds often in my car.

I made a number of goals at this course something I never had done before consciously. This time I wrote them down, this was new to me. One of them was 50 rentals. Another was to move house, annual family overseas holidays and there were plenty more, I also remember after it sitting with my eyes shut visualising all these things in my life and believe me at that point in my life it would have seemed fairly impossible.

6 months after this course I started reading (another thing I never used to do) read the ususal ones, think and grow rich, if you want to be rich and happy don’t go to school and of course rdpd everyone knows and his other books too. reading Roberts books made me feel fantastic, I realized I was on the right track, I just had to turn the “S” business into a “B’ business then I could go out and be an “I” . read the book “Rich dad poor dad” if you don’t know what I mean. So that’s what I did. (not immediately though) the time for me to leave work was not right instead I convinced myself I enjoyed work instead of resenting being there which made things much better. I did a few other courses over the next couple of years, a one day one of Robert Kiyosaki which he mentioned you need to be on the inside of the deals to get the great ones, didn’t understand what he ment at the time. (funny how naive some of us are) I also bought the cashflow game, learned heaps from that game alone. I went out and bought some negatively geared flats too just because I didn’t realize you could get positive cashflow, we had 2 rental houses I had bought over the years which I had paid off so were using the income from them to pay the loan,I was so proud of myself for getting them at the time, it wasn’t till later I would realize what a BAD investment they were. At the end of 99 I did a dolf deroos course a weekend one, this was really scary as it was by a long shot the most expensive one I had done, and from that I got “ you have to buy wholesale” and “the deal of the decade comes along about once a week.” I went out after that and bought 2 properties for 70% of value. Took me 3 months to find them. But I had proved it worked and I had positive cashflow, Then I STOPPED party because the bank said no more and at that time I used to listen to that.

So in Dec of 2000 John Burley came to Auckland, I just had to go, at the time we had no money and my husband was really against this investing thing now, kept telling me no more. But I got there and that was the next turn in my life. I realized I could stop listening to all these people who said it cant be done and just go out and do it. I also realized how badly negatively geared these flats were by using a debt reduction plan John gave us. I didn’t have personal debt but of course I had realestate debt and the numbers on those flats sucked!!! We were also in a flat market so when I inquired about selling that wasn’t an option either. Wont go on about them they are history I eventually sold them about 2 years later at a loss but I was glad to get rid of them and I learned heaps from that.
I had come away from Automatic Wealth which was the name of the course John Burley taught with the idea I can do some of this quick cash he talked about and get there, I also realized at that course I didn’t have to keep everything I bought. Up to then I thought I did as I had the mind set they were hard to come by. I also quit work at the beginning of 2001 the time was finally right hired someone to replace me.

From John’s course here I went to his Realestate Investing bootcamp in Phoenix Arizona, again against many other peoples wishes, and made it happen really, in that first year I bought 50 houses, mostly positive cashflow, I did a few instalment sales (wraps)which John was really passionate about at the time, I didn’t feel deep down they were for me but they served a purpose at the time as I was on a mission (didn’t realize it at the time) the market was flat remember, for every house I bought at the time and I was buying mainly 20 to 30% below value I could see another 4 I couldn’t manage to take, not my lack of action it was just the banks were having a job keeping up with it, as was the accountant and lawyer still that was enough for the year, the instalment contracts helped pay the slight negativity on some of the properties I bought which I had high equity in, you see my intention was to sell some down once the market changed.

I did scare myself when I realized what I had done after those 50 and stopped buying for a few months. Still I have made up for it now.

Now I will tell you here is all you need to do is believe in yourself and you can create miracles literally and millions of dollars of profit for yourself and who ever you choose to share it with. To date at the time of writing this 22nd June 2005 I have bought close to 180 properties I have sold many for a profit, I have continued to educate myself and do a number of courses a year as one thing I have got from these great teachers is continuing education is very important. So I still do a number of courses each year and help staff some I have done.

One thing I should add here is I found the goals I had written out after the course in 1998 and when I read through them I had done EVERYTHING, I had forgotten I had written them, it was some years later I found them like about 2 years ago, I had even put we are moving house in 2003 as when I asked my mind that was the answer I got, what I didn’t know at the time it would be move to the house next door which we purchased and did a make over on our own home and doubled the size of it before moving back in2004 funny how things turn out not always what you expect, we live on 25 acres which is in the city boundary still many years away from development which is just as well don’t want to move again too soon.

