Analysis Paralysis

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From: Lesley .


Dear Forumites. Over the past three months, I have been diligently reading most posts on this forum. I have also posted some questions regarding IPs, some of them quite basic. I notice that someone posted a message the other day asking for a mentor. I feel like I really need this as well. I have had some advice from some (Thanks, Tibor, Rolf and Ross S), but still I feel like I don't know what to do next. There are all of these things hanging over my head like strategy, strategy, strategy, loan structure, positive cash flow, reading, reading, reading. I have now clearly defined what my strategy is, and I have done substantial reading. However, what now?
Who do I get to help with loan structure?
Who do I get to help with the selection of the right property?
How do I find a good accountant, one who will work hard at getting as much tax back as possible?
Is finding a cash flow positive property as hard as it seems?


After reading some of the life stories posted recently, highlighting the sometimes "rags to riches" tales, I am beginning to think that I am never going to get there (all were very inspirational, BTW). The more I read, the more I seem to be going around in circles and the more questions I have. We really want to take the leap and buy an IP, but now we are a little cautious as we want to make entirely certain the property will be exactly what we want it to be. (Must add, nearly got bitten by a certain "club" which apparently was going to get us the deal of the century). There seem to be so many seminars and courses which we can attend, but it will be almost impossible to make it to all of them (let alone be able to afford the associated costs!). There are thousands of books available, but it will be almost impossible for me to buy and read all of them in this lifetime. I am beginning to feel that this is INFORMATION OVERLOAD and I am getting lost in the info. I attended a Freestylers meeting in Brisbane about 2 months ago, but was not overly impressed. I have plans to attend the next one though, to make sure that I didn't miss anything. Can anyone help by offering some advice?
Cheers,
Lesley
 
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Reply: 1
From: Tibor Bode


Hi Lesley,

OK, You've been overwhelmed with info and you have a strategy now. Then ACT on it. The accountant, broker, etc will come along. Talk to something concrete with Rolf (so the finance is in place) and while he is arranging it organise a trust (if you need it) look for properties (in papers, internet sites, walk and talk to agents in your selected area) and even PUT IN OFFERS on a basis that is good for YOU, not what the agent says you can buy the property for. Get your offer rejected, it is OK. Offers are free and you never know someone might accept one. The more you practice the theory, the better you will become. Ie. You see property asking price $150K yield 6% ($173 per week)reasonable good growth area according to your analysis 8% per annum. Then offer for it 120K. Your yield just jumped to 7.5%. Most likely your offer will be rejected. Move on to the next one. If it is accepted and you have the finance, then BUY IT. It is a deal. Just do it, otherwise you will become a poor professor of real estate, meaning nothing made financially but tons of theory. If in doubt about a specific deal contact either myself or anyone else. I am sure lots of people are willing to help you.

Just DO IT! Good luck.

Tibor
 
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Reply: 2
From: J Parker


Lesley,

Take heart. I know how you can feel overwhelmed at times, as I have been there too. There is a lot of information out there and it is difficult to know where to start, but may I make a couple of suggestions?

1. Sit down (with your partner, if applicable) and write down just what it is that you intend to get out of investing in property. Goal setting is vitally important as a first step. Try to include a timeline of sorts, even if it is basic.

2. Once you have decided on the why next is the how. That is, how are you going to invest? There are so many ways to make money in real estate, and not every technique will suit everybody. You need to decide what it is you're planning to do with real estate. Are you a renovator? A long term buy and holder? A trader? A wrapper? Would the security of guaranteed leases suit your style? The list is endless, so it is important that you find what suits you and your style.

3. Find a good independent broker and discuss your finance options. Finding out structure etc is easiest with a broker. They can really help with LOC's etc. They are also vital in getting you MONEY!! of which you will need to find out how much, before you begin looking...


3. Where are you going to buy? If you want to know where the best capital growth has been or what rental returns have been like, you need to purchase information that will help you out here. API magazine is a good start, as there are many tables at the back that give basic statistics but companies like Residex will be more specific. Their reports can be ordered by phone - look up their website for more info (www.residex.com.au) There are more companies- it's just that I've used Residex and have found them great. The Home Price Guide, put out by Domain (www.domain.com.au) is also another good source of info, particularly for postcode sales over the last 12 mths.

