$2m in 22 months - Rob's story ..

[Rob Williams]

So Rob do you worry that you're not getting all the best tax breaks by having all the properties in your name? There's so many people on here who say that you should set up such and such a trust. How come you haven't gone down this path?

Actually, I think I am getting the best tax breaks as things stand at the moment.
There has been some dicsussion regarding trusts here:
http://www.somersoft.com/forums/showthread.php?t=58773
Trusts are just a tool. Like any tool, it depends what you are trying to achieve.
My taxable income will be $0.00 this financial year, so the few dollars PAYG tax that gets deducted from my income each month will be fully funded.
In addition, I'll get a "low income offset" (last years was over $1,200) to help me buy more 2 minute noodles to survive on during the next financial year.
I don't have a partner, so I have nobody to income split in a trust with.
I have other asset protection strategies in place, so a Trust doesn't really serve me in that respect either.
Hope that answers your question.

 

[Rob Williams]

hi rob,

do you use bill zengs mb for your financing?? who do you use in there dept.?

i tryed a year ago with one and didin't work out so well, she's now set up on her own....

your thoughts on your strategy sound good as well if you like to go into more detail or p.m me .

thanks in advance.
yorkie

My strategist at Investors Direct is Amit Sharma.
He has taught me a lot.
I might put together a post detailing what I've learned about loan strategies soon. I've had many requests for this and am working on it.
I've even done a couple of seminar presentations detailing some of the things I've learned that may help others in making a decision regarding their choice of lender etc.
Too many people go straight to the lender with the easiest service model and straight for the loan product (or lender) with the lowest rate.
That's not a strategy and thinking it is will invariably get you into trouble in the future when you try to grow your portfolio or release equity.
I have to be a bit careful what i say on this forum as I have a couple of magazine interviews pending publication and they get a biy narky when I post stuff online that's awaiting publication.

 

[crc_error]

Hi crc_error,

Just out of interest, did you have buffers - ie cash and LOC's to back you up? If so, and with the benefit of hindsight, would it have been possible for you to have used some of this to get you through the high rate period - meaning you may have been able to keep your IP's?

Also, since 2005 when I presume you sold, there have been significant rent rises and capital growth in most capital cities. (Not sure where your IP's were). Not to mention the extreme drop in interest rates! That may have helped you - which is what I think Rob is saying - Rob has the cash (LOC's etc) in place ready to use as required.

Regards Jason.

I did have equity in the IP's, which I could have refinanced and used to cover the shortfall, how ever I didn't understand back then I could use this to fund negative gearing shortfall. So yes, looking back now, I could have quite easily held through the high interest rate period.

Today I would have been MUCH better off, had I held.. and would actually be cash flow positive now.

 

[radelaide]

great read, thanks for the post.

I am also an Adelaidian, looking to buy my first IP...

 

[crc_error]

I cant complain though, this IP I have has increased in value $80k in 2 years, and I managed to pay down $50k in the same time.

Good result I say.

But I'm reviewing if I should purchase another IP, or if I should increase my share portfolio. Shares are good, as I get dividends from them.

Another IP would reduce my cash flow once again.

Choices Choices!

 

[yorkiefish]

My strategist at Investors Direct is Amit Sharma.
He has taught me a lot.
I might put together a post detailing what I've learned about loan strategies soon. I've had many requests for this and am working on it.
I've even done a couple of seminar presentations detailing some of the things I've learned that may help others in making a decision regarding their choice of lender etc.
Too many people go straight to the lender with the easiest service model and straight for the loan product (or lender) with the lowest rate.
That's not a strategy and thinking it is will invariably get you into trouble in the future when you try to grow your portfolio or release equity.
I have to be a bit careful what i say on this forum as I have a couple of magazine interviews pending publication and they get a biy narky when I post stuff online that's awaiting publication.

hi rob, look forward to hearing your thoughts and experiences with the strategy, will keep my eyes posted.
thanks for sharing.
yorkie

 

[Sheryn]

Rob

A question so I can compare returns - what is the rental per week on one of your 2 bedroom units in the small complex?


Thanks in advance
Sheryn

 

[Rob Williams]

Rob

A question so I can compare returns - what is the rental per week on one of your 2 bedroom units in the small complex?


Thanks in advance
Sheryn

Hi Sheryn.
I have 3 villas in the group of 5. They have been renovated slightly differently.
The best rental return is $260 per week from the one with the new kitchen.
The next one rents for $250 per week and has been painted, carpeted but still has the original 1970's kitchen.
The other has an updated kitchen and has been painted and carpeted 2 years ago. The kitchen was updated with new benchtops and a new stove and rents for $245 per week.
Is that what you wanted to know?

 

[crc_error]

what are the units worth Rob?

 

[Rob Williams]

what are the units worth Rob?