I do still have a vision of a property on the coast with my own beach, I think it will be a farm which I will pay someone to run, some native bush would be nice too, not sure where it will be yet but it needs to be warm, if in NZ it will have to be up north but if I can convince the family to move maybe Cairns or Noosa would be good. Still when the time is right the right property will come. Of course it may not be in any of those places but I do trust it will come when the time is right.

I use the trading I do to pay down the loans on houses I plan to keep for the long term, I have houses all over NZ now including a couple of nice lifestyle houses we use ourselves, you can create this cool life for yourselves too if you are brave enough to face your fear and do it anyway. There are people who can help you deal with any issue you have in your life, infact that is one of my goals in the future to do some wealth coaching I call it, helping people get ahead in life and deal with their fears, I need to do more educating myself though there before I can teach it, one of the other courses I attended in 2003 gave me my life purpose and that is to help other people, that is what drives me nowadays I still plan to go on buying houses as I love doing it, I am doing a lot for others now, I offer nearly everything I purchase out to a list of investors for a finding fee if they don’t take them I just purchase them myself some I will onsell and some I put into my keeping trust. I also set up a charitable trust last year as it is a wonderful feeling to give back

We regularly have family holidays now, many overseas, we have made a lot of friends in Australia and USA because of the number of trips we do, this is a really cool life now not having to work, I basically just work when I feel like it and when you get a good number of agents on your side the deals come straight into your lap so you don’t even have to do the leg work to find them. The one I had faxed today was a classic, this was already signed by the seller so all I had to do was sign and it was a done deal, I love those ones!!! We get to go to the kids school things and school camps etc as we are not tied to jobs, my husband and I often go out for lunch or dinner. Now I am not trying to skite and I am sorry if you think this is so I just want to inspire you to make a better life for you and your family.

I have read a few posts and realize there are knockers there, I feel sorry for you people who choose to knock others who are successful, your energy would be better spent trying to get some posativity into your own lives, the statistics are alarming on people who are in jobs they don’t like, get your self out of it maybe realeaste isn’t the tool for you but I urge you to seek for it, just keep asking yourself what it is you would like to do and then just take notice of the opportunities that are put in front of you. I have been asked to write this by Donna, the wonderful lady who set his up along with her husband. I met Donna a couple of weekends ago at a financial education seminar we were both attending.

Also teach your children to think on financial education as well as what they get at school, I know some will disagree with me and I don’t say you shouldn’t do well at school infact I think people should try their hardest as you have more opportunities open to you if you get good grades, but please teach your kids to invest so they are working because it is something they love doing and not because it is something they have to do to survive. I know I have been preaching to mine for a few years now and they are certainly open to financial education and how they can make it work for them. The older one asked a couple of years ago whey they don’t teach investing in school????? Good question. I guess we need to educate the teachers first though.

All the best on your own path to wealth I wont be on the forum every day but I will try to get there every few days and answer any questions the best I can.

Robyn Grinter

General

• As there is a range of experience levels in this forum be careful not to take advice from just one person. It will only be their opinion. Try seeking out information from the seasoned investor too, they have been through property cycles and know how to survive them.
• Use the forums search function a lot of topics have already been discussed here. But if you cannot find anything just ask somebody will help you out.

Philosophy

• The property market works in cycles. It is fun and exciting for a couple of years when we have a boom (like we have just been through). But during any impending slump it is no longer the in thing to be doing and can at times be hard work.
• Property should not be treated as a get rich scheme (despite some seminars beliefs). If structured properly with the correct support it can be a reasonably safe wealth creation tool.
• Use as many resources as you can. Read past discussions here and go to the library to get some books out. There is a huge range of books available at the library and it means you can read them before you buy them for your bookshelf. Try: Planning for property success By Andrew King and grow rich with the property cycle By Kieran Trass. There are many other recommended books available and even reviews on this site.
• Form your own opinion based on what you believe is your own safety level. People can tell you to mortgage to say 80% but if you won’t sleep well at night due to worry don’t do it. Only go as deep as you feel comfortable.
• Try to be careful on how deep and fast you get into the property market. Use the advice from seasoned investors who have been through it all before. Most people can make money during a property boom just from buying any property. But it is buying the right property to hold long term that is harder. You will hear many stories from investors who purchased large amounts of property only to lose most of the gains during the slump. Buy the right property from day 1 and don’t be one of the statistics that need to sell up when the market tightens.
• Write down all the things that are stopping you from investing or that would affect you sleeping at night if you were investing. These are now you’re “What if’s”. What if interest rates go up? What if tenant builds a P lab? What if house burns down? What if house gets trashed? What if property goes down in value? What if rents drop? Etc. Now you can work on a plan to cover these. Eg. Insurance.
• Beware: Too many people can suffer “Paralysis by analysis”. By the time they invest the boom is all but over. This is Fear of investing.