4. Once you've narrowed down an area and what type of real estate you want to buy (house/unit etc) start using the shoe leather and the telephone to look, look and look some more. Ring agents and let them know what you're after. Hit the area and focus on it until you know when you've come across a great buy. The internet is a great place to start, but a great many buys are just not on there. Talking to agents really increases your knowledge as well, as most are quite chatty and happy to talk about the area in which you're buying.


5. Buy and enjoy!

Armed with knowledge and confidence you will make better well informed choices, Lesley. Good luck!
Cheers, Jacque :)
 
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Reply: 3
From: Dale Gatherum-Goss


Hi Lesley

I'm not sure I'm the right person to answer all of your questions, but, I'll see if I can start you off in the right direction.

No. 1 - identify why you are investing and what you want to achieve from your investing. For example, are you investing for growth in the long term or cashflow now.

No. 2 - Talk to Rolf Latham or one of the other mortgage brokers on this forum. This will get your finances and lending in order.

No. 3 - Ring Porta Lawyers in QLD and talk to them about looking after your legals on property purchases and related issues.

No. 4 - Interview a number of accountants in your area abt property investments to see if you can find someone you feel comfortable with. Talk to people at Freestylers to see if they can recommend someone in your area. If you still can't find someone, I am happy to help if you are comfortable dealing with a "Mexican".

No. 5 - talk to Ross Sondergold on this forum as he is a buyers agent who can help you buy an investment property. Before you do, make sure that you have spoken to a mortgage broker and identified what you want in an IP so that you can give Ross clear instructions.

The best thing abt using someone like Ross is that they will save you from making too many mistakes and will help you learn more abt the process. As I have said before, even buying the wrong one will not be a disaster if you have time on your side.

Obviously, keep reading, attending seminars, and learning just as we all do. It gets easier.

Lastly, and to quote TW, network, network, network. Develop contacts from other people like the Freestyler group. Who do they use for insurance? For legals? For accounting? For lending? etc etc etc. See if a pattern emerges or just interview the people recommended.

Lesley, I hope that this helps in some small way and good luck. I know you'll do well. Come on in, the waters fine!

Dale
 
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Reply: 3.1
From: Andy Duncan


what is the worst thing that can happen to you?
Will u die if you make a wrong decision?
NO!

Will u not have enough food to eat? Government will look after you.

Will your family and friends think you are a loser?
Probably. But that is their problem not yours. Also learn to say nothing to anyone...i'm still working on this one, i think it is the hardest to say not a single word of the exciting deal going on between your ears.

What if i default and have a bad CRA report?
Simple change your name...u can do this 7 times, once every year. I do not condone this coarse of action, but it can be done and has been.

What if i loose what i have worked hard for?
You'll continue to work hard for money, and little of it, if u don't put what u have on the line.


I keep hearing the voice of fear in my head? Your not good enough to be rich. Not smart enough, thats for other people. U know the ones in suits driving the expensive cars, talking on the mobiles non stop.

yes u are good enough, and yes property is the vehicle for u.

risk can be eliminated with all sorts of insurance policies.

Remember you will never starve in this country. Nor will u have no place to live.

Is whatever we therefore do Risk Free. No Risk, you can never loose the game.

Enough of my ramblings!
 
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Reply: 4
From: John P


Hi Lesley, I understand your situation and how overwhelmed you must be with all the information available out there. A lot of the time, you ask one question and it produces 100 other questions and so on and so on !!!!!

What Tibor said though makes a lot of sense; that is, sometimes you just have to get out there and DO IT!!! If you wait until you have had every question in the universe answered and you feel that you are finally well versed in the meaning of life, you may have well, missed the boat!!!!.