Most recent bank valuation came in at $320k. That would hold up for all three, I believe. Market value could be more, but I only care about bank vals when I'm releasing equity.
Paid around $200k for one in 2007, $250,000 for the other two in 2008 & 2009.

 

[Sheryn]

Hi Sheryn.
I have 3 villas in the group of 5. They have been renovated slightly differently.
The best rental return is $260 per week from the one with the new kitchen.
The next one rents for $250 per week and has been painted, carpeted but still has the original 1970's kitchen.
The other has an updated kitchen and has been painted and carpeted 2 years ago. The kitchen was updated with new benchtops and a new stove and rents for $245 per week.
Is that what you wanted to know?

Yes, thanks Rob

There is a 2 x 2 bedroom duplex locally on the market for 348K with a single garages. Rent $315K good back yard close walking distance to shops.

Obviously under market rental return, I can't as yet swing the finance for the kids to buy together but definitely think they are better to buy an old 2 bed duplex together as much easier to increase rent in a 2 bedroom unit as easier to get tenants IMHO.

This duplex [or indeed whatever they will eventually buy] will need a reno, hubby can do reno (son can take holidays to help).

I am coming to see your strategy is a good one.


Cheers, Sheryn

 

[crc_error]

so you dont believe in houses Rob?

 

[Rob Williams]

so you dont believe in houses Rob?

They are not part of my strategy. For the reasons I outlined in my original post, strata properties give me greater leverage in terms of property management and risk management.
I'm buying a location and to buy houses in some of there suburbs where I have my villas could cost me over $1million. It's easier to find tenants for a $250+ property in a $1million suburb than it is to find tenants for a $1million house.

 

[steveadl]

Can't remember whether you've mentioned it or not Rob - did you end up taking over the strata management of that group like you were thinking of?

 

[Rob Williams]

Can't remember whether you've mentioned it or not Rob - did you end up taking over the strata management of that group like you were thinking of?

Hi Steve.
Yes I did. The 2 other owners and myself were not happy with the lack of attention shown by the former management company, so we voted to bring it in-house.
So far it's working out well.

 

[Gools]

The best rental return is $260 per week from the one with the new kitchen.
The next one rents for $250 per week and has been painted, carpeted but still has the original 1970's kitchen.
The other has an updated kitchen and has been painted and carpeted 2 years ago. The kitchen was updated with new benchtops and a new stove and rents for $245 per week.

Rob, what are your thoughts on what the current market rent would be for these? Your rents seem a little low from what we have been getting lately.

Gools

 

[Rob Williams]

Rob, what are your thoughts on what the current market rent would be for these? Your rents seem a little low from what we have been getting lately.

Gools

I do all of my renewals in January, which is a peak letting season and I try to pitch my rents at slightly under market or a 5% increase, whichever is the greater.
At the time I did the renewals, around $260 looked to be market rate for a renovated 2br in that area. There are quite a few 70's build unit (villa) developments in the Payneham and Payneham South areas, yet demand for rentals there is very strong due to the popularity of the location.
I know I could have got a little more for the $260pw one, but not much. I was more concerned with getting the right tenant who is a good fit for me and for the other residents in the group. So far, it's working out well.
I could get quite a bit more for the $245 one, but it's rented to someone I'm trying to help out following a personal situation. I signed her up for an 18 month lease at a reduced rate to help provide stability to her and her young family. Doing right by them seemed more important than an extra few dollars a week, at the time.

 

[jezza]

Wow Rob

I have read this post over the last couple of months I think 3 times, it is truly amazing and inspirational. It always makes me realise that the decisions I make to buy additional properties are making a difference not just because of the fact I see opportunity in property to increase wealth but because I am making a decision to change my life instead of expecting things to change around me. Also you and a few others made me realise that the negotiations I do with a real estate agent are pitence in comparison to what a good broker can do for you in the long run.
Jezza

 

[Rob Williams]

I am making a decision to change my life instead of expecting things to change around me. Also you and a few others made me realise that the negotiations I do with a real estate agent are pitence in comparison to what a good broker can do for you in the long run.

That's the real turning point, the bold decision to leave the comfort zone and actually do something without the safe feeling of it being what the rest of the herd is doing. Well done!
Yes, a good broker with a long term game plan is gold!
Thanks for the feedback.

 

[yorkiefish]

That's the real turning point, the bold decision to leave the comfort zone and actually do something without the safe feeling of it being what the rest of the herd is doing. Well done!
Yes, a good broker with a long term game plan is gold!
Thanks for the feedback.

hi rob, would you recommend your current broker?? i thinks its investorsdirect, have they been good to you and given you any different options as regards others?? i was with them but hada bad exprience, and now discount them. but maybe i should talk to them as well.

anythoughts appreciated.

p.s what no property at you at now?? just re-read your goals 10 for 2010?

thanks
yorkie