Structure

• If you are serious to be a long-term investor get a structure in place to protect yourself and your assets.
• If you are going to use any statistics for house growth ensure you use 10 year growth figures. 1-year figures are deceptive and do not indicate possible future growth. During a boom even the poorer suburbs can experience growth that looks good. 10 year figures will most likely include a complete cycle boom through to slump. Shorter terms will miss part of the cycle and not be accurate.
• I heard an interesting stat that out of all the banks long term interest rate predictions they have had poor odds at getting it right. This would be similar to economist’s long term property value predictions I guess. Past history is no guarantee of future growth and long term factors are very hard to predict as something usually happens to alter the forecasts. (Wars, terrorism, floods, earthquakes, Asian crisis). However saying that we can usually see into the short term and be semi reliable. Using historical growth and buying in the right location at the right price can put us ahead of those blindly purchasing to follow a boom.
• A good way to protect yourself is to use the “What if’s” (See Philosophy above). Decide if you are going to protect yourself from anything that concerns you with regards investing. Most things that concern people and prevent them from investing can be covered by a well thought out plan. Do this from day one.

Finance

• Avoid using the 1 bank trap. This is simply where an investor gets comfortable with there current bank giving the bank complete control over there entire portfolio. Banks will like to cross collaterise if given the chance. Using several banks spreads your loans around and reduces the risk of your portfolio being called up if the economy turns bad.
• Banks use Loan to value ratio (LVR/ Equity) and debt service ratio (DSR/ Cashflow) to determine your ability to acquire a loan. It is safer to drop back and keep your serviceability low at end of a boom. This will enable you to have a buffer if things get tough and let you ride out any pending downturn in the market (Slump). Historically rents and house prices usually drop back from their peak.
• Ramp up your serviceability leading into next boom. This is when you need to use your servicing to catch the wave and build some serious equity.
• Just as it is sometimes safer to diversify your property locations. You should do similar with your borrowings. Interest rate diversification. Spread any fixed rate terms over a range of dates so all your loans are not expiring at same time. Interest rates move around regularly and you do not want to be caught out needing to have your entire portfolio expire at a time when rates may be high.
• There is a large amount of opinion on Principle and interest (P&I) loans versus interest only (IO). The general consensus is if you have non-tax deductible debt e.g. personal house mortgage. Then use Interest only and pay down the non-tax deductible debt with the money you will be saving in lower loan payments. Otherwise if you have no bad debt the choice is up to you P&I or IO. IO can allow you to accumulate more property but P&I can be good during a slump too as the debt is being paid off slowly.

Purchasing

• Treat real estate agents with respect. They are there to help and can provide valuable information needed before you make an offer. You may need them at another stage in life, What if you need to sell a property quickly?
• Analyse your purchase and rent figures. Know your exact cashflow position when buying. That way when/ if rents or property values drop you know if you will have sufficient cashflow to survive.
• Use morals when purchasing property. You will feel better. Why invest if you cannot be happy doing so. Some people use non-moral techniques to acquire property cheaply, watch out as Karma usually bites those people.

Example strategy

A strategy of investing could be as a simple as this:

• Always be aware of current serviceability levels.
• Property values can raise and fall so knowing your levels you can be prepared.
• At the end of a property boom it is probably better to have a lower servicing level. That way if prices drop you are more protected.
• Try to buy wisely during any down turn in the market so as not to affect your servicing level. . Buy creatively and try to achieve high yields eg. Buy a 2 Br and convert to a 3 Br.
• Buy in good areas which will see growth early as the next property cycle rolls around. That way you can be in a position to use your gains early and go hard into a boom. Being 1 step ahead of other investors who may have purchased last cycle in less desirable areas.
• As the property market picks up and we lead into the next boom raise servicing levels high. Buy up big as each property shows equity growth.
• As the boom is nearing an end consider dropping servicing level once again.
• Repeat process.