I always try and read as many books as I can on the subject and go to seminars when I can but my experience Lesley is that ....well there IS no substitute for experience. The biggest learning experience is when you are actually DOING it. Yes you WILL make mistakes, no doubt about it but as I have said before, property over time heals most problems. When I bought my first IP many years ago I remember handing the real estate agent a $500 holding deposit and then said to myself: "My God, what have I just done"
well looking back it is one of the best, if not THE best decision I have ever made. Good luck to you and judging by your genuine concern and research I have no doubt you will be successful.

John Poulos
Resi Mortgage Corp
0412 588986
 
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Reply: 4.1
From: Jakk Bass - The SLUM LORD


G'Day Lesley,

Once upon a time there was a newbie wannabe property investor. He had read a heap of books, attended a couple of seminars, done the rounds with the agents and found a property that he intended to put his name to.
He made an offer of $25,000 below the asking price of $130,000 and it was accepted.
He settled the property 30 days later and decided to spend a couple of weeks tidying up gardens and repainting gutters, spouting etc. One day during this tidying up period, a real estate agent approached him and told him that his property backed on to some other properties that had just been purchased by a property developer who intended to rezone the land for a huge office development and was interested in also acquiring his newly purchased property to consolidate it into the development.
After some days of negotiation , a price of $400,000 was agreed to. As the house was to be demolished, the developer allowed our now not so newbie wannabe investor to take it away, relocate it.
Our investor fellow now looks for a block of land to relocate the house to.
He finds a nice level block in an established suburb for $120,000, haggles a bit and gets it for $85000 on a 30 day cash deal. The first house is relocated onto this block and he has the place replastered and repainted, adding new carpets kitchen etc for a total cost of $65000(including relocation, and it looks a treat.
He gets an agent in and the agent tells him its now worth $265000, but the agent advises him that he would be a fool to sell as there is a possibility that he would be able to build another 2 townhouses on the block as there is sufficient room and the zoning in the area allows it. Our now not so newbie wannabe but learning fast investor gets plans drawn up for the townhouses and submits to council and guess what?, permit is approved. Obtains a quote to get townhouses built total of $280,000 for both, signs building contract and builder commences. Agent values new townhouses at $350,000 each as market has been rising in last couple of months and demand for this area is strong. Front house oozes with character and on rising market is now worth $300000.
Our now well seasoned newbie wannabe investor decides that this is real easy stuff and wants to cash in to be holding folding to move on to bigger and better things.
Sells all 3 units for a total of $1 Million
The same week, he's feeling lucky and buys a lotto ticket that wins him $200,000.
Now lets do the math, allowing that he started with $25,000 of his own money and add another $75,000 on top of that ($100,000 total) for plans, permits, stamp duties, legals etc.
He now has $1 Million (and a somewhat large CGT bill in the future), but has no investment property.
Seems this fellow now has the same problem as you, what does he buy now?

Yeah, maybe it is a fairy tale, but it's nice to dream sometimes.

regards
Jakk

**Lesley, there is no moral to this story, other than do your due diligence and trust your instincts.**
 
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Reply: 4.1.1
From: The Wife


Andy, you sound like me!

Jakk Bass, You always make me giggle, look forward to seeing you again soon!

Lesley, everyone stuffs up to some degree on the first couple of properties they buy, its the best learning ground. You have done everything you can to minimalise the stuff up which is great, maybe its time to just do it?

TW
 
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Reply: 4.1.1.1
From: Luke W


Some great advice here above. You just have to get your feet wet. I know I have learnt more in the last four months after starting than I ever would have without starting. Problems give you the questions that you don't think of otherwise... And yes, you will kick yourself later when you find out how you could have structured/planned/negotiated better. But you learn.

Anyway, the real reason I was posting was to share this quote of Mark Twain's :

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did. So throw off the bowlines, sail away from the safe harbour. Catch the trade winds in your sails. Explore. Dream.


Good luck.
Luke_W
 
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Reply: 4.1.1.1.1
From: Lesley .


WOW. Thanks, peoples. I am SOOOOOOO glad that I found my way to this forum. Many thanks for the reassurances and advice.

Lesley
 
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