The JamesGG Interview

Interview with JamesGG – 17th December 2006


How did you get involved in property?


I would have been about twelve when Dad gave me a copy of Kyosaki’s first book, “If you want to be rich and happy, don’t go to school”. Watching the success that Dad was having from investing in property (amongst other things) made it a simple decision to follow that path.


What is your property investment philosophy (CF, CG, renos, houses, flats, buy and hold, develop, flip, wrap, etc)?


For the time being, it is buy and hold; I am simply trying to accumulate properties for the time being, and will make an educated decision once I’ve hit a certain point about the direction I want to take then. The next property will likely include a reno, and I have plans to buy properties that *could* be subdivided if and when the time comes.


What is your IP / property story so far?


I purchased a small two bedroom unit in the outer suburbs of Melbourne as my PPOR shortly after my 19th birthday. I used a few grand in savings and the FHOG to get into this deal. I spent far too long doing little things to improve the value, such as painting and landscaping, and used the added equity (and none of my own cash) to purchase another two bedroom unit in a nearby suburb earlier this year.

I’ve also spent eighteen months as a real estate agent learning the rules of the game and how to use them to my advantage, and I’ve spent the last eighteen months or so working as an accountant for investors.


Has your age been a help or a hindrance in your investing so far?

I don’t think it’s made too much of a difference, to be honest. I would have loved to be in a position to start this prior to the last boom, but that was never likely to happen. For me, it’s simply been a matter of trying to be disciplined with my limited income and not splurging… too often ;)



Do you invest in other asset classes (shares, commodities, businesses, managed funds, cash, forex, etc)?

I’ve got a small share portfolio at the moment, and I’d love to invest in a business at some point in the next few years…


What criteria do you use when selecting a property to purchase?


This really comes down to the type of investment I’m after. With the first unit, I wanted potential to add value, while the second was intended to be a simple ‘rent and forget’ deal. Each potential investment was judged on its merits and compared to other opportunities available at the time.


Your thoughts on the next 12 months and the coming cycle?


In my local area, at least, I expect the market to coast along as it has in recent times. I’d pull out the clichéd ‘crystal-ball-and-the-lack-thereof’ line, but I don’t see anything extraordinary happening to change the market anytime particularly soon. The Mitcham-Frankston freeway could make things interesting in some areas, but I think much of that growth has already come in anticipation.


What structure do you use for your investing?

My PPOR is currently in my own name, for the time being, and my investment property and shares are all being held via a hybrid trust.



If a budding property investor asked "what are the top 5 things I should do", you would say?


I’d suggest they ask someone with a lot more experience than me! I cannot really impart a great deal of knowledge beyond what is probably just common sense.

As a direct answer to the question, though, five good ideas might include…

- Develop or continue good money habits,
- Know your chosen area like the back of your hand,
- Start with the end in mind,
- Investigate various structures and decide which is most suitable for your goals, and,
- Remember that there are many far more important things in life than money. Don’t sacrifice those for the sake of a dollar.



And if that same budding investor asked "what 5 things should I avoid", you would say?


Again, similar thoughts come to mind.

Pressed, I may suggest…

- Stay focused and avoid being distracted by ideas and investments that don’t take you closer to your goals,
- Try not to get emotionally involved in a deal, unless it will be your home,
- Making offers without financed approved can be stressful (I learned this the hard way with my first property...),
- Try not to burn your bridges. Completely screwing someone over – even an agent – can come back to bite you at some stage.
- Analysis paralysis can cost you. Doing something might not see you succeed, sure, but doing nothing guarantees you won’t.



And in a slighty different vein - what would you advise the property investor who maybe has a portfolio of properties, but is at a loss as to how to proceed?


(Likewise the two questions above.)

Compare where you are now, with where you want to be. What can be done to close that gap? Can loans be restructured to free up equity? Can value be added via a reno or development? Can discretionary spending be diverted and become investment expenditure?

I guess this will vary rather dramatically depending on just what sort of situation the investor is in, why they are stuck, and, what they want to achieve.


How important is planning to being a successful investor?

I’ll let you know once I’m a successful investor. ;)

Personally, I think it will be very important, so, I have made many plans and many more back-up plans. Planning only takes you so far though; you need to take action.


Do you consider having a team of professionals/advisers (eg: property managers, accountants etc) important to your investing?


Definitely. Naturally I’m biased on the accountant issue, but my broker (Rolf Schaefer) has been invaluable. My property manager (who recently took over from another, less competent version) has been excellent so far, too, and I’ve been very impressed with my solicitor and conveyancer so far.



Do you have any thoughts on the CF vs CG debate or on the issue of metro vs regional, units vs houses?

Horses for courses. Personally, I prefer buying for capital gains and will stick to metro areas. I expect the majority, if not all, of the future purchases to be houses, rather than units. I think that will provide more flexibility with what can be done with the property in future.



What do you prefer, fixed or floating interest rates and why?

I’m happy to stick with floating. I do not know enough about economics to try second-guessing the RBA so I am happy to stay with variable rates. Again, I like flexibility.



Finally, where do you see the market at the moment and do you think the current environment is making it harder for newer investors?

The only market I know anything much about is the local one here; the outer eastern suburbs of Melbourne. From what I’ve seen, and from what the agents I know have told me, it’s been slowly and steadily increasing on a regular basis since the last boom slowed down. As I mentioned above (insert broken crystal ball disclaimer here), I don’t expect that to change a lot in the short term.

It’s only harder for new investors (and home-buyers, for that matter) if they still want to get the same property for their dollars that they could have purchased five years ago. Realigning expectations with the market seems to be harder for many people – especially first home buyers – than it should be.


Comments etc....... http://www.somersoft.com/forums/showthread.php?t=29639
 
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