Note: This was an example strategy. Every investor is different and needs to work out a plan that suits them and there risk profile. Think outside the square, use renovations, developments, buy and sell, buy and hold, commercial.

My 2 cents

A lot of people have gone out and have maxed out serviceability levels to buy numerous properties through the hype of a boom. This on its own may not be bad but could be slightly flawed during a slump. If values do not increase much in years to come they will quickly run out of serviceability and find they have to wait quite a while.

As a side note some of these people have been purchasing in less than desirable areas. Which are slow to move in value until later in a property cycle (ripple effect) so they won’t be able to benefit until well into any property boom.

One thing to consider when purchasing in less desirable areas is the ripple effect during a boom.

Take the last boom we have just been through as an example. Some of these less desirable suburbs got there big jump in prices later on in the boom after others had already been through it.

This could cause implications for a portfolio of property. If the next boom continues to follow the ripple effect pattern you may not get the big price rise until the boom is well under way/ nearing its end.

This is not to say you will not get slow growth just that the large portion of any equity which may be created during a boom will not be usable until boom is well in truly arrived.

We want to be right there at the start of a boom ready to pounce before the rest of the herd push the prices up. Then when they do, they propel our property prices with them.

image by klearchos

I first read Rich Dad Poor Dad by Robert Kiyosaki about 6 years ago. I can remember thinking at the time that the ideas were solid and that I should take some action. I did nothing. I think I bought each of Robert Kiyosaki’s books as they came out, and I can even remember trying his basic debt reduction strategy and giving up after about a month. Suffice to say I continued my poor financial ways, although it wasn’t too bad initially as I couldn’t borrow much “consumer” money.

As a young man I started and failed in a couple of “S” quadrant job type businesses while spending time at University. I say spending because I definitely wasn’t studying and my life was basically going nowhere. However I did have a bit of fun. I was quite entrepreneurial in my own way so I decided to quit Uni, pitched my then part time employer and he became an investor in my first attempt at a proper business. For a number of reasons (which I won’t go into here but which all rhyme with Chris Ashenden) this business failed in fairly spectacular fashion. This left me feeling betrayed, very broke, and very depressed. It also left me feeling sorry for myself.

-NOTE: I failed to take responsibility for what happened in this business failure for FIVE years, basically until Keith Cunningham made got me to take a long hard look in the mirror, but at the time, I was the ‘victim’ from hell and I let my self confidence plummet. It was all “someone else’s fault”. Looking back at it now I was my own wet fish, feel free to slap me for it if we ever meet-

I lost around $10,000 in this venture which while isn’t much to me now was a killer then. Luckily the only debt I had was a $1,400 phone bill so I did a bunch of odd jobs to cover my food bills (including time as a car wholesaler, cold calling dealers – which though I didn’t realize it at the time was great sales and rejection training) then while trying to get out of the hole that I had dug I took a career change and in 2000 graduated from the NZ Police – and suddenly everyone wanted to give me a credit card, HP or personal loan. This was bad, very bad, and by March 2002 I had a net worth of – (MINUS) $62000. My net income after tax and before living expenses and debt servicing was about $440 a week. I was living way beyond my means and spending about 120% of my weekly income. I’m sure you can do the math. It wasn’t very pretty.

I didn’t really see it coming at the time but I looking back now I realize that my level of self-discontent was growing towards action status.

I read Real Estate Riches by Dolf de Roos in late February 2002. For some reason the combination of discontent and reading this book gave me an absolute kick in the pants. I became consumed with real estate, financial literacy and wealth/freedom creation and began devouring everything I could see on the subject. I physically looked at over 300 houses inside a 2 month period. I think I went to every open home in Avondale and Mt Albert, dutifully making notes on every property that I saw. After all that I only made ONE offer and it wasn’t accepted.

In March or April I read JB’s “Money Secrets of the Rich” and decided that this guy told money how it was and gave more ‘how to’ than any other author that I had found at that point. I liked everything I read by him but decided at the time that his “wrap” idea wasn’t for me as I wanted long term ownership.

I kept looking at houses and after responding to a newspaper add that seemed to be showing incredible yields I discovered the property market in Southland. Spotting the fact that rents had more than DOUBLED and prices were just starting to catch up I saw the potential at the time. I was then (and still am) a cashflow buyer. More importantly I was learning my lessons about leverage on my time and I started interviewing agents over the phone in Invercargill. I proceeded to make over 100 written offers over the next three months of which 11 were accepted. After selling my car and using credit cards for deposits (not highly recommended) I eventually purchased 8 houses and settled the first on May 15, 2002, less than 90 days from reading my first book on real estate. I settled the other 7 staggered over the next two months.

- NOTE: Most people at this point ask me how I bought these houses when I was 62K in consumer debt. I’m not going to tell you so you will have to BUY MY BOOK. I’m just kidding, I don’t have a book. If you recall that I had made my one offer on a house in Auckland. This property was the worst house on a good street. The owner had lived there for 5 years and never spent a cent on ANY maintenance so the property had a lawn consisting of bamboo that was higher than the house and on the inside… Well, let’s just say that she had some big ‘ole cockroaches in there. I knew all this was easy to fix and so immediately made a very low offer subject to finance. No one had offered on this property in six months of being on the market so with absolutely no money or financing in place I proceeded to go home and absolutely S*** myself that the vendor might actually say yes. As fate would have it, some one else bid 4K more than me the same evening with a cash offer so they got the house. This individual immediately spent about $5K removing the bamboo and cleaning it up and two weeks later sold it cash unconditionally for $50K more than he paid for it. I realized then that while I had the right idea I was on the wrong track with both my time and the financing. Sorry, I digress. How did I get the money for the Invercargill houses? My mother who had initially been rather skeptical now offered me her individual life savings of $3,000, for which I gave her 10% of my new company. More to the fact I then proceeded to sell my car, got a couple of consolidation loans and using credit cards as the deposits, bought a bunch of very cheap houses, which were yielding between 16-20% on purchase price. I don’t recommend the practice of using credit cards to anyone. Everyone can read that, so enough said. -

Still devouring information I discovered the john burley forum while reading through creonline (another US property forum). I searched the whole thing for NZ, read everything apart from personal chats and eventually plucked up the courage to make a few posts. This resulted in coffee with a regular contributor from the website which was very rewarding. This individual was incredibly helpful and even though I had not asked a real question on the forum at that time I had my first introduction to the power of the SHARING that is such a part of propertytalk and a (rare) few other websites as well as the reality of an abundance mentality. I met a number of posters from the JB forum over the next couple of months and I have to say that taking people in the know who have DONE it out for a lunch/coffee will frequently be the one of the best investments you can make.

At this time I did a residential do up in Epsom (pp 300K, spent 27K, after repaired RV 450K) which my girlfriend kept in her name and also a JV on a small commercial property deal in Newmarket where I got to borrow against the property if I could add 50% to its value. I managed to do this in three weeks and had myself a hard money investor (a bit like a line of credit).

I staggered off track for a couple of months while trying to start a business with/for my partner. During the course of this I took NO action in RE for about 7 or 8 months other than structuring these few deals with/for my then girlfriend. I just read. I went to JB’s seminar in Auckland in November (my first ever) and it was pretty cool but I still took no real action. This was mainly due to my fear that if I stuffed something up I could jeopardize my girlfriend’s new business. This was not a risk I was prepared to take at the time although I now admit that it was entirely psychobabble.

Read Part 2 here …

“It might not be the house that you want to live in long-term, but you could buy a $350,000 house in Te Atatu, Glenfield, Panmure or Pukekohe,” he said. “People should spend less money on coffee and brand new cars and overseas trips.

“It’s up to them to save more. This is a culture of ‘I want it now, I want everything and I deserve it’.”

Yesterday, the Government floated the idea of property developers being forced to build low-cost homes in new estates to ease Auckland’s housing shortage. Housing Minister Chris Carter after two new reports revealed that New Zealand’s most populous region faces a severe housing shortage and must accommodate growing numbers of people who may rent all their lives.

A study on rental housing by Wellington consultants DTZ predicts falling home ownership, a big increase in the number of people renting – particularly young families and the elderly – and a growing demand for rental accommodation.

Even households making $70,000 a year are being locked out of home ownership, the report says. The city will need almost 55,000 new houses and flats in the next 10 years. But high development costs are strangling new-house building – a topic the second report examines.

The housing supply report by consultants Motu proposes speeding up resource consent approvals by financially punishing councils for delays. It also suggests abolishing the artificial city limit boundary, freeing new tracts of land for development.

Mr Carter said he had two solutions – a new law that is yet to win support from other politicians, and funding for shared-equity schemes, which he expects to be in next year’s Budget. The minister wants to force developers to build a proportion of cheap houses in large new Auckland estates. He said the move had succeeded in Australia.

“We would consider a home affordability bill to direct developers to build a certain portion of affordable housing,” he said.
“I’m enthusiastic about this but I need to convince my colleagues.”

He also favoured shared-equity schemes, in which the Government takes a stake in a house to reduce the cost for first-home buyers. The scheme had been introduced in Britain. Money for a pilot scheme should be made available in next year’s Budget, Mr Carter said, but numbers were yet to be decided. He promised to issue a report within six weeks outlining options, and said a new law could be passed next year. The reports sparked strong reactions from developers and landlord and tenant groups.

Patrick Fontein, an Auckland developer building a $400 million 500-house and apartment project at Orewa, was concerned about Mr Carter’s cheap housing proposals. Forcing developers to build low-cost houses in new estates was no solution to the affordability crisis, Mr Fontein said.

The move could lower the tone of new estates and force buyers of higher-priced houses to subsidise the cheaper housing. Mr Fontein said Mr Carter should work out ways to help people into existing homes rather than new housing, which was often out of reach for many first-home buyers.

Angela Maynard, co-ordinator for the Tenants Protection Association in Auckland, called for more quality rental accommodation and better security of tenure. Landlords should have to get warrants of fitness for their houses or flats before finding tenants, she said, to ensure minimum standards were set.

Landlords should also have to give reasons for eviction, which could be achieved by amending the Residential Tenancies Act. “At the moment, you can give a tenant 90 days’ notice without a reason,” she said. “We want landlords to give just cause for eviction.”

She said she was not surprised to find that people making up to $70,000 a year were faced with a lifetime of renting, but said the city’s property market was based purely on greed.

“Everyone in the equation is greedy and trying to get more and more,” Ms Maynard said.

The Salvation Army’s director of social policy, Major Campbell Roberts, called for swift Government action, saying very little had been done to alleviate Auckland’s crisis. The region’s state housing supply was under considerable stress, forcing many people into the private rental market where rents had risen in the last year, Major Roberts said.

He urged a wide-sweeping range of solutions, including more state housing and more care and professionalism from private landlords. “Mom and pop investors are not in the rental market primarily to provide accommodation,” he said. “They are there for investment and superannuation purposes, so if another type of investment comes along, they shift their money. They don’t care about the tenant.”

Hugh Pavletich, a Christchurch developer and investor and co-author of the Demographic housing affordability report, welcomed the Motu report in particular, saying its recommendations had stunned him because they were so radical.

The recommendations went much further than he had expected, he said, advocating freeing of Auckland land for housing – necessary to start solving the city’s housing crisis – and punishing councils for lengthy resource consent delays.

Without the property investor having to daily ‘be there, at work,’ (at the building), passive income is money coming in, day-in and day-out. It’s called rent payment.

For a share market investor, passive income is also money coming in, day-in and day-out, without the share market investor having to ‘be there,’ at work. It’s called a dividend payment. There are major benefits to property ownership/investment:

• Ownership of a tangible asset, real estate – a property with a building on it;
• Most people can tell by inspection whether or not a property and building looks well built, well maintained and durable;
• The idea is easy to grasp. Buy a building – get a tenant, collect the rent;
• Generally, getting in or out of property investment is straight forward and usually without any financial losses;
• Because it’s an easy idea to grasp, most modest-sized property investors ‘manage’ their own rentals;
• Financial Institutions are usually keener to lend money on property than other forms of investment;
• Tax deductions are more readily available on property than on other forms of investment;
• While providing immediate rental income and tax deductions, real estate usually appreciates (goes up) in value.

Of course, those are a few simple points. There are also repairs and maintenance, mortgage payments, rates bills, insurance costs and so on, to consider.

Nothing is certain. Tenants may fail to pay the rent. Share markets may collapse. Buildings can be damaged. Individuals companies can have their share price shrink unexpectedly. The back-and-forth of the pros and cons of each, as passive income generators, goes on, endlessly.